The Albanese government’s record entering 2026 presents a curious paradox: strong employment figures alongside falling living standards, increased migration targets meeting inadequate housing supply, and ambitious climate commitments coinciding with record energy costs. The contradictions suggest less a coherent policy agenda than a series of disconnected responses to immediate pressures.
Economically, Australia is experiencing what economists politely term a “per-capita recession”—GDP grows, but not as fast as the population. The result is straightforward arithmetic: living standards decline. Inflation, particularly in housing and energy, has proven stubborn despite repeated assurances it would moderate. Rental vacancy rates in major cities hover near historic lows while migration runs at record highs—a supply-demand imbalance that requires no sophisticated analysis to understand.
The December 14 Bondi Beach attack, which killed fifteen people in an ISIS-inspired assault on Hanukkah celebrations, represents the deadliest terrorist incident since Port Arthur in 1996. The government’s response has focused on community cohesion messaging, though critics note this doesn’t address underlying questions about intelligence coordination or the efficacy of existing counter-terrorism frameworks. Public confidence in national security apparatus has measurably declined, according to polling from multiple sources.
Internationally, the Albanese government faces an awkward diplomatic position. The AUKUS security framework—negotiated under Morrison but maintained under Labor—requires careful management of relations with an unpredictable Trump administration that shows limited enthusiasm for multilateral partnerships. Australia’s traditional foreign policy strategy of maintaining strong ties with both Washington and regional trading partners becomes harder when those interests diverge sharply.
None of these challenges are unique to this government—housing undersupply accumulated over decades, energy transition involves genuine trade-offs, and geopolitical complexity isn’t something any single administration can control. But governing involves making choices about priorities and trade-offs. When everything is presented as equally important, nothing receives sustained focus. That may explain why so many policies seem to exist in pilot-program purgatory—announced with fanfare, implemented partially, then quietly shelved when political winds shift.
The question for 2026 isn’t whether Australia faces serious challenges. It clearly does. The question is whether the current government can demonstrate the capacity to prioritize, sequence, and actually complete policy initiatives rather than simply announcing them.