Josh Frydenberg, the outgoing Liberal treasurer who is set to lose his seat to an independent, defended his record on Sunday, pointing to the lowest unemployment rate in half a century and the fastest improvement in the "budget bottom line in more than 70 years" as the economy bounced back from the pandemic.
But Stephen Koukoulas, who was an economic adviser to former prime minister Julia Gillard when she was in office, said that the new treasurer Jim Chalmers would be receiving some "ugly news" in the coming days during discussions with the treasury and Reserve Bank of Australia. "Jim has been handed the proverbial shit sandwich," he said.
Shane Oliver, chief economist at AMP bank, said inflation was running at its highest level since the early 1990s, pushing up interest rates. This coincided with record high household debt-to-income levels, soaring budget deficits and the risk of a wage-price spiral.
"Gone are the days of fiscal largesse that was made easy by very low inflation and very low interest rates. To take pressure off inflation and interest rates, the new government really needs to significantly speed up the pace of deficit reduction, or budget repair, and to commence significant economic reform in the areas of industrial relations, tax, competition policy and education to boost productivity," he added.
Saul Eslake, founder of Corinna Economic Advisory, said that Labor might be inheriting an economy "with a head full of steam" but it could be hampered in its attempts to deal with inflation and any further deterioration in relations with China, its biggest trading partner.
"It will do so with limited room to deploy fiscal policy forcefully in response to any shocks, given the deterioration in Australia's public finances during the pandemic."
Albanese has a very narrow mandate after running a safe campaign that shied away from promising big reforms.
"Bearing in mind that no first-time Australian government since 1931 has failed to secure a second term, Labor needs to be laying the groundwork for a more expansive mandate at the 2025 election if it is to make a lasting difference to Australia's medium-term prospects," Eslake added.
Those problems pale in comparison to those of the Liberal party, whose coalition with the rural National party is on course to record its worst result since 1983 when Labor's Bob Hawke was swept to power.
The Liberal party could be left holding only three seats in Melbourne based on the latest projections and none in Adelaide or Perth after suffering huge swings to Labor. It lost heartland urban seats in Sydney and Melbourne to "teal" independents, a new generation of climate-focused female candidates standing in affluent seats, and unexpectedly lost ground in Queensland to the Greens.
Results in the senate, Australia's upper house, have also been grim for rightwing parties, which ceded territory to their progressive rivals ranging from the Greens to single issue groups including the Legalise Cannabis party.
David Pocock, a former Australian rugby union player for the Wallabies standing on an independent ticket, is close to taking a Canberra senate seat from Zed Seselja, who was the minister for the Pacific in Morrison's government. That would mean there would be no Liberal senators representing the nation's capital for the first time.
Meanwhile, Pauline Hanson, the firebrand rightwing senator for One Nation who has opposed climate change policies, could lose her Senate seat to the Greens in Queensland.
Albanese will probably need to rely on support from the Greens or independents in the Senate to pass legislation.
On Monday, he will fly to Tokyo to attend the leaders' meeting of the "Quad" security grouping in his first act as prime minister as the final election results play out.
There he will meet Joe Biden, the US president, Fumio Kishida, Japan's prime minister, and India's PM Narendra Modi. "It's an opportunity for us to send a message that there is a change of government and that there will be a change of policies on things like climate change," Albanese said on Sunday.
That message rippled out to the Pacific, to which Albanese has promised to devote more attention. Frank Bainimarama, prime minister of Fiji, celebrated Albanese's climate focus. "Of your many promises to support the Pacific, none is more welcome than your plan to put the climate first," he wrote on Twitter.
Mike Cannon-Brookes, the software billionaire and climate activist, told the Financial Times on the eve of the election that Albanese's climate targets were not overly ambitious but that it was positive that he was a step ahead of the Morrison government, which had turned the country into a "climate criminal on the international stage".
Written by: Nic Fildes and James Fernyhough
© Financial Times
