A now-or-never moment for the Albanese government

March 16, 2026 — 7:30pm

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As the war in Iran stretches into a third week, the economic consequences for Australia are intensifying.

The conflict’s disruption to global oil supplies is taking a mounting toll on household budgets. The price of unleaded petrol in Sydney has been above $2 a litre for a fortnight, with no relief in sight. As the fighting drags on, fuel rationing becomes ever more likely.

Meanwhile, soaring fuel costs are set to drive Australia’s inflation rate higher. That increases the chances the Reserve Bank’s monetary policy board will today raise interest rates for the second time in as many months, inflicting more financial pain on borrowers.

Many voters blame Anthony Albanese for the affordability crunch – the Resolve Political Monitor published today by this masthead shows 40 per cent of people believe the federal government is responsible for rising living costs.

Australia had entrenched economic challenges long before the US and Israel attacked Iran.

Inflation was already elevated, productivity growth was in the doldrums and economic growth was sluggish. It was obvious Australia’s tax system has fundamental flaws.

All this has brought Treasurer Jim Chalmers’ fifth budget, due in seven weeks, into sharp focus.

The Albanese government was already being pressured to use the May 12 budget to unveil meaningful reforms – the disruptions of the Middle East war has made that even more pressing.

While the conflict threatens to do serious economic damage, times of crisis also provide opportunities. The turmoil offers Labor a political opening: voters should be more receptive to major reforms when the economic costs of doing nothing are clear-cut.

The scale of Labor’s victory last May means it is in a strong position to take action; Anthony Albanese leads a government with the biggest House of Representatives majority in living memory. Labor must find ways to use that political success to build coalitions in the Senate that ensure reforms are passed.

There are indications the government is examining changes to capital gains tax provisions, the tax treatment of trusts, and fringe benefits tax exemption for electric vehicles, as well as incentives for business investment.

This is not a time for half-measures; substantial tax reforms that reward effort, boost productivity and improve generational equity are required.

One constructive option put forward by independent MP Allegra Spender proposes a major income tax cut for full-time workers to be funded by scaling back tax breaks that tend to favour older, wealthier taxpayers, such as the capital gains tax discount.

Spender is to be congratulated for championing sweeping tax reforms from the relative powerlessness of the cross benches. Her proposals have filled a political vacuum left by the major parties.

Chalmers has acknowledged the current global turmoil strengthens the case for new policies that enhance the productivity and resilience of the Australian economy.

He said on Sunday that he saw “all of this volatility not as a reason to go slower, but as a reason to go further on reform”.

The treasurer must now shift from talk to decisive action; the May 12 budget looms as Labor’s now-or-never moment.

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© The Sydney Morning Herald