Labor must fix our tax system. Anything less is economic destruction

February 10, 2026 — 7:55pm

Today, in Australia, people live in very different economic realities. One part of the community, the asset-rich ‘owners’, have been experiencing soaring asset values and rising living standards. The other reality is that of the ‘earners’, who rely on work to get by.

These earners are being hit by inflation, record rents, higher taxes and the Reserve Bank’s interest rate decisions. When plotting these two experiences on a chart, it forms the shape of a K, with the owners on the upstroke pulling away from the earners on the downstroke.

As an earner myself, with a new mortgage and young family, I’ve recently joined the millions of Australians paying annoyingly close attention to what the Reserve Bank (RBA) does.

Each of the interest rate cuts had been a small step towards the family budget being in better shape. But now I am being told there’s “excess demand” in the economy and interest rates might have to go back up. How has this happened?

What’s happening is that the spending and accumulation of the owners is counteracting the belt-tightening of the earners. Previously, low interest rates saw the values of property investments, shares and superannuation accounts boom.

Then, when the RBA raised rates to fight inflation, it was the earners such as young families with mortgages and small business owners who copped the brunt. Further interest rate hikes in 2026 will punish the earners further, while the owners still have plenty of savings to spend.

Instead of wringing their hands on the sidelines, Prime Minister Albanese and Treasurer Jim Chalmers should be reforming our tax system.

Some might say that this has always been the way, referring to the 17 per cent interest rates of the late 1980s. But a lack of affordable housing has broken economic mobility. When housing was more affordable, people could work, save and buy a home. The K shape was more like a U, as we rode economic conditions together.

But society has split inter-generationally – the net wealth of 15 to 44-year-old Australians declined before the pandemic, while the wealth of older age groups increased significantly. Spending data since then shows that as interest rates rose, older Australians increased their spending, while younger Australians cut back.

My gut reaction is to be angry at the RBA. However, the truth is the RBA does not have the tools to target the owners driving inflation. Responsibility for the K-shaped economy lies instead with our politicians, who created it through decades of poor policymaking and now protect it through their inaction.

Instead of wringing their hands on the sidelines, Prime Minister Anthony Albanese and Treasurer Jim Chalmers should be reforming our tax system. Tax reform can accurately target the people driving inflation and reverse the splintering of our society.

By winding back overly generous tax breaks like the capital gains tax discount and superannuation concessions, owners won’t be subsidised to spend and accumulate. The owners will then contribute to reducing inflation, rather than driving it higher.

The thing is, we can’t keep supporting the owners’ spending. The erosion of financial security and economic mobility is destroying the fair go and a merit-based society. It means younger Australians struggle to find the time and money to invest in education, start a new business or raise a family.

Our tax settings risk stalling our economy further as activity becomes dependent on a narrowing base of wealthy investors, ageing consumers and family inheritances. Ultimately, the whole economy could crash, leaving millions unemployed and assets worth far less.

The good news is that political leaders have addressed wealth inequality before. Reforms after the Second World War laid the foundations for decades of broad-based prosperity. But doing so again requires our political leaders to fix our tax system.

Anything less is economic mismanagement, and the ongoing destruction of the fair go will be on our political leaders, not the Reserve Bank.

Thomas Walker is the CEO of Think Forward, an economics think tank run by younger Australians.

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