One of Prime Minister Anthony Albanese’s closest former economic advisers has delivered a blistering critique of the Labor Government, accusing it of abandoning the pro-growth reform agenda that once defined modern Labor governments and replacing it with a high-tax, interventionist approach that risks undermining Australia’s long-term prosperity.

Alex Sanchez, who advised Anthony Albanese on economic policy before quietly departing the Prime Minister’s Office in 2024, used a speech at the Centre for Independent Studies to express frustration with what he sees as Labor’s failure to pursue meaningful structural reform.

Sanchez described his experience working for the Prime Minister as a “Faustian bargain“, saying he struggled to reconcile his own economic philosophy with the direction the government ultimately chose to take.

The criticism is particularly significant because Sanchez is not a traditional conservative critic.

A long-time Labor member and economist, he joined Albanese’s office after years of advocating market-oriented reforms from within the party. His remarks therefore represent an unusually pointed assessment from someone closely associated with Labor’s own economic policy development.

According to Sanchez, the Albanese Government has drifted away from the economic philosophy championed by former Labor prime ministers Bob Hawke and Paul Keating, whose administrations became synonymous with sweeping productivity reforms, trade liberalisation, competition policy and tax reform.

Instead, he argued, Labor has increasingly embraced larger government, higher taxation and greater state intervention in the economy.

Among Sanchez’s biggest frustrations was his unsuccessful attempt to persuade the government to pursue more ambitious tax reform.

He revealed that he had advocated reducing Australia’s top personal income tax rate from 45 per cent to 30 per cent while lowering the company tax rate to 25 per cent in an effort to improve Australia’s international competitiveness and encourage greater private investment.

Those proposals were ultimately rejected.

Sanchez argued that Australia’s tax system increasingly penalises productive investment and entrepreneurship while making the country less attractive compared with competing economies.

He also criticised what he described as Labor’s renewed emphasis on redistribution rather than wealth creation.

According to Sanchez, governments should first focus on expanding the economy before deciding how national income is distributed.

He suggested the current policy direction risks slowing productivity growth by placing greater emphasis on raising additional revenue instead of encouraging investment and business expansion.

Another major target of his criticism was the National Disability Insurance Scheme (NDIS).

While acknowledging the importance of supporting Australians living with disability, Sanchez questioned whether the program’s rapidly growing cost was producing outcomes that justified its increasing share of national expenditure.

He noted that the scheme now represents roughly three per cent of Australia’s gross domestic product and argued governments must become more willing to examine whether major spending programs remain financially sustainable over the long term.

Sanchez also expressed concern about what he sees as an increasingly interventionist approach to industry policy.

He argued governments should avoid attempting to direct investment through extensive subsidies and instead create conditions that allow businesses and markets to allocate capital efficiently.

In his view, productivity-enhancing reforms—including simpler taxation, greater competition and lower regulatory burdens—would generate stronger long-term economic growth than expanded government intervention.

The comments add to a broader debate over Labor’s economic legacy during Anthony Albanese’s prime ministership.

The government has defended its record by pointing to lower and middle-income tax relief, investments in renewable energy, manufacturing, housing and skills development, together with policies designed to reduce inflation while supporting employment.

Ministers argue these measures represent practical economic reform aimed at improving productivity and long-term resilience rather than simply reducing tax rates.

Labor has also maintained that its industrial relations reforms, investments under the Future Made in Australia strategy and infrastructure spending are intended to strengthen Australia’s economic capacity over coming decades.

Government ministers have argued that targeted public investment is necessary to support the energy transition, advanced manufacturing and national economic security in an increasingly competitive global environment.

Sanchez, however, believes those initiatives do not amount to the kind of structural reforms that transformed Australia’s economy during the Hawke and Keating years.

He argued modern Labor has increasingly moved towards policy positions traditionally associated with a larger role for government, describing the shift as moving closer to the Greens on several aspects of economic policy.

That ideological evolution, he suggested, represents a significant departure from Labor’s historic emphasis on economic liberalisation and productivity growth.

His intervention comes as Australia continues facing a series of long-term economic challenges, including slowing productivity growth, housing affordability pressures, population ageing, persistent budget demands and the transition towards lower-emissions industries.

Many economists have argued that addressing those issues will require another generation of major structural reforms comparable to those implemented during the 1980s and 1990s.

The debate centres not on whether reform is necessary, but what form it should take.

Supporters of lower taxation argue Australia must improve incentives for investment, innovation and entrepreneurship if it wishes to remain internationally competitive.

Others contend government investment, targeted industry assistance and stronger public services are equally important for sustaining long-term economic growth and improving living standards.

Sanchez’s criticism therefore reflects a wider philosophical disagreement over Labor’s economic direction rather than simply a dispute about individual policies.

His remarks also stand out because they come from someone who worked inside the Prime Minister’s office and participated directly in discussions over Australia’s economic strategy.

Although the government has not adopted many of the reforms he advocated, Sanchez said he believes Australia still requires a renewed focus on productivity, tax competitiveness and market-based economic reform if it is to maintain strong long-term growth.

Whether those ideas gain greater political support remains uncertain.

For now, however, Sanchez’s comments have intensified debate over Labor’s economic credentials and reopened questions about whether the Albanese Government is delivering the kind of transformative reform agenda historically associated with some of Australia’s most influential Labor administrations.