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

Anthony Albanese says he is aware more people will turn to populist parties if they feel the system is not working for them. (AAP: Lukas Coch)

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.

One Nation has become the dominant threat to Labor. (ABC News: Matt Roberts)

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."

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.

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.

The rise of One Nation is partly behind the government's decision to take on tax reform in this year's budget, the prime minister has admitted.

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