Australia tries to tax its way out of a housing crisis by hitting boomers

Wednesday, 13 May 2026

Luke Malpass is politics business and economics editor. He previously worked at The Australian Financial Review

OPINION: In the parallel universe that is Australian politics, the Albanese Labor federal Budget has just attempted a first: raising taxes on Australia’s asset-rich, property-owning class through a series of broken promises.

The pitch is to whack the baby boomers in order to make home ownership easier for younger generations. Aside from inflation and the cost of living, housing affordability and lack of housing supply has been the number one post-Covid political issue for Australians.

Essentially, the Albanese Labor government and its Treasurer, Jim Chalmers, promised not to abolish negative gearing and were very quiet on lifting capital gains tax. Unlike New Zealand, Australia has a capital gains tax, but since the late 1990s there has been a 50% discount on the tax for just about everyone who owns investment properties. That is being changed so it is taxed at people’s marginal tax rate, with a minimum slug of 30%.

It is being pitched as the right thing to do, but blatant broken promises are usually problematic.

Negative gearing ‒ the practice of writing off losses from rental properties against personal income ‒ is also going to be wound back. In short, the tax breaks enjoyed by Australia’s mum and dad property investors with a rental are being axed. Bill English did this in New Zealand in the early 2010s by scrapping the tax advantages of loss attributing qualifying companies (LAQCs).

And all this has been done in order for Albanese Labor to create a A$250 per year work-style tax credit. And, it seems, to put some money aside for dishing out tax cuts or providing some more bracket creep relief at the next election.

The other aspect to the changes is that some of the tax advantages still remain to a degree for new builds, in a bid to increase housing supply.

Overall, the Albanese government expects it to mean 75,000 young Australians can buy houses over the next 10 years. Sounds great, but it means barely anything ‒ a possible lift in the rate of home ownership from 66% to 67%.

And to put the A$250 per year into context, the NZ Government’s very modest relief package for the fuel crisis will be worth $2600 per year for eligible households.

It’s expensive and won’t touch the sides.

And the bigger problems have not really been dealt with by the Albanese government.

Australia is now running over $1.1 trillion in debt, will increase spending by over A$18 billion this year, and run a budget deficit of about A$31.5b on a budget of about A$800b.

To its credit, the Albanese government has made moves to pare back the National Disability Insurance Scheme — a sort of ACC voucher system for disabilities. When it was first conceived about 13 years ago its maximum cost was expected to be A$14b; it is now A$45b and one of the single largest budget items. Since being introduced in 2013, it has come to gobble up about 8% of the Budget.

In common with New Zealand — and most other Western democracies for that matter, with the exception of the US — Australia has a productivity problem which has led both the Reserve Bank of Australia and the Australian Treasury to forecast sub-par growth in coming years.

The Chalmers Budget does nothing to help this. There is no real reform to sharpen incentives, a creaky tax and industrial relations system, and some now seriously indebted states. Also in common with New Zealand is that wage and salary earners are facing higher and higher tax burdens thanks to bracket creep.

The politics of this will no doubt be closely watched by New Zealand Labour, which is also planning to introduce a capital gains tax to boost GP subsidies if it takes the Treasury benches after November 7.

But there are a few notes of caution. The first is that the Albanese government is making these changes from a position of massive electoral strength. It cast aside the Liberal-National Coalition in last year’s election, Pauline Hanson’s One Nation is now eating into the right of politics, and Labor currently has a 38-seat majority, holding 94/150 seats in the Parliament.

Labor has used its political domination to very modest ends.

The second fact is that Australian Budgets over the past decade have been built on a very handy assumption of a low iron ore price (it is the first thing financial journalists look at when cracking open the Budget papers). So this year the Budget assumes it will return to US$60 over the year for 62% FE landed in China. Currently the price is US$111 per tonne. It also makes similar assumptions about thermal and coking coal prices, which are also much higher than assumptions.

That will obviously turn south one day — the last time was 2015 — but for years now most Australian Budgets have taken in far more cash than budgeted for.

New Zealand has not had upside surprises of that nature since the cheap money days of the early and mid-Covid pandemic.

The other very big difference is in voting systems and political behaviour. So Albanese and Chalmers have bet on younger Australians overwhelmingly voting for them on these issues. In a system where voting is compulsory, this is a reasonable bet. In New Zealand, that would carry far more risk: boomers are a far more reliable voter group than younger voters, who must actually turn up, and voting is optional.

There’s also another matter: that capital gains taxes are blunt instruments and changes to them, while having an effect at the margin, will struggle to overcome the settler society cultural attachment to property as both a hobby and an investment.

All that said, there is clearly a view on both sides of the Tasman that intergenerational equity has gotten out of whack, and that is seen most keenly in the area of home ownership. Labor thinks capital gains and tax treatment of housing is one fix to this.

“The Lucky Country” was published by Donald Horne in 1964. And while the title has taken hold in the public imagination, the second part of the Donald Horne quote is that Australia is “a lucky country run mainly by second-rate people who share its luck”.

That always seems snarky, harsh and for the most part untrue, but the deeper Australia gets into its resources boom, the more it resonates.

The Aussies are now 23 years or so into a resources boom that has made it one of the wealthiest countries in the world. Add to that its massive funds management system and higher superannuation balances, and it should be in a great position.

But policy drift under a conga line of Treasurers including Labor’s Wayne Swan, the Liberal Party’s Joe Hockey, Scott Morrison, Josh Frydenberg and now Labor’s Chalmers has meant that despite Australia going 29 years without a recession up to 2020 (broken only by Covid-19), it has only recorded two Budget surpluses since 2007 — during the inflation years of 2022 and 2023.

Australia is a rich place with a lot of opportunity, but given its supercharged wealth, its fiscal management and economic reform agenda has been woeful these past two decades. The Albanese government has even embraced 1970s-era industrial policy to try to build Australia into a renewable energy giant.

When the tide goes out on commodity prices — iron ore especially — a crunch will come.

But for the meantime, with a fuel price crisis on the doorstep and with high inflation going into the war in Iran, keeping inflation under control will be one of the most pressing political challenges for the Albanese government, and a real-world requirement for the Reserve Bank of Australia.