Going into 2026, Australia is in managed decline. We are all feeling poorer. Here's how with bravery and sacrifice we could turn it around | Retrui News | Retrui
Going into 2026, Australia is in managed decline. We are all feeling poorer. Here's how with bravery and sacrifice we could turn it around
SOURCE:Daily Mail
Our politicians are the last ones who should be relaxing in this holiday period, with the country mired in an economic stagnation that is stripping away hard-won prosperity.
It’s the quiet week between Christmas and New Year when politics is usually the furthest thing from people’s minds. But that doesn’t mean our problems and challenges as a country have gone away.
They just briefly fade into the background, although the Bondi terror attack has certainly punctured the holiday season and brought greater attention to domestic security.
Away from that now dominant debate, Australia in recent years has slipped into a habit of managing rather than reforming, and our politicians today aren’t even very good managers.
The year ahead will test whether we can break the do-nothing political habit. Not because 2026 is necessarily destined to be a crisis year in the old fashioned sense, but because our economic prosperity - taken for granted - is steadily drifting away.
On the headline numbers, the economy is muddling through: GDP grew 0.4 per cent in the September quarter and 2.1 per cent over the year, with GDP per capita still basically going nowhere in quarterly terms. That’s why people don’t feel like they are getting ahead.
The problem with our politicians, however, is that muddling through has become their only plan.
A country can coast for a while on high migration rates, a commodity cycle that saves us and a decent set of institutions built in an earlier era.
Managed decline in 2026 - unless they surprise us: Prime Minister Anthony Albanese and Treasurer Jim Chalmers
But eventually it can’t. And that’s where Australia is now. The last decade has been a lost decade. A lost opportunity to lock in future prosperity.
We’re now playing catch up, or we will be, if we start to try. For the moment our politicians are content with winning elections and pursuing pet projects. Indulgences, such as the Voice referendum and Albo’s decision to recognise Palestine.
Serious economic reforms are less appealing to student activists who rise to become national political leaders.
The Hawke-Keating reforms, and, in a different way, the Howard-Costello years, left Australia with a sense that big change was possible, even when it hurt. Since then, our politics has increasingly preferred the symbolism of bravery to the substance of it.
Kevin Rudd’s inability to land his emissions trading scheme wasn’t just about a carbon price, it was an early lesson that hard, economy-wide reforms are uniquely vulnerable in a system that rewards short term panic and punishes complexity.
Tony Abbott’s 'horror' 2014 Budget, whatever its flaws, at least tried to repair the country's fiscal situation in a nation that would rather pretend spending programs pay for themselves.
In the end, both of these moments in time became cautionary tales for future leaders: attempt something hard, and you get hammered.
So we’ve drifted to where we are now, and it’s come at a cost. Productivity is an obvious problem, with labour productivity falling again this year.
While the Productivity Commission has recently pointed to some ‘green shoots’, the end of year bounce is very small and still well below long run averages.
When productivity is weak, wages growth is hard to sustain without inflation, and living standards become a political fight over slices of a pie that isn’t growing.
The other cost of reform neglect is fiscal. The government can point to a ‘stronger budget’ narrative in MYEFO, but it’s a mirage. The budget is in deficit with no sign of that changing. Government debt is at one trillion dollars. The annual interest bill alone on that much debt is more than most policy portfolios have at their disposal for things Australians need: policing, education and health care.
Less than two decades ago Australia had no debt, yet the debt we’ve accumulated hasn’t been used to enhance the nation. Much of it has been wasted on what’s called recurrent expenditure.
Australia’s debt burden is not internationally alarming, but that says more about problems overseas than all being well here at home. And the direction our debt is heading is all bad. The pressures in the system are structural: ageing, health, disability spending, defence, interest costs and the continuing expectation that government can cushion every shock without ever asking voters to trade something off.
A Christmas celebration in 1975. Australia needs reform to improve its standard of living further
We can’t afford to do all of that without racking up more and more debt.
At the same time, monetary policy is no longer the simple comfort blanket it was during the era of low inflation. The cash rate is sitting at 3.60 per cent, and the RBA is openly watching for signs that inflation isn’t just sticky but re-accelerating. Economists are now predicting rate rises next year instead of cuts. That’s going to hurt.
There’s a particular Australian irony here. After years of being told inflation was dead, we now have a politics that still behaves as if the cost of living pain can be solved mostly by announcements such as energy rebates, while the central bank is warning that temporary fixes can muddy the signals and entrench expectations.
That is the economic backdrop we face as this year comes to an end. The political one is, if anything, more fragile.
Labor’s landslide election win in May gave it 94 seats, a dominant House position in a period supposedly defined by fragmentation. The Coalition, after Peter Dutton lost his seat of Dickson, has been struggling since Sussan Ley took over. She’ll struggle to survive beyond the mid-2026.
Confidence in politics is very thin, patience for long explanations is even thinner, and the incentive structures still reward soundbites over substance, which has been a hallmark of Albo’s leadership.
That incentive structure will only intensify in 2026 because the government will face competing tests that demand so much more than soundbite politics. The first and most obvious is social cohesion and national security. The Bondi terror attack has already triggered a sharp political fight over intelligence failures, gun laws, protest rules and whether the Commonwealth should establish a royal commission.
A country can’t simply message its way through that kind of trauma, especially when the public is being asked to trust institutions and politicians that missed threats, stoked radicalism and is now charged with repairing a mess they contributed to.
The second test is the basic governability of an economy that needs reform but has trained itself to fear it. Australia’s last genuinely major, system wide tax reform was the GST, legislated a quarter of a century ago.
Since then, the tax mix has become more reliant on personal income taxes and bracket creep, less suited to an ageing society, and increasingly distorted by concessions that are politically untouchable because too many voters now see them as entitlements.
What do Australians want their government to do, and what are they prepared to pay for it?
The economy needs reform - but will Labor use its commanding numbers to do something about it?
The question is whether Labor uses its commanding numbers to do something that lasts beyond the next news cycle. A big majority can be a license to embrace reform, or it can invite complacency. The easy path in 2026 is to keep governing like a permanent campaign: stay vague, drip-feed small concessions, blame global uncertainty, and hope Australians settle for less. Turn the Bondi terror attack into a national security focus that allows Labor to avoid walking and chewing gum at the same time.
Whatever response Bondi warrants, government must also modernise the economy to lock in prosperity.
A serious government would treat 2026 as the year to start telling the truth again. But so far at least Labor is anything but a serious government, and nobody can take the Coalition seriously as an alternative government right now.
If our politicians decide to get serious they’ll realise that productivity is not a slogan, nor is it a feel-good innovation agenda document. It’s the hard work of making the economy more competitive, getting the care economy and public services delivering better outcomes with fewer wasted inputs, and reducing the regulatory and planning choke points that keep housing and infrastructure scarce.
Budgets are moral documents in the sense that pretending money is free is a moral failure. Living standards can’t be protected by permanently expanding the state while refusing to reform how that state spends.
Australians are not allergic to reform, they are allergic to being conned. They will tolerate tough decisions when they believe the people making them have a plan, can explain it, and will share the burden. And when they believe the decision makers are competent.
The tragedy is that too many leaders have learned the wrong lessons from past failures like the emissions trading scheme or the 2014 Budget’s fiscal tightening: not that reform must be done better, but that reform shouldn’t be tried at all.
Our politicians are such a weak collective.
Between Christmas and New Year, in the rare quiet, it’s worth being blunt. The year ahead won’t be helped by one more cost of living announcement or one more carefully scripted line about working families. Our politicians need to get serious about economic reforms.
If 2026 becomes another year of managed decline, it won’t be because the problems were unknown. It will be because the political class again choose the comfort of the short term over the responsibility of planning for the long term. And that, more than any global headwind or domestic threat, is the real challenge Australia faces.