Labor shuffles to centre-right as three-party system waltzes in

A year after the Albanese government’s election win, Labor’s strategy for its first term in office is clear.

On the issues where the Coalition has historically had an advantage, most notably economics, defence and foreign policy, Labor has adopted those policies and sought (so far successfully) to more competently implement them. On everything else — climate, health, education, human rights — Labor has pitched just far enough to the left of the Coalition to provide a point of difference while minimising the risk of losing votes on the centre-right.

Examples of the first part of the strategy are the stage three tax cuts and AUKUS, but they’re only the most prominent. As well as promising to implement the stage three cuts, the government allowed numerous initiatives of the previous government — funded for a limited time — to expire on schedule. Most notable was the low- and middle-income earners’ tax offset, which ensures the tax system will be more regressive by the end of the government’s first term than it was at the start, even if the stage three tax cuts are trimmed.

In foreign policy, as well as AUKUS, the government has outdone its predecessor in supporting the Quad alliance to contain China. Prime Minister Anthony Albanese’s embrace of the ethno-nationalist Narendra Modi government, and (literally) of its prime minister, goes beyond anything seen under former prime minister Scott Morrison.

The government has interpreted its House of Representatives majority as a mandate to do precisely what was contained in its election platform (and nothing more), but one major promise has been watered down and, for practical purposes, repudiated.

In 2021, Albanese promised a renewed commitment to full employment. The plan included a jobs summit, leading to the issue of a white paper on full employment. Its title echoed that of the 1945 white paper on full employment in Australia, which was the founding document for Australian economic policy during the decades of postwar full employment.

But then the jobs summit became a jobs and skills summit, with most of the discussion centring on the difficulties faced by employers when full employment unexpectedly became something close to reality. Similarly, the word “full” disappeared from what is now promised as the employment white paper.

Finally, the 2023-24 budget projected an increase in unemployment during Labor’s first term. The projected rate of 4.5% exceeds even the Reserve Bank’s estimate of the “non-accelerating inflation rate of unemployment”. In contrast with Albanese’s statement that a return to 2019 conditions would be unacceptable for a Labor government, the projected rate is within half a percentage point of that prevailing before the pandemic.

Left, right and centre

In summary, Labor has taken a position in the centre-right of the Australian political spectrum, occupying a space vacated by the disappearance of the moderate Liberals epitomised by former Liberal prime minister Malcolm Turnbull. On the right, the Liberals and Nationals are in dire straits nearly everywhere. To the left, Labor is fending off the Greens and independents, whose economic views are broadly in line with Labor’s but who want more action on issues such as climate policy and human rights.

While most of the political commentariat is still focused on the long-standing two-party system, urban Australia has already moved to a three-party system, in which Labor confronts a divided opposition.

The Liberals now hold only 19 seats in the metropolitan areas of Australia’s capitals, barely more than the combined total of Greens and independents. The trend is even clearer among young voters. According to the Australian Electoral Survey, about 38% of those under 40 voted Labor, compared with about 25% each for the Liberals-Nationals and the Greens, leaving about 12% for independents and minor parties.

The closest international analogue is France, where the centrist party of Emmanuel Macron in France secured 39% of the votes in the 2022 legislative election, compared with 32% for the left-wing coalition NUPES (Nouvelle Union populaire écologique et sociale) and 25% for the right and far-right. Unlike in Australia, this was not enough to secure an absolute majority.

Neoliberalism on the wane

The best way to understand these developments is that they follow from the decline of neoliberalism as a dominant ideology. For most of the time since the 1980s, politics in developed countries has involved an alternation of power between versions of neoliberalism: hard, represented by LNP, US Republicans, UK Conservatives and European conservative parties; and soft, represented by Labor in Australia, New Labour in the UK, US Democrats and European social democrats).

Since the global financial crisis in 2007-08, the failure of neoliberalism to deliver on its promises has led to the erosion of support for this comfortable duopoly. On the right, this has been manifested by the rise of demagogic leaders such as Donald Trump, Boris Johnson and Marine Le Pen. On the left, traditional social democrats have lost support to the Greens and others, so there is no longer enough support to sustain two neoliberal parties.

The consequences are still playing out globally. But in Australia, it appears Albanese’s Labor Party has taken hold of the mantle of neoliberalism, with the Coalition reduced to a rural and peri-urban rump. In metropolitan Australia, Labor is facing a challenge from Greens and independents, whose positions are probably closer to the actual views of most urban voters. But enough voters still think in two-party terms to keep Labor in front for the moment.

On this analysis, Albanese’s ambition to hold office for three terms, or even more, looks quite feasible. But it will be achieved by abandoning most of the policy goals Labor previously aspired to. And as urban voters shift left, it will be harder and harder for Labor to hold on to its narrow majority in Parliament.