4 days ago
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May 11, 2026 — 5:00am
Proposed changes to CGT, negative gearing and trust taxation in the federal budget will make the tax system fairer, but let’s also be honest: the door to home ownership has already slammed shut on a whole generation of young people. If the government is serious about re-opening it, it knows the path it must tread.
At the crux of intergenerational inequality is a decoupling of work incomes from wealth generation. Asset prices, capital returns and inherited wealth have grown significantly faster than wages for over a decade. Arithmetically, young people are on the front line of that. Half the workforce is under 40 and most rely on work incomes to build a life. They’re scrambling to keep pace, with multiple job-holding near record-highs.
I think a lot about Adelaide’s northern outskirts. Deindustrialisation and unemployment hit them harder than the adjacent west I grew up in. Solid brick houses on 700sqm were less than $300,000 forever, until 2021 when prices rose, more than doubling in just five years. Fifty per cent of all property purchases in Paralowie last year were by investors. Accessible working-class suburbs are now cash crops.
The working class have been priced out of their own suburbs. Owning a home is now a pipe dream on a median wage.
So for young people to have a chance again, the solution is simple: wages need to buy more. That means ensuring pay packets grow with the cost of living. But with inflation surging again, it is also critical that government gets more control over high prices hitting workers’ incomes. It can do this by directly funding and delivering high-cost items like housing, childcare and electricity, and curtailing excessive corporate power through price regulation and stronger taxation.
For the last three decades, tax “reform” has served to build the wealth and power of the wealthiest 10 per cent – mostly older. Retrospective tax changes are always a hard sell politically. But the tide needs to turn.
Inflation effects from war in the Middle East are going to push up construction costs. If we don’t take aggressive measures like tightening investor lending regulations, then it will be the wealthiest cohort who can handle interest rate rises who will buy up scarce new dwelling supply. It certainly won’t be first home buyers.
The political task is now formidable, not least because of Australia’s unique national hobby: landlordism. The designated pathway to wealth and prosperity left the boundaries of humble home ownership and became about owning other people’s houses long ago, but it was encouraged by Howard’s CGT changes in 1999. Almost 1 in 10 Australian adults is now a landlord (9 per cent), compared to 7 per cent in 2000, and 1 in 21 adults in the UK.
But this national hobby is now primarily for elites. In 1999-2000, almost half (49 per cent) of all rental properties were owned by average-earning people with taxable incomes of $18,000-$50,000 per year (the average individual taxable income was $39,000). But by 2022-23, the share held by average earners in the $50,000-$100,000 bracket had fallen to 29 per cent (average taxable income was $73,000). Meanwhile, above-average earners increased their share from 26 to 39 per cent.
The declining incidence of average workers in the investor market shows building wealth out of wages isn’t as easy any more. Regular Australians can’t live feudal lordship dreams in perpetuity. The system wasn’t built for this. A long-term outcome where the wealthiest benefited most by setting up housing as a casino was not a mistake – it was by design.
For a while, John Howard was able to ride a unique set of historical circumstances to dismantle solidarity and egalitarianism and remake the national image into a country of self-interested “battlers”.
But the lucky confluence of cheaper credit, rising numbers of two-earner households and low house prices that created the conditions for Howard’s politics has ended. The party is over, and the humble demands of young workers for good jobs, a secure home and quality public services cannot be waylaid by dreams of becoming property barons.
Housing taxes became federal Labor’s bogeyman after the 2019 election. It became a dam wall that held back tax reform for years. The upcoming budget will pierce that wall. Anyone interested in the future of young people must keep pushing the Albanese Labor government to widen that crack.
If government is serious about tackling intergenerational inequality, then your wages must be a plausible path to a decent life. This is the heart of our social contract with young and future generations and the substance of our future prosperity.
Alison Pennington is chief economist at the McKell Institute.
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