Can Albanese win the next election? Depends on the RBA’s danger zone

Opinion

November 9, 2026 — 5:00am

Last week, Andrew Hastie was just one of many to acknowledge the dominant role played by inflation in the absolute smashing Donald Trump’s Republicans received in the American midterm elections. The “economic frame” was “critical … People feel worse off after tariffs and after the war in Iran, and Donald Trump has said a few times now that he doesn’t really care.”

What distinguishes Hastie here is that, unlike many in politics, he expressed concerns about the Iran war right from the start. Early on, he was careful to stress Iran’s sins and his support for America – but also said that, “as a veteran of the so-called forever wars, I’m very suspicious about regime change by force.” Four weeks later, he was describing the war as a “huge miscalculation”, which was unusual enough at the time to attract criticism from Labor.

When it began, the Iran war was discussed from every angle – the Iranian regime, its nuclear ambitions, the oppression of its peoples, the role of Israel, whether Trump was resetting international norms. All were important. Sometimes, though, it is important to cut through to the central underlying question – which was what Hastie did. Was regime change by force achievable? Not likely. And here we are.

And here is Trump. Similarly, you can talk about the US midterm election results from many angles. Perhaps they were a rejection of the billionaires or of data centres or of Trump himself or authoritarian style. Perhaps they were a re-embrace of “woke” – or of US isolationism. All are potentially significant. But in the end, there was one undeniable issue: inflation.

There is a subtle but important point hiding behind this one. In correctly attributing most of the result to inflation, we risk a large potential error; of too easily dismissing other developing trends which may soon play a significant role in American politics. Yes, inflation’s dominance means we should be cautious about all the claims now being made about what drove the results. But we shouldn’t rush to say that they are incorrect, either.

And that is in part because large events in politics – and inflation is one – can amplify conclusions voters are already reaching. It is possible that inflation stands alone, in isolation – and that when it fades Americans’ doubts about Trumpism will fade too. But it is also possible that Iran and inflation have confirmed suspicions Americans already had about Trump, his blind spots and excesses, and that they will not readily let go of their conclusions. We just don’t know.

As we seek to apply American lessons to the next Australian election, then, the dominance of inflation cuts both ways. Labor’s opponents see it as a problem for Labor. Labor, meanwhile, can tell itself: inflation is what’s hurting us in the polls – when it fades, we will spring back.

That’s because that’s what happened in its first term. As I’ve written before, it’s an important context in which to read the polls right now; inflation always hurts governments. But while it is true commentators should be restrained in their interpretation of current polling, there are several reasons Labor strategists should not assume history will repeat.

The first is that we just can’t know what is going on out of sight, hidden by inflation. Labor’s great danger is that inflation confirms concerns voters already have. At the last election, they were willing to put such concerns aside – in part because it was the first term.

Remember, too, that this is the second bout of inflation on Labor’s watch. This is what happened to Scott Morrison, in a different form. He won an election, the polls went up. After the bushfires, his polling plummeted as voters developed their suspicions. Then COVID-19 arrived and he was up again. Then the vaccines’ debacle confirmed all those earlier suspicions and he never recovered.

The second is the Reserve Bank’s latest forecast. I’ve written before about the study showing governments facing elections within two years of an inflation peak double their chances of defeat. Previously, headline inflation was expected to peak in June this year, meaning the likely May 2028 election would be right on the two-year mark. As of last week, the RBA is saying the peak will arrive in December. That puts the election well within the danger zone, in which voters still remember the pain they faced. That is not an academic point; the economic conditions are now expected to be fundamentally different from what was forecast. (Of course, these new forecasts may be wrong as well.)

The third is that nobody knows what the political landscape will be in 2028 – though we can assume housing will still be dominant. On that front, Labor will be telling itself that this term it undertook significant reform. That’s true. And it will be hoping that by the time of the next election it can hold that over the Coalition, which opposes the reforms, arguing only Labor understands the economic challenges voters face.

But what if Andrew Hastie is Liberal leader by then? Hastie, in the same interview where he described the Iran war as a “huge miscalculation”, seemed to suggest he might back Labor’s changes to housing taxes (though he has been more critical since). If Hastie is leader, the things Labor has done so far this term may not seem as large a potential advantage as they do now.

The economy will likely dominate politics for a while yet. Obviously, Labor must put its focus there. At the same time, counterintuitively, Labor must ensure that not every ounce of its energy is taken up by concerns about inflation and recession.

Quietly, privately, it must take seriously the developing concerns of voters about its character as a government and prepare for the possibility that those concerns last even as inflation fades – and work out how to counteract them. Economic policy is likely to be only part of that.

We end then in the same place as last week: has Labor thought adequately about 2027? “There’s always a plan”, Anthony Albanese has said in the past. There will have to be.

Sean Kelly is a regular columnist. He was an adviser to former prime ministers Julia Gillard and Kevin Rudd.

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