Australia’s upcoming federal election, set to take place on May 3, is being closely watched by experts and citizens alike as the country faces a number of challenges that threaten to undermine its stability and prosperity. According to a new report released by the Berggruen Institute, the University of California Los Angeles (UCLA), and the Hertie School, Australia’s reliance on extractive industries and economic centralization in major cities is a “ticking time bomb” that must be addressed by the next government.
The report, based on the Berggruen Governance Index (BGI), highlights the country’s economic success and high livability rankings, but also points out underlying issues such as rising political polarization, deepening inequality, and racial tensions. These issues, along with the erosion of public trust in the government, have set the stage for a highly contested election between the centre-left Labor Party led by Prime Minister Anthony Albanese and the centre-right Liberals led by Opposition Leader Peter Dutton.
One of the main factors influencing the election is the housing market, which has reached its worst level on record in 2025. This has pushed younger voters towards the Australian Green Party, which has made housing market reform a central part of its policy agenda. However, the country’s preferential voting system, which only translates 12% of the national vote into 2.5% of seats for the Greens, may hinder their success in the election.
The report also highlights Australia’s economic reliance on extractive industries, which has reduced the incentive to diversify and weakened other parts of the economy. This is exemplified by the fact that the country’s top five exports are all environmentally harmful minerals. Instead of reducing this dependence, Australia has doubled down on extractive industries, making it the world’s largest coal exporter and a major supplier of lithium to China.
The report also points out the country’s delicate position in the growing rivalry between the US and China. While economically dependent on China, Australia also relies on the US security guarantee. This puts the country in a vulnerable position, as it is “economically tethered to one superpower, while militarily aligned with another.”
To address these issues, the report recommends that Australia leverage its impressive state capacity and strong educational system to develop a more advanced services sector and more complex manufacturing. This will not only reduce the country’s vulnerability to foreign powers, but also ensure future growth and stability.
The upcoming election will be crucial in determining whether Australia can address these structural issues and move towards a more diversified and stable economy. The report’s researchers conclude that the next government must focus on essential domestic reforms, such as housing market reform, and building economic complexity in order to secure the country’s future growth and stability.
Derick is an experienced reporter having held multiple senior roles for large publishers across Europe. Specialist subjects include small business and financial emerging markets.