THE LABOR PARTY AFTER THE 2026 BUDGET – JOE HILDEBRAND

The Albanese Labor Government faced strong criticism after handing down the 2026 Budget. Proposed new taxes on capital gains, trusts and investments caused property values to slide and anxiety among investors many of whom are Australia’s ordinary mums and dads. To reflect on what might be the outcome of these changes and the general fall in Labor popularity, Joe Hildebrand – journalist, columnist for The Daily Telegraph and Herald Sun and News24 contributor – addressed The Sydney Institute on Wednesday 1 July 2026

THE LABOR PARTY AFTER THE 2026 BUDGET

JOE HILDEBRAND

Thank you very much, Gerard. It’s lovely to be here.

You’ll be pleased to know this is the sum total of my speech, and it was written by somebody else. It is one of my favourite poems, which is the Second Coming by W. B. Yeats. It says:

Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity.
Surely some revelation is at hand;
Surely the Second Coming is at hand.
The Second Coming! Hardly are those words out
When a vast image out of Spiritus Mundi
Troubles my sight: somewhere in sands of the desert
A shape with lion body and the head of a man,
A gaze blank and pitiless as the sun,
Is moving its slow thighs, while all about it
Reel shadows of the indignant desert birds.
The darkness drops again; but now I know
That twenty centuries of stony sleep
Were vexed to nightmare by a rocking cradle,
And what rough beast, its hour come round at last,
Slouches towards Bethlehem to be born?

I’m sure all of you have read it, but it is the most incredible piece of poetry. It was written in 1919 in the wake of the First World War, which, of course, to them was the Great War. They thought it was the war to end all wars and, in fact, what Yeats is doing there is saying that this war has unleashed the force of Satan upon the earth. There’s going to be a new second coming. It’s not going to be good. It’s unleashed these animal forces. You know, the best like all conviction, while the worst are full of passion and intensity.

Who among you here doesn’t immediately think of what’s going on in Australian politics right now? I think this is where we are. What Yeats did then was take the greatest disaster the world had ever known and use it to say this has actually changed us. He predicted the rise of fascism, the rise of Nazism. People forget this all the time. Nazism didn’t rise up as a response to liberal democracy or functioning liberal democracy. It rose up in response to the fear of Bolshevism and people thinking they were going to lose everything in something similar to the Russian Revolution. And, of course, the Irish uprising came as well. And Yeats is thinking about all those things.

This brings us to the second greatest disaster, the second greatest man-made disaster in human history, which is the 2026 federal budget. And the forces that that has unleashed. I’m fearlessly impartial or at least fearlessly independent and honest. But I do have a soft spot for the Labor Party. And it’s fair to say they really screwed the pooch on this one.

Obviously, most of you will know that negative gearing, especially and ironically, has sort of sailed through while it’s the capital gains tax issues that have really put people off. Negative gearing, coupled with capital gains tax, has been an article of faith among many in the left and in Treasury. Economists as well. To them, this was an incongruent irrationality that was not doing what it was meant to do. Negative gearing, obviously, and capital gains tax was meant to apply to and encourage investment in the share market.

An accountant at some stage has said, “Hang on a minute, there’s nothing here that says it can’t be another type of investment like a house.” And away we went. I ask you: would you design an economy with negative gearing/capital gains tax discounts on investment property at the heart of it now? Of course you wouldn’t. But it’s something that’s become baked into the Australian economy.

When you sit down and plan an economy, that’s usually when things go catastrophically wrong, as every command economy in human history has been seen to do. Nonetheless, the boffins in Treasury and people who love to jump up and down saying how much they support equality along with upper middle-class socialists have set out to do just that.

There is a strong sense in the Labor Party that this was something that was always going to happen. Which is why sensible heads in the Labor Party, plus myself, were saying, “Do not do this. Do not do this. This is a mistake.” It’s a bit like what’s happening in south west Sydney seats, where people in the Labor right who would usually warn against anything that looks like class warfare, or be the biggest friends of Israel, people who should have but didn’t let them do that.

In the case of Jim Chalmers, the leading figure in the right, a poll just out suggested he was the person the public thought most likely to replace Anthony Albanese. I’m not so sure that that’s true anymore. But the sort of person who should be on the right of the party, holding back the left, cleaving that centre line, has become a captive to a Treasury that has been wanting to do this for years because it would unlock huge amounts of revenue. Treasury should not be about distributing money; it should be about collecting it. It’s the finance minister who distributes it.

There have been reports in the press that the treasurer and the treasury secretary, Jenny Wilkinson, were at loggerheads over the changes to tax on negative gearing and capital gains tax. That is not true. Even scarier is the fact that Jenny Wilkinson has said that these measures won’t actually increase housing supply which is what the budget said.

The changes to the Capital Gains Tax (CGT) and negative gearing will reduce supply by some 35,000 houses. This is over a decade, and the redistribution of the existing housing stock would be negligible. We are talking between 7000-5000 (not even six figures) in homes in the millions of homes changing hands. That is 7000-5000 over 10 years, which is half a decade beyond the government’s own target to build 1.2 million homes.

What the treasurer is trying to say, or saying and hoping that people don’t quite don’t quite get it, is that all the revenue that they get from these new tax measures can be ploughed directly into building new homes. This is back in the realm of a command economy. You stop the demand where it is generating housing growth and say, we’ll take all of this and we’ll do a better job.

I’m not aware of any residential property development arm of the federal government. Or what department it sits under. At a time when they are not meeting their existing targets anyway. You would think this would be set off warning bells as well. Removing negative gearing and changing the capital gains tax has been such an ideological touchstone of the left it has become almost a self-fulfilling, a self-evident good. In fact, as the budget that introduced it shows it is none of those things. It does none of that.

The only plus for the government is that it will massively increase taxation revenue. It will drive housing supply down and have a negligible impact on redistributing existing stock. It will not even bring down prices all that much. In fact, the crisis of confidence in the property market that has seen prices plunge in some areas was not what the budget was trying to do.

We’re in a state of confusion. We don’t know. Hang on a minute, this is meant to make houses more affordable. But when prices go down, we say, “Oh no, no, that’s a bad thing. Don’t worry, they’ll start going back up again, but not too much.” Again, it’s a budget that doesn’t do what it says on the tin and doesn’t deliver the overwhelming benefits that compensate for the overwhelming pain.

I’ve used a term that a lot of people have picked up on. We all thought of it at once, but it is a friendless budget. Every budget has its losers. Every year we do a winners and losers table in The Daily Telegraph. With this, all the losers know exactly what they’re losing. In this Budget, none of the winners seem to think they’re getting much if anything out of it.

The government would have tested all this in focus groups. They would have tested it ad nauseum. But focus groups are not meant to find out what people think about issues. The ultimate purpose of a focus group isn’t just to say, okay, what do you think? Who do you like? Red or blue? Good or bad? That’s what polling is for. Focus groups are meant to find out what of your messages is most effective, what things will work.

Many years ago, a pollster who worked for the Clinton administration gave a talk at a specialist political consultancy. He asked people who they thought was better at handling the economy – Republicans or Democrats?” Most of those asked, even Democrat voters, replied the Republicans were better at handling the economy. Then he asked who they thought was better at handling the economy for working Americans. Suddenly there was a 15 per cent shift of the dial to the Democrats. So, suddenly, there was a shift of the dial just by changing the way people were thinking about issues.

Pushing messaging on people in focus groups inclines them to tell the other person what you think they want to hear. Often the hardest part is getting people not to just nod along. If you get people around a table and you ask, should it be easier for young people to buy a home, anyone who said no would be seen as a cold-blooded. Take climate change. You ask should the government take action on climate change? Absolutely. Would you accept a $100 increase in your power bill to pay for it? Absolutely no way.

This is what has happened. The party boffins, the strategists, the pollsters are controlling the messaging and seeing how people respond to that sort of messaging. They’re getting an overwhelming positive result. Even after the budget, the government was very bullish about no back downs. They thought, we can get through this. But, clearly, as soon as all the budget stuff has been exposed to sunlight, it’s getting criticism. People are saying, “Hang on a minute, I’m about to pay double. I’m not going to be able to have a startup. This is absolutely terrible.”

You’ve got to be so careful in politics that you are not just hearing what you want to hear. It’s a horrible cliché, but it’s true. If you are hearing something that sounds exactly what you want to hear, worry, check again. As soon as this sort of bubble has been burst, it turns out that no one was in favour. Labor’s Anne Ali says, “Everyone I speak to comes up and says that they’re concerned about generational inequity.” Well, where are they? Where are they now, Anne? They’re just not there. It is a friendless budget and that is the problem.

There has been a crash through or crash approach to this. If you look at the front page of the Sydney Morning Herald the day after the budget, with the journalists having been in the lockup all night before, you would think the reporters hadn’t had a chance to go through it. Journalists at the Sydney Morning Herald – people for whom getting rid of negative gearing and CGT discounts is an article of faith were saying the Budget was fantastic. Now, that commentary has completely disappeared.

So, what is Labor’s response? Labor’s response has been first to hold the line, then to back down, then to hold the line a bit, then to back down a bit, then to do a dirty deal with the Greens, then to whatever. Much is still in doubt. But the PM certainly was extremely determined. Jim Chalmers, the leading figure of the right, is now trying to do more progressive left reform than Anthony Albanese, the leader supposedly from the left.

Labor’s right is not doing its job in the party, which is to hold the left to the centre. Instead, it’s a centrist former left prime minister who is trying to hold back a treasurer who is trying to push too hard. That’s against all the laws of nature. As with the stage three tax cuts, they thought they could push through and people wouldn’t care they were breaking a promise because it would be so popular. But the stage three tax cuts gave people money. This Budget has not done that. It is a broken election promise that has delivered negative equity in voters’ homes. It is taking away people’s financial security. And offers nothing in its place. Suddenly the government has, potentially, shredded their ability to be believed on anything ever again.

The other comparison that’s completely flawed is John Howard’s GST. He went to the election to get a mandate for the GST. An act Sir Humphrey Appleby would call courageous. The only government ever to win the number of seats that Labor now has in the House of Representatives was John Howard in 1996, after five terms of Labor. Two years later, not even a full three-year term, John Howard and the Coalition lost the popular vote. Kim Beazley could have been Prime Minister after just one term. John Howard was saved by a handful of votes in outer western Sydney – in seats like Lindsay. So, again, the idea that breaking a promise on tax is fine because John Howard did it is no comparison. He took his GST policy to an election and came within a few votes of being a one-term prime minister, not even a full one-term, just two years. That’s how painful it was.

So, what has happened? Again, the polls maybe give you a clue. Current politics have unleashed forces where conservatives have lost faith in the Coalition and are saying they can’t trust them. I see in the comments on my articles that people are also turning away from Labor. Even an ex-union delegate expressing support for One Nation. People for whom Labor institutions meant something, be they Labor voters or actual union members, have had their trust shredded; it’s lost all meaning and they are drifting to One Nation. One Nation does not have a great workplace relations policy for workers but people don’t care.

New South Wales premier Chris Minns once talked about catching himself sounding like a politician and feeling sick, and thinking, “Oh my God, is that what I sound like? I’m never doing that again.” And he’s arguably the most straight-talking politician in the country today. This is why someone like Pauline Hanson, who is not – it’s fair to say – the most articulate communicator, or someone like Barnaby Joyce, who is not the greatest political strategist, cut through. You can understand what they’re saying, you know what they stand for, and they haven’t had a chance to disappoint people.

That is the risk in this budget. You’ve got breached trust. You’ve got 180 degrees spin, where Labor MPs are tying yourselves in knots and looking like they are contradicting the treasury secretary, when they’re just trying to spin hard and pull the wool over people’s eyes. And so, people are reacting angrily with a mood to upend the apple cart, drain the swamp, whatever. And that is bad for everybody.

That is bad for government. It’s bad for the workers, the blue-collar workers for whom One Nation is now the most popular party. So, what do we do? Looking down your nose at One Nation or their voters is one of the left’s biggest problems. It is counter productive. For the centre, the right of the Labor Party, and the PM who does genuinely believe he is a centrist, they should say we’re not doing that because it’s stupid. This is what we are doing, because this is what matters. Wayne Swan was trying but didn’t quite get there. His line was we have to stop being centrist and be more pro-worker. I would say being centrist is pro-worker. You don’t solve right-wing populism with left-wing populism, otherwise there’d be a communist revolution.

What is needed is what I call the muscular mainstream. We need people who are direct. And not ambivalent. That can work and it was a good strategy in 2022. But it can only work for so long. It certainly can’t work after you’ve been in government for three years. You’re much better off telling people what you stand for, being unashamed in what you stand for, telling the people on the far right and the far left, this is what we’re going to do.

For years, I’ve watched the left run off the rails. The rise of social media means that every student protest can suddenly go global, spreading these crazy ideas. And, if you haven’t built up an immunity to them, people think that’s a great idea! What? We can just print money. Remember when they were going on about that? Crazy ideas can catch fire and turn out to be absolute disasters in the real world. What W.B. Yeats was talking about.

It’s not enough to keep quiet about this insane stuff. You’ve got to stand up to it, and you’ve got to declare what you believe in. So being a centrist isn’t insipid or anaemic or weak. Being a centrist is saying, I believe in strong family values. I believe in the suburban, the values of a typical Australian suburban family. Forget Tickle versus Giggle or critical race theory. It’s about how we make workers better off? And if everyone’s better off, they’re not going to blame immigration for their woes because they won’t have any woes.

If you’re relying on what the focus groups are saying as to how things are going to go, or you’re relying on what the polls are saying, you’re going to do insane stuff. Politics has to be a process of osmosis. It has to be organic. It has to be you as a representative. And the best MPs do this; they soak up the view of a nation. John Howard didn’t need polls to tell him where middle Australia sat on a particular issue. That’s why he was able to do strangely quite radical and strong things. Things that were darlings of the left: gun control, East Timor. He didn’t need a poll to tell him to do that. He thought no, I feel like this is right.

We need to stop calling it centrism. Just call it mainstream politics, mainstream values and you can’t go wrong. Labor is starting to understand that. And if there’s any good that’s come from the fallout from the budget, it is that it has proven what happens when you try to fiddle with the real world using leftist touchstones and tropes.