Opinion: Intergenerational inequity is a smoke screen
13 May 2026
Jim Chalmers has to be the best politician in Australia. No-one spins like Jim. He really is the best.
The 2026 Federal Government Budget has been delivered as addressing intergenerational inequity and helping young people get onto the housing market. However, We don’t think the measures meet the marketing promise. We think Jim may have gone too far.
In our view, the difficulties faced by younger generations getting ahead are cost of living, interest rates and income tax. For younger (and all) Australians, personal tax rates are too high, with bracket creep taking more and more of their personal income. Interest rates and the cost of living are elevated, driven by inflation rates that would not exist if the government were to substantially reduce spending. And we are leaving the most enormous government debt to our children, despite the increased taxes in the Budget. The current Federal Government’s gross debt is over $1,000,000,000,000 (1 trillion) with further cumulative deficits of $150,000,000,000 ($150 billion) forecast between now and the end of the decade; taking gross debt to a projected $1,249,000,000,000 ($1.249 trillion). Isn’t that is just too many zeros?
The Budget removes of the 50% capital gains discount and the changes to negative gearing will slow the growth in house prices from 6% to 4% in the short term. This does not even offset the increase in property prices at the lower end due to the Australian Government 5% Deposit Scheme. Tim Lawless at Cotality reported in April this year that the value of eligible homes rose 6.7 % in the first six months after introduction of the scheme on 1 October 2025, nearly double the 3.6 % increase recorded for higherpriced properties.
Is it bold to suggest that the “intergenerational inequity” marketing spiel is just a smoke screen to increase taxation to fund exorbitant government spending?
The removal of the 50% capital gains discount applies farms, small businesses and to capital investments more broadly. The average CGT rate among developed economies in the OECD is 19%. The current maximum rate is Australia is 23.5%, half the highest marginal tax rate of 47%.
Christian Gillitzer, a former Reserve Bank of Australia economist, has conducted analysis indicating the introduction of indexation on an assets with a 9% gain per annum (excluding income) will increase the tax rate to 33.9% to 37.4%. Investment in higher performing assets will see that tax cost in the range of 40% to 47%. These rates compare with Singapore and NZ, where there is no taxation on capital gains. The United States is at 23.8%, United Kingdom at 24%, Germany at 26.4%, 27% in Canada, 33% in Ireland, 34% in France and 36% in the Netherlands. With the new inflation model replacing the 50% discount, Australia will have one of the highest capital gains tax rates in the world, which must discourage investment. Economist Dimitri Burshtein is quoted in the Australian Financial review as saying that capital should receive preferential treatment. “It encourages business formation and investment – key drivers of productivity and economic growth”.
The budget papers also indicate Treasury has:
downgraded economic the growth forecast for next year from 2.75% to 1.75%;
pushed the inflation forecast from 3.75% last December to 5%;
expects food prices to continue to increase due to urea costs; and
projected a 4.3% increase in government spending in real terms.
And the CBA reports “the Budget is unlikely to shift the RBA’s near-term view on interest rates, but it does little to help in the fight against inflation. Greater spending restraint in 2026-27 would have reduced aggregate demand across the economy and created more headroom for the RBA if inflation stays high. As it stands the risk sits with further tightening by the RBA.
If the tax increases and budget initiatives reduced income tax and housing values for younger generations, reduced cost of living and interest rates, and were applied to reduce Australian government debt, intergenerational inequity might have a chance of improving. However, the budget does not do any of these. Phillip Correy, usually a very balanced journalist for the Australian Financial Review, says it all so well: “Rather than lift all boats, this budget sinks all yachts. How else to explain a raft of tax increases that takes from the asset classes, both present and future, but does not do a great deal to redistribute that wealth to workers?”
And for those who wish to exit (we never will, we love this place), the government has increased the outbound passenger departure tax by 14% from $70 to $80.
Peter Debus is a director of PrincipleFocus, a Chartered Accountant and Chartered Tax Adviser.
