Labor aimed for a fairer Australia with its tax changes. As house prices fall, it needs to make the case for them | Tom McIlroy

Anthony Albanese was back in Australia for just a few days this week, a stopover wedged between the Commonwealth summit in the Caribbean and his flight to Turkey for the Cop31 climate talks.

Prime ministers often relish time in the international spotlight, but neither trip seems particularly appealing for Albanese right now.

He was asked on Tuesday if he wanted the treasurer, Jim Chalmers, to stay in his post until the next election, and if he ever loses his cool as prime minister. The second part of the question was in response to a Liberal campaign video designed to make Albanese look bad.

“No on the latter and yes on the former,” Albanese told the press pack.

Journalists who have covered him for seven years as Labor leader laughed as the PM quickly tried to move things along. Press gallery stalwart Michelle Grattan was diplomatic on Friday when she described Albanese’s “tendency to impatience”.

But the brief exchange highlighted something about how the PM and Labor are tracking, as the 2026 political year gets increasingly long in the tooth.

Painted into a corner by voter anger at the high cost of living, the government is suffering in the polls, struggling to land contentious tax reforms from the May budget, and backtracking on promises. The public increasingly blames Labor for its difficult economic reality and say the country is headed in the wrong direction. Amid a punishing summit season of international travel, Albanese himself looks frustrated.

Ahead of the last two parliamentary sitting weeks of the year, Labor appears to be somewhere between a midterm slump and serious political trouble. So far, the government isn’t making its own task any easier.

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The question about Chalmers’ future in the cabinet stems from a two-pronged problem with Labor’s budget strategy. After promising to tackle intergenerational unfairness in the housing market back in May, the effect of changes to negative gearing rules and the capital gains tax discount is being seen through the lens of falling property values around the country.

Australian Bureau of Statistics data on Wednesday showed new lending to property investors fell at its fastest pace on record through the three months to September, driven by higher taxes and five interest rate rises this year alone.

Worse, the value of new investor loans plunged by nearly one-third in the September quarter – the biggest drop recorded in the ABS dataset, which stretches back to 2002.

Appearing before a parliamentary committee, the ANZ boss, Nuno Matos, said consumers were feeling anything but confident due to the confluence of the cash rate at an 18-year high, an increasingly choppy international outlook, and a meaningful drop in home values.

All told, a “massive wealth effect” is being felt across the economy, he said.

“Your major asset, your major saving, has lost value, and that has an impact on your perception, on [the] outlook of consumers.”

The National Australia Bank boss, Andrew Irvine, called Australia’s obsession with property values unhealthy, warning it had created major distortions. The expat chief executive suggested Australians should focus on more productive places to invest their capital.

This poor consumer outlook comes as the Reserve Bank fights to cool the economy, causing conditions the governor, Michele Bullock, openly concedes will make households and business owners feel they’re in the middle of a recession. If the RBA successfully threads the needle, it will be the recession we never had to have.

The parliamentary committee heard that for housing affordability to improve, as Labor so desperately wants, interest rates need to fall. Because of inflation, that looks unlikely until well into next year, a timeline Albanese and his caucus will see as uncomfortably close to the next federal election.

These tough political conditions might require Labor to adjust its messaging.

The housing minister, Clare O’Neil, and the cabinet secretary, Andrew Charlton, have been among ministers prepared to own Labor’s changes and explain the government’s approach.

O’Neil pointed out that the share of homes going to first-time buyers and owner-occupiers was increasing, as investors change their behaviour due to higher borrowing costs, the tax changes and lower house prices.

The Commonwealth Bank told parliament there was a shift in the market away from investors as well. Charlton talked up the positives, a message likely to resonate with the younger voters Labor needs to attract and hold if it is to fight off One Nation and the Coalition.

The changes have the potential to deliver some of the fairness the country needs, finally helping younger generations get a slice of the market currently crowded out by cashed-up investors and older owners. It might be tough politics for Labor now but, on housing at least, the policy could deliver material improvement in the future. It needs to keep making that case.

Chalmers has had a lower profile in the past week amid internal criticism and pressure for spending cuts to be included in next month’s mid-year budget update.

Meaningful cuts are needed to take pressure off the economy and help the fight against stubborn inflation. Already the expenditure review committee of cabinet has held a series of marathon sessions, with Canberra public servants working across the weekend in anticipation of Monday morning meetings.

There has been speculation that popular renewable energy subsidies might be in the firing line. Speaking at Cop31 in Antalya, the climate change minister Chris Bowen acknowledged electric vehicle and home battery incentives could be wound back after take-up dramatically exceeded expectations. Spending caps or means testing could be applied.

Albanese is due to land in Manila on Saturday, to attend another round of summits and meet US president Donald Trump and China’s Xi Jinping. When he gets back to Canberra a week later, tough budget decisions and an opposition with a spring in its step will be waiting.

The prime minister can be forgiven for losing his cool occasionally, but getting Labor’s political mojo back will be a priority before the start of the long summer break.