Opinion
At first blush, the great post-budget showdown of 2026 looks like a return to the traditional arrangements of Australian politics. In the red corner, Labor targeting investors’ tax breaks on the grounds of equity; in the blue corner, the Coalition fighting for its investor-class constituents on the grounds the budget will kill aspiration, and with it, the economy. Labor’s centrepiece will raise taxes; the Coalition promises perpetual yearly tax cuts. Redistribution versus production. Let’s get ready to rumble.
But beneath the surface, the contest is not nearly so neat because today’s politics is not nearly so traditional. As we entered this budget, Labor stood alone in the political centre, charting a cautious path to becoming the natural party of government. The Coalition stood in the trenches of a war for the conservative flank, against One Nation. That is, the Coalition had split from its urban, aspirational base, and in two-party terms, Labor had mopped them up. Only the teals, who now own the wealthiest traditionally Liberal seats, complicate this picture. But it’s telling that their positions tend more often to align with Labor’s than with the Coalition’s.
That context hasn’t simply disappeared now that Labor has delivered the most disruptive, controversial budget since at least Abbott’s 2014 offering. And it’s shaping the post-budget fallout in intriguing ways that make it difficult to pick the winner. This isn’t actually a straightforward fight between redistribution and aspiration. Labor’s political centrism means it still has an aspirational argument to make. And the Coalition’s increasingly nationalist politics blunts its aspiration-based critique. So, while it’s true the Coalition is confidently on the attack, and Labor is under siege, the siege is taking a slightly different shape.
Take, for instance, the week’s viral online campaign from young business owners. It consists of AI-generated memes in which a smiling Anthony Albanese appears in various offices in his capacity as a “new cofounder with 47 per cent equity”. It’s a perfectly distilled online campaign. Funny, smart, pithy. It immediately communicates the idea that under the government’s capital gains tax changes, someone who builds a business from scratch and sells it later at a significant gain, surrenders nearly half that gain in tax.
The government argues this is not true in most cases, but that response doesn’t address the essential point: that hiking capital gains tax in this way is a real disincentive to take on the risk of starting a business. Accordingly, the danger is that entrepreneurs will leave Australia and start their new businesses elsewhere. The campaign culminated this week in a letter to the prime minister from 40 young business founders, asking him to rethink this policy.
They are joined in these objections by four independents: senator David Pocock from the ACT, and three teals – Allegra Spender, Monique Ryan, and Sophie Scamps. Pocock is typically aligned to progressive causes, and recently spearheaded the campaign for a gas export tax. The teals represent what was once the investor-class within the Liberal Party’s traditional base.
But now look closer. Those 40 young entrepreneurs say they support the government closing investor tax loopholes to tackle housing affordability. Instructively, so too, do the teals whose constituents are among the most likely to benefit from those concessions. Spender’s constituents saved comfortably more from capital gains tax concessions than those of any other seat in the country – $1.8 billion in a single year. Ryan’s electorate ranks second on this score, with savings of $1 billion. Even so, these responses don’t protect investor tax concessions in the traditional Coalition style, as though they are holy writ. They proceed on the basis that these concessions should be reduced. Just carefully, in a targeted way.
That’s an argument about production, specifically the need to incentivise investment in productive assets. That happens to be exactly the language the government used on budget night. These entrepreneurs and politicians think the government has got it wrong, and the government is now in consultation mode, meeting with the start-up sector, for instance. But even on Labor’s own terms, these will not be conversations about redistribution. They will be about pre-distribution. That’s an argument from the centre.
Under traditional circumstances, that would suit the Coalition. And no doubt, in attacking Labor on tax and going large on its own income tax cuts, it is sounding much more like itself. But the Coalition’s problem is that it’s also spruiking a cut to immigration of historic proportions. No doubt, that is a salvo in One Nation’s direction and matches the public mood of considerable public anxiety over immigration levels. The idea of linking our intake to the number of new houses being built has intuitive appeal. But it also gets in the way of the Coalition’s economic line of attack.
Here, for example, is the Business Council of Australia’s chief executive, Bran Black: “Australia depends on skilled migrants to build homes, care for older Australians and keep essential services running”. He echoes Master Builders Australia, who admit we’re not building enough houses, but say that’s largely a result of labour shortages, a puzzle whose “critical piece” is “skilled migration”, in acting chief Melissa Byrne’s words. The idea is simple enough: cut immigration to match housing growth, and you risk cutting the very thing you need to build more houses. That implies a death spiral, in which construction slows, which further reduces migration, which further slows construction.
That, too, is an argument about production. In this case, the production of new houses, while the Coalition is talking mostly about distributing them. This is an argument the traditional Coalition simply never would have encountered, which is why the shadow treasurer and arch liberal, Tim Wilson, steered well clear of immigration in his National Press Club speech this week.
The government is under enormous pressure, to be sure. Its budget deals the Coalition back into the political debate, and history shows, when the budgetary battle is pitched along traditional lines, the Coalition traditionally wins. But in this case, the battle is tilted slightly off its axis. Labor’s corner is slightly less red than it appears. The Coalition’s has an orange tinge. We therefore can’t assume history will simply repeat. Not when we’re in the process of watching history be made.
Waleed Aly is a broadcaster, author, academic and regular columnist for The Age and The Sydney Morning Herald.
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Waleed Aly is a broadcaster, author, academic and regular columnist for The Age and The Sydney Morning Herald.