Q&A - Australia's economic outlook 2026

ANDREW CLENNELL, HOST: Hello, Prime Minister. Thanks for joining us.

ANTHONY ALBANESE, PRIME MINISTER: Thank you.

CLENNELL: I want to start the interview by playing a couple of exchanges you and I had in the last week of the election campaign.

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CLENNELL: There you go. Do you rule out negative gearing? You did. Why can't you win an election by telling the truth?

PRIME MINISTER: We did win an election. And one of the things that I looked up when we were preparing for this speech was what we did a year ago, and what you had to say then - and you could play it maybe, was when are you going to get serious about economic reform? And we're here. The Australian, I reckon I could dig up 50 editorials over my time as Prime Minister and Leader of the Labor Party that calls for tax reform, that calls for government to get serious about it. We couldn't continue to kick the can down the road, and we've made a difficult decision. We've changed our position. That's a difficult thing to do. And we understood that there would be a criticism of that. But what we couldn't afford to do is to sit back and say, well, you know, we're in a position to do something about this. We know that it's an issue, but we're going to just stand still. And one of the things I did - that was at the National Press Club. I was the only person who appeared before the National Press Club during the last campaign, and I went there a month later as well. And I said we would have a year of delivery, which we did. Ticked off on the environmental reforms that are very significant. Ticked off Free TAFE, Medicare Urgent Care Clinics. All the things we said we would do, we did, delivered all of it in the first year. We weren't going to sit around for two years and just occupy the space. And so we've made what is a difficult decision. Reform's hard - probably why The Australian have had to write so many editorials, because people haven't had the ticker to take it on -

CLENNELL: You didn't have the ticker to take it to an election. I mean, if you believe so much, Prime Minister, that we need this, if you had always had the desire to end negative gearing, to get rid of Capital Gains Tax discounts or tax trusts, that this 1999 system of John Howard and Peter Costello was so faulty, why not take it to the last election and make the case?

PRIME MINISTER: Because it wasn't our position then. We have changed that, we have changed our position, Andrew, just as we changed our position in the last term on the stage three tax cuts. Because we're confronted with what is before you. And what was before us at that time was enormous pressure on cost of living. And we couldn't afford to sit back and say, we've got $107 billion of tax cuts, but we're not going to give any of it to the people at the bottom end on the lowest marginal tax rates. But also, of course, we increased the top marginal rate from 180 to 190 as well. So, we made sure that we did that. We didn't go to the last election as well saying that what we would do is to reduce fuel tax - you might remember that was front and centre of the last election campaign. We said we wouldn't do it. We did it, because circumstances meant that that was the right thing to do.

CLENNELL: But what was before you was, I think 78 seats, right that you had? Correct me if I'm wrong. Now you've got 94. Is it the fact you had 94 seats before you that made you change your mind?

PRIME MINISTER: No, we'd had what is now a $47 billion Homes for Australia Plan. Okay. So, we've thrown everything at housing and bear in mind the context - the former government didn't have a Housing Minister for half the time. So, we have had the Homes for Australia Plan, the Housing Australia Future Fund, which is building social and affordable housing, Help to Buy, which is a shared equity scheme, the five per cent deposits that helped 250,000 Australians into their first home, Build to Rent, which is encouraging private sector development for private rentals. We've done all of that. We had increased the Rental Assistance for the first time in consecutive Budgets. We have a target of 1.2 million new homes. We have incentives for infrastructure, including the last mile infrastructure, the $2 billion additional that we're putting in this Budget. But it wasn't proving to be enough to shift the dial.

CLENNELL: Alright, well, let me ask you - do you owe the Australian people an apology for violating their trust by going to this election, never mentioning these policies, in fact denying them to me and other journalists. Do you owe an apology over that?

PRIME MINISTER: It wasn't our policy. I'm not interested in word games, Andrew, and I don't think Australian people are either. They will make a judgement. Part of the judgement will be, of course, about when governments change positions, but on the merits of what we are doing. And it strikes me, if anyone out there thinks that the housing market is working, then they're bonkers. They're not speaking to young people who are missing out and who are giving up. And we could not kick the can further down the road. And that's the choice that's before us. It's a choice that we make. It's not the easy choice and that's not the easy option. You can't have, also, people in the media say for year after year after year, governments need to move to - and the OECD, for example, speaks about more equally taxing income from work with income from assets. This is genuine tax reform and we are advancing it. We're putting our case. And of course the Australian people will judge, but automatically, as you would have seen in Parliament this week, I'm very heartened by the stories of people from Geelong, from Queensland, here in the suburbs of Sydney, who have had success at auctions because after months and sometimes years of competing, they're actually able to get into the market. And what we also did in the way that we designed the scheme as well, grandfathering it so that anyone who has negatively geared properties can still do so, the Capital Gains discount still there, all of the measures there up until the 1st of July, 2027. But we have done it in a way that's designed as well to boost supply. And we know supply is the key. And if you, I'm sure during the election campaign, many times I spoke about supply. We think that is right, but this will help supply as well, because when young people invest in a negatively geared property, it will be assisting their future wealth and assets, but also assisting the future wealth and assets of the nation.

CLENNELL: Your speech seemed to indicate that one of the reasons you've been forced into this was the rise of One Nation. You didn't say the words One Nation, but at a time when there's -

PRIME MINISTER: Well, there's three parties that have the same agenda.

CLENNELL: There's never been less trust in the major political parties, and One Nation support is rising. Is it really ideal to be breaking promises like this? Because that looks like something that could fuel the rise of -

PRIME MINISTER: I'll tell you what's not ideal. It's to see the rise of populism, whether the right or the left, populism and opportunism without answers. Whether it be One Nation and the increasing blurring of the lines between the Liberal Party and One Nation, and the Greens political party on the other extreme and say, everything's going okay if we just go out there and defend. And that essentially was the theme of the speech, and that is in part the context of these decisions that are made is a political judgement that I make that if governments stand still, the world world will go past them. And if you look at some of the issues which are being confronted by mainstream political parties in Western democracies, what you are seeing is a rise of populism. And you know, we can get into the political argy bargy that we just did a bit. But out there, what they're concerned about is if people think the economy isn't working for them and they're working their guts out and they're not getting opportunity, I tell you what, they will turn to more simplistic grievance based politics. And that is the context in which my government is saying, 'no, no, we're going to deliver real change for the better. This is what we're doing. This is why we're doing it'. Because it is real, the frustration that people have out there. And I don't - I'm critical of the leaders of that political movement but I'm never critical of voters. If voters are sending a message which they have for a period of time and you know, there's an argument about whether that's reinforced by certain, you know, political agendas. But it is real that people are frustrated. They don't think that the economy is working for them and they don't want to work for the economy.

CLENNELL: I'm going to ask something quite unusual now. I'm going to ask everyone here if you have, if you're negatively geared to put up your hand.

PRIME MINISTER: I have.

CLENNELL: You negatively geared?

PRIME MINISTER: I have.

CLENNELL: Yep.

PRIME MINISTER: Nothing wrong with that.

CLENNELL: Okay. There is nothing wrong with that except young people who can't get in the market and find it harder to build wealth can't. So, all of us are doing it. You're doing it. I'm doing it -

PRIME MINISTER: That's nonsense.

CLENNELL: Well, you would say on new properties.

PRIME MINISTER: That's a fact, Andrew. And part of the debate that has happened is if people in the media say you've got to have real reform, when you get it, by all means be critical, but be critical based upon what we're actually doing. And what we're doing is everyone there who put up their hand, no change to any of their existing arrangements. No change. But if you're a young person outside this room hoping, or the kids of people in this room, they can still invest in a negatively geared property. And you know what a whole lot of people - I don't know if you've seen Harry Triguboff's comments and others. I've spoken to a range of developers as well. And what they've seen is an increased number of inquiries into buying new properties. So, they're still building assets and building wealth, but they're building something for the country as well, rather than competing and knocking out first home buyers.

CLENNELL: Why not go for that policy of banning negative gearing on more than one property? Is it just too hard to administer?

PRIME MINISTER: I'll tell you the big decision there is because that doesn't fix supply. We very consciously have a policy of new builds because that's what drives supply. And so we made that decision. You know, One Nation is saying two properties as well. So, you know, you can look at that. The other thing that we're trying to do with tax reform is to remove distortions and advice was if you had negative gearing on two properties, then what people could do essentially is stack up, if they had ten properties stack up their debt onto the highest one, improve their deductions and that it would distort the market towards basically the allocation of debt because of the nature of negative gearing and how it works. So, Treasury did modelling of various of these measures. I was determined that for those two reasons, one of stopping a distortion in the market but secondly as well, that the measures that we're putting forward will boost supply. That is why we chose that model rather than the one or two or five homes.

CLENNELL: You knew at the last election the Budget was in dire straits. It still is, despite these tax changes. So, you're getting $77 billion in net extra tax over ten years coming from these changes but you're still running deficits of $150 billion over five. Isn't that an indictment of your economic management? Why are you still running such large deficits?

PRIME MINISTER: We're running less deficits than the ones that we inherited. If you look at when we were in -

CLENNELL: Why are you running them at all, you've got this big tax take -

PRIME MINISTER: We're giving it back. Andrew, across the forwards this is a revenue neutral package. Every dollar is going back through the Working Australians Tax Offset. Every dollar. This is revenue neutral and we have saved, as I put the figures in the speech, we've saved already substantial interest payments. We produced two budget surpluses and then lower deficits every year. And we are returning to budget surplus over the medium time to balance in 2034-35. So, we are projecting that -

CLENNELL: Ten years away.

PRIME MINISTER: Well, we're projecting that forward. But it is not true, Andrew, that there's higher debt in this. There's lower debt in each year of the forwards as well, than was in the Mid-Year Economic Forecast which was also an improvement on last year's Budget. We have $64 billion of savings in this Budget, which is $64 billion more savings than were in the last Budget that we were handed in 2022.

CLENNELL: Are you promising tax cuts in 2028, do you think?

PRIME MINISTER: You can interview me in 2028 and -

CLENNELL: So, there's a line in the Budget paper saying you could do that, you could look to return -

PRIME MINISTER: You'll get to see our policies -

CLENNELL: You're definitely running then?

PRIME MINISTER: Of course I'm running -

CLENNELL: You know Mike Baird, New South Wales Premier, I once interviewed -

PRIME MINISTER: I'm running hard.

CLENNELL: And said give me a bottle of Grange if you don't run. Would you be prepared to do that?

PRIME MINISTER: You're paid too much already on Sky. Many of your presenters can give me a bottle of Grange I would have thought -

CLENNELL: I don't know about that.

PRIME MINISTER: I got a very nice bottle of wine to declare an interest for speaking today, so -

CLENNELL: Oh, there you go -

PRIME MINISTER: I thank Sky and The Australian.

CLENNELL: One of the things that really strikes me about the influence behind this Budget is the ghost of Paul Keating. How many conversations did you have with Paul Keating in the lead up to this Budget?

PRIME MINISTER: I talk to Paul Keating all the time.

CLENNELL: You didn't listen to him on AUKUS so why are you listening to him on CGT?

PRIME MINISTER: This is my Budget in 2026. This is -

CLENNELL: But he urged you to do this, didn't he?

PRIME MINISTER: No, this was - he supports what we have done but we make our decisions in 2026. And it might surprise you if you knew how often I talk to the newly minted President of the Liberal Party who rings me as well - Abbott. I talk to Turnbull, I talk to Julia, I obviously talked to Kevin while he was Ambassador as well. I respect people who've had the job that I currently occupy. Only people who've done it know what it's like.

CLENNELL: You've indicated that you'll do something for the startup sector as some sort of exemption from Capital Gains Tax changes. How big will those measures be, or have you indicated in that speech perhaps they're not going to be that big, given these people can't claim indexation under the new system because they start at a cost base of zero.

PRIME MINISTER: You'll see, we're working that through. We said on Budget night that we would have a consultation process. Treasury are handling that. You would have seen the comments, for example, from Scott Farquhar on behalf of the Tech Council this week. We're engaging. There will be a Senate Committee Inquiry. We will have the details, the first legislation will be debated in the Senate in a couple of weeks' time and then of course, we've said there'll be later legislation as well. Bear in mind when the Howard Government last did, the last tax reform, bear this in mind was last century, 1999 -

CLENNELL: They took it to an election.

PRIME MINISTER: It was a long, it was a long time ago. Howard did lots of things he didn't take to an election. I'll give you the list. So, what we did was, you know, they had, I think 30 something pieces of legislation at that time. You know, we're not doing that, but we are obviously consulting and you'll see the outcome of that.

CLENNELL: Did you accept some startup entrepreneurs are going to leave Australia because of these changes?

PRIME MINISTER: No.

CLENNELL: Will you be changing the proposal on trusts at all to protect inheritances?

PRIME MINISTER: We will do nothing that impacts negatively on inheritances.

CLENNELL: Is this the end of tax reform or would you consider increasing a GST and reducing income tax? Or is John Howard's condition that the money go to the states make that too difficult? Or what about this cash flow tax the Productivity Commission has recommended? Would you look at that?

PRIME MINISTER: I'm not in favour of the cash flow tax. With regard to GST, it goes to the states. You got to get the states, I mean, the system that was set up was so complex and so difficult to change. You know, there's a whole range of things that you might, if you're starting with a blank sheet, be able to do. You're not. So the states get all of the revenue. You know, one of the things that I think Paul Keating got right, I think it was Paul who said it, any Prime Minister could have - never get between the states and a bucket of money. You know, that's just a reality. But the job of reform, I said this during one of the campaigns I got 'you're channelling John Howard', it's just a fact. The job of reform is never done. You know, governments have to look at what's before them and do it. And I genuinely take positions, the election campaign, we had an ambitious, an ambitious agenda. We put that forward, we implemented that in our first year and then we've changed our position on these matters.

CLENNELL: Alright, just a final one, I'm out of time, but I'll ask it anyway. Given the low growth figures and the fact the trim mean of inflation is in the mid threes, do you think it would be appropriate for the Reserve Bank to not be too trigger happy on rate hikes this year?

PRIME MINISTER: I think what's appropriate as Prime Minister, is that the Reserve Bank are independent.

CLENNELL: Prime Minister, thanks so much for joining us at the Summit again.