Albanese government can expect economic and political pressure in 2026

What are you watching in Australian politics in 2026?

That's the question we put to the ABC's political journalists and columnists as we head into the new year.

After a strong year for the Albanese government, with a landslide election victory, the consensus was that 2026 will bring its challenges for Labor. The cost-of-living crisis will spotlight tough budgetary decisions while the horrific Bondi terror attack has put social cohesion at the top of the agenda.

Here's what our reporters and commentators are keeping an eye on.

Clare Armstrong, chief digital political correspondent

The shocking Bondi terror attack has dramatically shifted the political outlook for 2026.

While issues like gambling reform, politician expenses scandals and the energy transmission remain ones to watch, the coming months will be dominated by the fallout of the horrific shooting.

Responding to rising antisemitism was a vulnerability for Anthony Albanese in the last term, and while his government took steps to address some of the concerns of Australia's Jewish community, questions will now follow about whether more could be done.

The ongoing investigation will provide some answers, but there will be pressure on the prime minister to confront this moment of cultural reckoning decisively.

Those directly affected by the tragedy will need ongoing support, initial moves to reform gun laws will most likely require follow-up and meaningful moves to further address antisemitism are non-negotiable.

Beyond the immediate police investigation, there will be inquests and inquiries with recommendations for the government to grapple with.

Albanese must also deliver a formal response to the report on combating antisemitism by his special envoy, Jillian Segal, and can expect ongoing scrutiny from the Coalition on this issue.

Ensuring social cohesion will be paramount, and the nation will be looking to the PM to chart a course that helps the entire community heal.

Patricia Karvelas, host of Afternoon Briefing and host of Politics Now

Inflation and the economy. The Labor government may have won a thumping victory but the cost-of-living crisis and the high housing costs and mortgages is still the only game in town.

2026 promises to be a difficult year for the government because it will need to rip money out of the budget that it has been spending in order to put downward pressure on inflation and demonstrate that it can deliver an economy that is working better for the ordinary people who elected them.

None of this is easy. The middle year in a three-year electoral cycle is often the hardest of all and it is the year after the victory.

It's the year where the hardest decisions need to be made before the government re-enters an electoral cycle where it will be under pressure to provide gifts and largesse to the public without the harder decisions. 2026 is the year the tough decisions need to be made and they know it.

Jane Norman, national affairs correspondent

This time last year, the polls were so dire, we were reporting Labor could be reduced to a minority government, or worse, become the first government since the Depression to lose an election after one term.

So, it can be dangerous for reporters to make bold predictions! But here's what we know: Labor is facing the twin dilemmas of a budget built on borrowings and structural deficits, and uncertainty about what its towering agenda ambitions are for the next 2.5 years.

The May budget will be decisive because, in the three-yearly federal cycle, it'll likely be the Treasurer's best chance to make some tough decisions on budget repair (code for spending cuts and possibly new or higher taxes) while also paving the way for new policies (beyond fulfilling election commitments).

Will he take the leap and tackle a tax system that's giving younger Australians a raw deal?

Keep an eye on simmering tensions between an ambitious treasurer (and a backbench brimming with new and ambitious MPs) and a more cautious prime minister.

David Speers, national political lead and host of Insiders

One thing to keep an eye on is artificial intelligence.

This is such a fast-moving field, with impacts on so many aspects of work and life. Pessimists fear it will lead to the end of humanity while optimists foresee a productivity nirvana.

The government has produced an AI strategy, but this is a starting point only.

If the technology accelerates as some expect, all sides of politics will need to quickly work out where they stand on how AI should and shouldn't be used, and when humans should be kept in the loop. At this stage, that remains very unclear.

Casey Briggs, chief elections and data analyst

It may sound like a rare disease, but I'll be watching JSCEM closely next year. It's the parliamentary committee currently reviewing the conduct of the 2025 election and our electoral laws, and one of the things it is considering is whether we should have more federal politicians.

The parliament hasn't been expanded since 1984 under Bob Hawke, when there were 16 million Australians. Now, the bureau of statistics estimates there are nearly 28 million of us, and so every federal MP is representing a lot more constituents than they used to.

Proponents for an increase (of which there are many within the government) argue local MPs can't meaningfully represent that many people, and the workload of supporting constituents has grown too much.

Opponents reckon we already have enough pollies and don't think having more of them is worth the cost, given any increase in the House would, for constitutional reasons, require an increase in the size of the Senate too.

If the government does decide to spend some political capital to grow the parliament, it would radically redraw the electoral battleground for the next election.

Courtney Gould, political reporter and live blog specialist

It's bubbling away under the surface, but the government is actively looking at a plan to significantly expand the size of the parliament, something that hasn't happened since the Hawke era.

It would also like to implement fixed four-year terms but that would require a referendum (and after the failure of the Voice, that's unlikely without bipartisan support).

There seems to be an acknowledgement (at least privately) that the size of parliament should increase, but whether Labor can get voters on board is another thing. An inquiry is looking into this and is due to report back mid next year.

Tom Crowley, federal political reporter

Our political centre held in 2025 but there is no guarantee we're immune from the jolts seen elsewhere. It is obvious to all Australians that our politics is coursing with an unfamiliar and uncomfortable anger.

Nowhere is this more obvious than our migration debate, which on the surface is about numbers but is also about whether people feel in control of their lives. Even if migration policy changes, that visceral feeling won't shift unless people feel better.

And most importantly, to feel like the government is making things better. Whatever your political outlook, it's not hard to understand why people don't feel that way now.

We've talked about the same housing problems and the same economic problems for years, and it's hard to say much has improved.

Last year, I read reader responses to a call-out about the housing crisis. I lost count of those who said they were so jaded they were contemplating both the far left and the far right.

If governments tethered to the political centre want to hold power, they'll need to show they're starting to fix things. No small task.

Maani Truu, federal politics reporter

With a Labor super-majority in the lower house, the odd Pocock-Coalition-Greens alliance in the Senate is one to keep an eye on.

The unlikely allies figured out over 2025 that if they worked together, they could land some blows on the government, particularly when it came to Labor's transparency issues (which, while I'm at it, will also likely be an ongoing theme in 2026).

In one particularly absurdist example from the past year, the trinity decided they were done with the government refusing to handover the so-called "jobs for mates" report, which investigated political appointments, and turned the tables. Together, using their collective majority, they voted to extend Senate question time and give themselves extra questions until the report was released.

The result was a record three-and-a-half-hour-long question time, more than double the usual length, and a furious Labor.

The group have also teamed up to get answers about the government's secretive plan to deport members of the so-called NZYQ cohort to Nauru (expected to cost more than $2.5 billion, but we still don't know for sure) and had a win forcing the delivery of at home support packages for older Australians to speed up.

Shenanigans aside, it's a reminder that there are creative ways to hold even a very powerful government to account. And with the blueprint established, who knows what will emerge.

Jake Evans, federal political reporter

2026 will be a year of reckoning on climate change for the federal government.

With much of the political focus set on adopting a climate target for 2035, or from the Coalition's end abandoning climate targets, 2026 will be the year the Albanese government has to prove it is shifting the dial.

Having shed itself of any requirement to reach net zero, the Coalition is free to tear down the government's approach to energy and climate change.

Meanwhile, Chris Bowen ended the year with a quiet acknowledgement that the government was not at all on track for its next climate commitment and was due to fall shy of its 2030 target, too.

The government has argued it spent last term laying the foundations for cutting emissions, and that should now bear fruit. If it doesn't in 2026, they will have a hard time convincing the public that Australia will reach its 2030 target in the short amount of time left.

Shalailah Medhora, political reporter for triple j's Hack

While younger voters overwhelmingly voted for Labor in the last election, there's no guarantee they will do so in the future.

Young voters have little party loyalty and are among the least rusted-on voters around. So just being Not-the-Coalition will only work for Labor for so long. In 2026 Labor must prove to younger voters that it is not timid and has the courage to tackle massive structural issues.

Gen Z is likely to be the first generation to be worse off than those who preceded them, so they do not want tinkering around the edges; they want bold and subversive change.

Despite having a huge parliamentary majority and an opposition that, to put it politely, has yet to find its feet, Labor has not indicated that bold reform is ahead.

The Productivity Roundtable was a bit of a fizzer, and Labor has not yet acted on modest changes to taxing superannuation.

Young voters do not care for business as usual — will Labor listen?

Stephen Dziedzic, foreign affairs (Asia Pacific) reporter

This won't necessarily define 2026 but I'll be keeping a very close eye on the Trump administration's relationship with China, and how that changes.

There are plenty of China hawks within the administration, but there are also now clear signs that Trump might be seeking a modus vivendi with China.

Australia might be very worried about the prospect of conflict between the two great powers, but a "grand bargain" between what Trump has called the "G2" carries risks for Australia as well. The federal government doesn't want the US to withdraw from Asia.

All our efforts to balance Chinese power quickly look very forlorn indeed without the economic bulk and military heft which the United States brings to the table.

Australian foreign policy is about more than just China and the United States, but the reality is that the decisions made in Washington and Beijing will continue to have enormous influence on our region, and what its future might look like.

Claudia Long, federal politics reporter

How the government manages the changes to the NDIS will define this Labor legacy project.

With Jim Chalmers already flagging Labor will need to "make room" for unavoidable pressures on the next budget, how this is managed in regard to the NDIS has the potential to reshape one of Labor's biggest legacies.

The scheme has changed the lives of hundreds of thousands of people across the country, for some it has been the difference between a life of isolation and being able to leave the house. For participants — and the family members who care for them — it can be the difference between being able to be in the workforce or not.

Last term the government imposed a cap on the growth of the scheme of 8 per cent, Minister Mark Butler has since flagged that will likely be cut back to 5 or 6 per cent.

But with reports of the scheme turning to automated "robo-plans" with drastically limited human intervention and a watered-down appeals process, Labor have been accused of doing the very things they once criticised the Coalition for.

Participants are also reporting seemingly nonsensical funding cuts, like a deaf participant whose budget for interpreters was more than halved as he was advised to develop "other communication methods".

In the Labor policy pantheon, the NDIS is up there with Medicare and super. But will they be able to keep it that way as they try to reach their budget aims?