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About an hour before the sun came up in Canberra on Friday morning, Jim Chalmers was out for a run.

In single-digit temperatures, photographers were on hand to capture shots of the treasurer, days out from what he says will be Labor’s most ambitious federal budget yet.

It’s designed to rebalance the intergenerational scales away from the baby boomers, but Labor also wants billions of dollars in new spending to make the country more resilient to be able to withstand increasingly frequent international shocks.

But, even amid the worst of the global energy crisis, voters might be smart to get used to shocks emanating from closer to home.

The reform plan Chalmers is expected to outline in Tuesday’s budget, and the result of Saturday’s Farrer byelection, look set to shift the political landscape. Both could test Labor’s supremacy in the parliament, further weaken the deflated Coalition and turn focus to the insurgent Pauline Hanson ahead of the next election.

The race in Farrer – the country New South Wales seat held by the former opposition leader Sussan Ley – was notable even before ballots were cast.

Labor is not contesting the byelection and the dire politics facing the Liberal and National parties means neither is a serious prospect of winning. Instead, the only candidates with a real chance are One Nation’s David Farley and the community independent, Michelle Milthorpe.

It would be the first time One Nation has won a lower house seat in its own right, 30 years after Hanson was elected as a disendorsed Liberal and almost six months on from Barnaby Joyce’s defection from the Nationals. The decline of the major party vote continues around the country, and tough economic times means the power of grievance has rarely been as strong in Australian politics.

After success in the South Australian state election and talking a big game ahead of the November poll in Victoria, Hanson would use a victory in Farrer to claim vindication for her anti-immigration policies, along with her support for Ben Roberts-Smith, the Victoria Cross recipient alleged to have committed war crimes offences during military service in Afghanistan.

Claiming to represent battlers, Hanson has spent the final weeks of the byelection campaign bragging about her new private plane, a gift from her billionaire backer, Gina Rinehart. Never fans of tough questions, One Nation on Friday banned ABC journalists from covering Hanson’s campaign stop in Albury and fought with reporters sent to cover the race.

Farley has had a difficult time of it in the past few weeks, amid revelations he sought to run for Labor just four years ago and cooperated with the community independent “Voices” movement before the 2025 election, even discussing preferences and suggesting a platform for a House and Senate campaign.

Asked about his endorsement of Milthorpe last year, a One Nation spokesperson on Friday conceded to the Guardian that Farley had been on a political “journey” before signing on to Hanson’s party. Some in Farrer doubt he will go the distance as a member of One Nation, an ominous sign for Hanson, who has a record of falling out with party figures.

Likely the controversy doesn’t matter much for some locals. As respected press gallery commentator Michelle Grattan wrote on Friday, voters supporting Hanson “are reacting to a vibe … rather than worrying about the fine print”. They are ready to give the middle finger to the major parties.

Losing the seat will add to the pressure facing the opposition leader, Angus Taylor. The Liberals and Nationals have held Farrer since the seat was established in the 1940s, but the opposition can’t afford to go any further backwards in the lower house. Their preference deal with One Nation is designed to stop the teal march, but will probably strengthen Hanson’s position to cut the Coalition’s lunch from the right.

More support for One Nation works for Labor as well, especially as the government prepares to break clear promises to voters on generous tax concessions for property investors.

Like the promises from Labor’s failed campaigns in 2016 and 2019, changes to negative gearing rules and the capital gains tax discount are widely expected on Tuesday night.

Chalmers insists Labor’s push to deliver more fairness and help those shut out of the housing market isn’t about pitting one section of the community against another. But increasing taxes on property owners will anger some in the electorate, as well as cashed up lobby groups, and hand new ammunition to Taylor and the pugilist shadow treasurer, Tim Wilson.

Labor is expected to carve out new homes from the negative gearing changes, possibly limiting the rules for investors with multiple properties, and could fully abolish the 50% capital gains tax discount. A crackdown on tax rules for trusts is also expected.

Labor has room to take on some of these big fights, especially as some in the caucus are getting restless over Anthony Albanese’s measured and methodical approach through the first four years in government. But if Labor goes to an early election, this budget might be its best shot at the major reforms Chalmers appears so eager to deliver, with another budget next May likely to be about the upcoming election.

If the Coalition can muster an effective attack against Chalmers’ changes, the political shock could put new pressure on Labor.

Chalmers won the debate on a broken promise over changes to the stage-three personal income tax cuts in Labor’s first term, knowing most voters would win from the change. The budget will create more losers, even if many would be more at home voting for the Coalition.

Jim Chalmers’ budget and an unusual byelection race have the potential to shock the system.

• Tom McIlroy is Guardian Australia’s political editor