As One Nation nips at his heels the PM has no choice but to play the long game

Over the past year Labor and the Coalition have watched as One Nation has eroded their support at a pace the major parties could only dream of.

As the waterline has risen past the Nationals, the Liberals and now laps at Labor's feet, the government's tone has shifted from derisiveness to sobriety.

Two major polls now have recorded more voters flirting with One Nation than any other party, with a third of the country interested in what the prime minister has dubbed "grievance politics".

Beneath that label is a frustration held by Labor and the Coalition, a feeling that the obligations of running a government prevent them from offering a quick or easy fix to soothe the aggrieved.

As one MP puts it, populism is immediate, structural repair to the budget is a long game.

Labor MPs are not ignoring the momentous shift in Australia's political landscape, even though it can appear from the outside like the major parties are standing still as the water rises around them.

On Monday Prime Minister Anthony Albanese said voter frustration was the "backdrop" on which the government had made its decisions, including breaking a promise not to touch negative gearing and capital gains tax.

When Albanese was asked how he explains One Nation's rise, he responded that it was the outpouring of people who "feel that the system isn't working for them".

"If governments don't respond to that there'll be a continued rise in populism, be it of the right or the left," he said.

"It's something that we are very conscious of and I'm conscious of."

This is not the budget to beat One Nation

With that acknowledgement it could leave people scratching their heads after the government just handed down a budget that is landing shakily, has upset business, workers, the young and the old.

It has frequently been cast as unfair, despite the government's explicit characterisation of its proposals as a rebalancing of Australia's system to be fairer.

It does not seem like the kind of budget that responds to a nation of aggrieved voters looking elsewhere.

But the government has its sights set further into the future.

"There's a long play here," one MP says.

The government's first of three budgets this term has been used to fix revenue issues, cut costs in the NDIS and rework Australia's tax mix.

It has front-loaded the term with some of the more bitter medicines and given itself wriggle room in the remaining two budgets to address concerns in housing and cost of living driving One Nation's support.

It also hopes that pressures caused by the Iran War and high interest rates are a temporary storm that can be weathered with sunny forecasts in the budget saying inflation and much else will quickly return to normal if the storm passes.

Albanese has staked his future on the understanding that if the economy improves, and voters can see it, they will lose interest in populist politics.

"To paraphrase, it's the economy, stupid," Albanese said on Monday.

"It's always the economy that sets the parameters for debate, which is why the argument that says that having delivered our commitments in our first year of our second term, we should sit back and coast for the next two, was one that I wasn't prepared to support."

One Nation has already changed the game

It is the middle of an election cycle, about the same time last term when the Coalition under Peter Dutton was outpolling Labor.

Australians wielded their voting intentions as a protest, but support for the Coalition subsided once an election became real.

One Nation is now the dominant threat to Labor, but the government's overall position is not so different to this time last term, which is what MPs are holding on to.

It hopes there is time to address housing, for the Iran conflict to end and cost of living pressures to ease, for migration rates to settle, and for more careful scrutiny to be applied to One Nation.

There is another political adage however that exposes the risk in playing the long game: "Events, dear boy, events."

Albanese acknowledges his government cannot "sit back and coast", and he has proven a willingness to break glass on grievances that make voters feel the system is stacked against them.

Making more radical choices in the two budgets that remain a live option.

Whether voters have abandoned the major parties, or whether they are just sending a message, cannot be answered yet.

However One Nation performs at the 2028 election it can already claim one win for this term: it has put a fire under the federal government and forced it to rethink its approach.

That is something the Greens and Coalition would struggle to assert.