Anthony Albanese says the surge in popularity of Pauline Hanson’s One Nation party played into his decision to controversially break an election promise on a key tax concession.

The Prime Minister says Labor could not afford to ignore the frustration of voters and “stand still” on policies or “the world will go past it”.

“If people think the economy isn’t working for them and they’re working their guts out and they’re not getting opportunity, I tell you what, they will turn to more simplistic grievance based politics,” he told the Sky News/Australian Economic Summit.

“And that is the context in which my government is saying, ‘no, no, we’re going to deliver real change for the better. This is what we’re doing. This is why we’re doing it’.

“Because it is real, the frustration that people have out there. I’m critical of the leaders of that political movement but I’m never critical of voters.”

He also denied his solid 19-seat majority was the reason for his government’s backflip on capital gains tax and negative gearing.

Mr Albanese on Friday addressed Australia’s Economic Outlook 2026 summit, jointly hosted by Sky News and The Australian, as business demands amendments to tax reforms passed by the House of Representatives the day before.

Striking a defiant tone, Mr Albanese defended his government’s reversal, having pledged not to touch either investor tax benefit during the 2025 election campaign.

“We have changed our position,” he told host Andrew Clennell.

“Just as we changed our position in the last term on the stage 3 tax cuts because we were confronted with what is before you, and what was before us at the time, (which) was enormous pressure on cost of living.”

Mr Albanese denied Labor’s increased majority or the rise of One Nation – which now has two MPs in the lower house after winning the Farrer by-election – was behind the backflip on investor tax.

Later, he said the Australian people “will make their judgment” on the decision.

“Part of the judgment will be, of course, on the merits of what we are doing,” he said.

“We’re putting our case and of course, the Australian people judge.”

In an awkward moment, Mr Albanese was asked why he could not “win an election by telling the truth”.

“We did win an election,” the said before continuing to talk about media pressure on his government to act on the economy. Later, Clennell asked those in the audience with negatively geared properties to raise their hands. Mr Albanese did the same.

“I have,” Mr Albanese said.

“Nothing wrong with that.”

Mr Albanese said those people already with negatively geared homes could keep doing so under the reforms, while younger people will still be able to invest in a negatively geared property. Speaking on the rise of One Nation, Mr Albanese said he was concerned that “if people think the economy isn’t working for them and they’re working their guts out and they’re not getting opportunity, they will turn to more simplistic, grievance based politics”.

“What’s not ideal is to see the rise of populism, whether of the Right or the Left,” he said.

“Populism and opportunism without answers, whether it be One Nation and the increasing blurring of the lines between the Liberal Party and One Nation and the Greens political party on the other extreme, and say everything’s going OK.”

In his speech, Mr Albanese defended his government’s budget, rejected calls for capital gains tax changes, and pushed back on the threat from One Nation.