While heralded for their high living standards, solid politics, and favorable economy, Australia seems to have underlying cracks that require its next governing body to deal with. The Australia BGI Report on Governance Performance released recently suggests that the country is suffering from rising political division, increased polarization, greater inequality, and a reliance on destructive oil and gas industries, which “fishes where it shouldn’t.” These compounding factors have been described as a “ticking time bomb.”
Eroding Foundations: Challenges to Prosperity and Cohesion
From the curtained sunset glow of the Australian optimism, revealing signs of fraying are surfacing. Released by the Berggruen Institute Think Tank and Lehman School of Public Affairs alongside The Hertie School, the report utilizes the Berggruen Governance Index to analyze the interplay between democratic accountability, state capacity, and the provision of public goods. ” Citing a key deficit to self-governance and national accountability, “the report signals an urgent need for resilience through reconciliation to cope with the ongoing disillusionment period America finds itself in,” placing volatility on the index. This shift came just eight days before the general election on May 3, where Albanese’s constitutive realms of the center-left faced off against Dutton’s competing centers on the right.
The report acknowledges that Australia has long benefited from a confluence of favorable economic, geopolitical, and demographic factors. Australia’s major cities are among the most livable in the world, and the country performs well on a number of governance indicators within the BGI framework. Yet, the researchers still claim that Australia experiences the same problems as other affluent Western European and North American countries face, especially concerning the declining public trust in government. The report argues this erosion of trust serves as “the backdrop for a hotly contested federal election.”
The Shifting Political Landscape: A Mirror to Global Trends
Australia’s upcoming election has received considerable attention due to a dramatic change in expected results. After a lackluster post-pandemic economic recovery, the Labor Party was widely predicted to suffer a defeat. However, new polling data suggests a narrow victory for Albanese’s party, reversing the forecast. This is also seen in Canadian trends, where former U.S. President Trump’s increasing negative branding of conservatism seems to have a bearing on voter outlook.
The growing problem of rental affordability constitutes another major concern impacting the Australian election and reached its lowest point in history in 2025, as stated by the REA Group, a real estate company. The Australia BGI Report claims this housing crisis is resulting in increasing support among younger voters for the Australian Greens, who are primarily focused on reforming the housing market. Nonetheless, the report highlights the Australian preferential voting system that allows voters to rank candidates; similar to what happened during the 2022 election, where 12 percent of the votes turned into only 2.5 percent of parliamentary seats, it can restrict the electoral success of the Greens.
Geopolitical Risks and the Extractive Economy’s Underlying Vulnerabilities:
Australia’s extractive industries, while beneficial, strategically limit the economy’s diversification potential, a notion put forth in the BGI report. Contrasting Australia’s global standing as ninth in GDP per capita and ninety-ninth in the Economic Complexity Index (ECI), Worth underscores a major argument of the report: “While Australia is richly endowed with natural resources, its political economy is also constrained by this very endowment.”
A significant portion of Australia’s exports comes from iron ore deposits, coal, petroleum, gold, and an array of other minerals, constituting nearly fifty percent of the nation’s trade and standing as five of the largest products sold abroad. The BGI report highlights how “Australia has in many ways doubled down” rather than shifting away from this dependence by becoming the largest coal exporter in the world. This, coupled with Australia claiming over fifty percent of the world’s lithium exports—with most being sent to China’s battery manufacturing sector—exacerbates Australia’s economic dependence on China. China’s reliance for economic support places Australia in a traditionally precarious position, as it historically depended on the U.S. during security agreements.
Amid rising tension between the US and China, Australia finds itself “economically tethered to one superpower, while militarily aligned with another.”
A Path Forward: Diversification and Domestic Essentials
The Australia BGI Report suggests that Australia’s overarching issues could be resolved if the next government “capitalizes on its impressive state capacity and strong educational system to cultivate a more advanced services sector and complex manufacturing.” The researchers stress the fundamentals on which sustained domestic growth can be achieved, such as comprehensive housing market reform, advanced economic complexity, or the “essentials,” as further straddling Australia’s position as a middle power. Australia can achieve sustained growth and reduce vulnerabilities to China and the US shift in policies, thus ensuring internal and external stability, by this strategic, multi-layered diversification.
