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Australia to Curb Migration as Albanese Faces Voter Backlash

(Bloomberg) -- Australia’s government is looking to calm a political storm around record-high migration, at a time when Prime Minister Anthony Albanese faces plunging approval ratings, stoked by public discontent on everything from inflation to surging rents.

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With 2024 set to be a critical year for his government, as national elections loom, Albanese’s center-left Labor government revealed its long-awaited Migration Strategy. The policy will aim to reduce net migration from more than 510,000 in the year ending June 2023 — the population of the Australian state of Tasmania — down to about half that number within two years.

Among the measures included in the new strategy are a crackdown on student visas, as well as indexing the income threshold for temporary skilled migrants, now at A$70,000 ($46,000) a year. Over the weekend, Australia also announced a tripling of the foreign investment fees for international buyers of established homes.

Speaking to journalists in Sydney on Saturday, Albanese said the country’s immigration system “is broken.”

“We’ve got to make sure that our population is sustainable,” the prime minister said at a press conference. “What I want to see is a system that works for Australia.”

Immigration has surged in Australia since the lifting of Covid-related restrictions, putting pressure on housing and infrastructure. As annual population growth has almost doubled from usual levels, public discontent has grown, and conservative parties, for whom migration has long been a powerful weapon, taste blood.

Australia isn’t alone in struggling with high levels of immigration post-Covid. New Zealand Prime Minister Christopher Luxon said on Monday that the levels of net annual migration are not “sustainable,” with New Zealand’s central bank warning earlier this month that it can’t afford to ignore a surge in new arrivals.

But for the Australian government, immigration is just one of the headaches which has led to a drop in Albanese’s standing over the past few months.

Approval Plunges

This time last year, Albanese’s approval rating stood at 62%, and he looked on track to lead a long-term Labor government, possibly becoming the first Australian prime minister in two decades to win two elections in a row. Today, he’s polling at a miserly 40%.

The inflection point was Albanese’s decision to push ahead with his pledge to write an Indigenous advisory body into the constitution. It was heavily defeated at a referendum this past October, and opened his government to criticism that it was pursuing minority interests when a majority of households were struggling to make ends meet due to high inflation and soaring borrowing costs.

Now, opposition leader Peter Dutton, a former policeman and defense minister, has begun publicly speculating about the Liberal-National coalition returning to government sooner than many had expected. At the very least, he could push Albanese into a minority government at the next election — due by mid-2025 — given the ruling Labor party’s razor-thin majority.

Albanese now faces a critical test on whether he and his colleagues can regain control of the political agenda next year, said Michelle Grattan, a professorial fellow at the University of Canberra and veteran observer of Australian politics.

“It could be a temporary pit into which they’ve fallen, or it could be the beginning of a slide,” she said.

Wins and Losses

Despite being elected by one of the narrowest margins in Australian history in May 2022, Albanese’s approval rating and his government’s popularity soon soared as he moved quickly to implement election promises, including an independent anti-corruption commission, carbon emission targets and faster wage growth.

The prime minister also demonstrated a deft diplomatic touch, deepening relations with allies and partners like the US and India but also rapidly improving ties with China, which had fallen into a hole under predecessor Scott Morrison. His government even delivered the first budget surplus in 15 years.

Emboldened by this first 12 months in office, Albanese pushed ahead with his most ambitious policy yet — a national referendum on the Indigenous Voice to Parliament in September. Initially popular, it rapidly lost its appeal and took Albanese’s rating down with it.

Grattan said the loss “knocked the stuffing” out of the government psychologically. “It gave Albanese’s authority a knock, especially among colleagues,” she said.

Since then, little has gone right.

The eruption of the Israel-Hamas conflict in October led to extreme pressure on Albanese to either support Israel or the Palestinians. In the interests of national cohesion, he chose a middle road, pleasing no one.

The war also pushed petrol prices in Australia to well above A$2 ($1.3) a liter, intensifying the squeeze on families. Then in November the Reserve Bank ended four months of pauses and raised its key rate to a 12-year high of 4.35%.

Soon after, a new front opened on a traditional vulnerability for Labor: immigration. The High Court ruled, in early November, that the government had to release dozens of long-term detainees. The cohort included offenders charged with crimes like murder and sexual assault, but who couldn’t be deported due to concerns they’d be killed back in their home countries.

Even though it had no control over the decision, it led to accusations that Albanese had failed to keep Australians safe or anticipate the ruling. High octane political battles in parliament — reinforced by a 24-hour media cycle — resulted in rushed legislation that gave an impression of a government in chaos.

By the end of November, Labor’s primary vote had dropped 8 percentage points from a year earlier to 31% and Albanese’s net approval was level with Dutton’s.

Backbench Jitters

Albanese’s lawmakers are starting to show signs of uncertainty, with backbench politicians holding an emergency meeting with Treasurer Jim Chalmers and the economics team in the last week of November.

Labor lawmaker Brian Mitchell was one of those who sought the meeting, concerned that mortgage holders were unfairly bearing the brunt of the fight against inflation. In particular, he was worried about comments by RBA Governor Michele Bullock that there might be more rate hikes to come. The central bank has maintained a hawkish stance even after pausing last week.

“I’m not sure people in my electorate with very high mortgages who are already stretched can withstand another one, two or three 25 basis point rises,” he said.

While there is the prospect of financial relief for households in 2024, even that isn’t straightforward. The previous center-right government had legislated significant tax cuts for higher income earners beginning on July 1 next year. Albanese pledged to support the policy at the last election.

Yet the economic landscape has now changed and there are strong arguments for redirecting some of that largess to lower-income households desperate for extra cash. But any changes could be seen as a broken promise — never taken well by voters.

On the upside, there is potential for interest rates to begin to fall later next year, while a decline in the global oil price should also eventually filter through.

Jill Sheppard, a political expert at the Australian National University, said Albanese’s government is losing its confidence as it reached the halfway point of its term and is “really, really nervous” about making decisions.

“When you start to second guess your decision making ability, then that permeates everything that you do. And I think that’s what we’re seeing,” she said. “From a voter’s perspective, that’s really unnerving.”

Despite his troubles, so far there is no sign of leadership speculation against the prime minister in the corridors of power in Canberra, and Sheppard said Labor was likely to head into the next election with an economy on the upswing. “There’s still a long way between now and the last possible election date.”

--With assistance from Swati Pandey.

(Updates with migration announcement)

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