4 weeks ago
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February 2, 2026 — 5:00am
What from this week is likely to have a lasting impact on our politics? The interest rate rise? The coalition reuniting? Angus Taylor rolling Sussan Ley? The great big announcement One Nation has been foreshadowing?
That is if any of them happen. And then there is one more big what-if, at present still low-key. Amid the major headlines, there are small but significant hints the government is building to major change.
At the very end of a profile in Friday’s Australian Financial Review, ALP national secretary Paul Erickson said: “You will see some pretty substantial contributions over the coming months from the PM and from the treasurer, and the lead-up to the budget that will set that out.”
The government believes 2026 is a chance for serious reform, he said. Erickson works closely with Anthony Albanese – and he is not known for overegging things.
Now, add in the treasurer himself saying last week he was “impatient for reform”. He named housing as a “defining element” of the “intergenerational challenge” – particularly “building more homes for people”. In itself, this isn’t surprising. Recall, though, that acting on intergenerational equity was the most significant area of consensus to emerge from last year’s Economic Reform Summit. These issues (along with inflation, productivity and resilience) are the “sorts of lenses through which we view” the budget, Jim Chalmers told Saturday’s Guardian.
The fact that Labor’s heavy hitters are willing to say such things three and a half months out from budget day suggests some confidence in the significance of what is to come. It sounds as though the budget will be more than a steady-as-she-goes effort, despite new worries about inflation. Housing may play a role.
I have written before that prime ministers tend to get into habits – and that if you look at Albanese’s first term, it was the second year when he attempted the difficult stuff, with the Voice referendum and the changes to the stage 3 tax cuts. Labor talks, too, about wanting time to embed changes as a reason for its desire to govern long-term – in which case it would want to deliver such changes soon. If Labor is to step up its ambitions, 2026 is the most likely time.
Meanwhile, on Friday, Albanese finalised a deal with the states, balancing the needs of hospitals, the National Disability Insurance Scheme and support for children needing early intervention.
And all of this – actual announcements, telling a story about what the government is doing and planning for the months ahead – is going on while the Coalition tears itself apart.
The Coalition’s future is muddy. Andrew Hastie has now withdrawn from any approaching contest, leaving Angus Taylor as the likely next Liberal leader, though the timeline is unclear. Probably the clearest fact is that Sussan Ley was never really given a chance by many of her colleagues. Yes, she has made mistakes – but the truth is most have been fairly trivial. And on the measure no politician can escape – polls – she has not done well. The Coalition’s primary vote has fallen steadily.
But she has impressed in certain ways, too. At times, it seemed she might navigate a path between the right of her party and the demands of modern Australia. She staked out clearly conservative positions while avoiding the worst rhetorical excesses of some. She applied pressure to the government over expenses and then she played her part in forcing a backdown on the royal commission after Bondi. Leading a divided party against an ascendant government, these are noteworthy achievements.
And yet, it never seemed like she was quite accepted as a legitimate leader. Some of this is about her being a woman in a party dominated by men; it would be naïve to think otherwise. Much of it is about the fact that she is a moderate. You could see a similar force at work when Malcolm Turnbull was prime minister. He simply wasn’t trusted by the conservatives. At times, he did their bidding, but they judged these acts as hollow.
Scott Morrison could get away with a lot more – including dragging his party to net zero – because the right of his party believed he was one of them. Taylor, should he take over, will have the same advantage.
This points to the real problem bedevilling both parties in the (former) Coalition. So much of politics on the right has become about identity. You are judged not by the quality of your policies but by what your colleagues believe is in your heart; and what is in your heart is judged by how rigidly you adhere to certain positions.
When a politician’s main concern is reaching a good result on policy, negotiation and compromise are always possible. Adjustments can be made. But when policies become merely a means of projecting a certain political identity, then compromise is not permitted, because to do so would risk being perceived as compromising yourself. This is what Hastie discovered when he voted with his colleagues to support Labor’s hate speech laws: the conservative base saw this not as pragmatic politics but as abject betrayal.
And this is why it is hard to see a world in which the Liberals and Nationals work well together soon: the Nationals, in a race with One Nation, cannot compromise when they are focused on upholding some abstract political identity.
Former Liberal strategist Tony Barry wrote last week that both parties needed “significant internal mindset change”. He argued the Coalition needed to focus on economic management and housing. John Howard’s former chief-of-staff, Arthur Sinodinos, in a separate piece, focused on the same two issues.
Are these the issues Labor has been working on, while the Coalition has been busy yelling at itself? An odd feature of Taylor’s likely ascent is that he may be charged with attacking the government at the very moment Chalmers is in the spotlight. As shadow treasurer in the previous term, Taylor was ineffective against Chalmers. This time, on precisely the policies on which Taylor most needs to impress, Chalmers may have got a big head start as well.
Sean Kelly is author of The Game: A Portrait of Scott Morrison, a regular columnist and a former adviser to Julia Gillard and Kevin Rudd.
