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Australia’s 2025 federal election has delivered a clear win for Prime Minister Anthony Albanese, who becomes the first leader in two decades to secure re-election. His centre-left Labor Party won with a clear majority and is expected to have at least 87 seats in the 150-seat lower house after around 79.5% of the votes have been counted.
The Liberal-National Coalition trails with just 40 seats. The result not only strengthens Albanese’s grip on power but also signals a potential return to political stability after years of leadership turnover.
DWS Chief Investment Officer Vincenzo Vedda said the re-election of Labor likely signalled continuity for the economy, with some policy changes expected in areas such as housing, taxes, and healthcare spending, in line with the Budget and campaign promises.
“However, Australia’s key economic challenge is that productivity is very weak, and a structural reform agenda is needed to lift productivity. A stronger mandate in a second term could allow more focus on a reform agenda,” he added.
After Australia’s election – will a major tax reform come?
It remains unclear on whether the re-elected government will pursue major economic reforms. The last major reform—introducing a 10% goods and services tax—dates back to 2000. In his victory speech, Albanese highlighted plans for increased social spending, including broader childcare subsidies, additional healthcare funding, and measures to ease living costs, such as support for first-home buyers.
Australia continues to rely heavily on individual income tax, more so than most other advanced economies. Economists and international organisations have long recommended shifting the tax burden toward indirect taxes, such as the goods and services tax, while easing the reliance on income taxes to enhance long-term fiscal sustainability.
“A reasonable interpretation of the election result is that it was a vote for centrist stability with the election providing no mandate for radical reforms,” says Shane Oliver, Head of Investment Strategy and Chief Economist, at Australian finance company AMP.
“An optimistic take though is that the Government could use its enhanced political capital to push more aggressively down a productivity reform agenda, e.g. in terms of tax reform and deregulation possibly with the help of the Coalition. However, this would probably require a shock to push the Government into action like a sharp fall in commodity prices cutting national income, reversing the budget revenue windfall and leading to a credit rating downgrade,” Oliver adds.
Economy gains momentum
After recording 1.3% GDP growth last year, Australia’s economy seems to pick up again. The Reserve Bank of Australia (RBA) expects economic growth to reach 2.4% by December this year. Inflation is expected to return toward the 2-3% target.
Even so, overall economic performance remains below the nearly 3% average annual growth seen in the two decades before the Covid-pandemic. The outlook is clouded by persistent challenges, such as a tight labour market and ongoing concerns about housing affordability, driven by strong migration levels and elevated building costs.
Adding to these domestic pressures is an increasingly uncertain global environment. Albanese’s response to recent international trade tensions—particularly his calm but firm handling of former U.S. President Donald Trump’s proposed 10% tariffs on Australian exports—reinforced his image as a steady hand in volatile times. Although the tariffs were ultimately paused, his measured stance helped to reassure both markets and voters.
