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Treasurer Jim ‘Zippy’ Chalmers should have named his budget ‘Scott’: as in, ‘scott-no-mates’. Yeah, it’s an old joke, but none the worse for being well-worn. And it certainly applies in spades to this near-universally unloved budget. Chalmers’ latest effort is so obviously appalling that the knives are out even in the Labor caucus and even among the party’s own greybeards.
A top adviser to former Labor leader Kevin Rudd and NSW Premier Chris Minns has joined a growing group warning that Prime Minister Anthony Albanese and Treasurer Jim Chalmers’ decision to hike the capital gains tax on businesses will stifle the economy and drag productivity, as Labor MPs grow uneasy about the backlash over the controversial measure […]
[Lachlan Harris] argues that a policy ostensibly designed to create equity between generations would actually make it “much, much harder for young Australians to start businesses, to work in small businesses, and for those businesses to raise money”.
In the last two days, small businesses owned by young Australians have flooded the internet with memes mocking the tax changes. Albo’s only response was that at least the pictures were ‘flattering’.
Several Labor MPs are nervy too, though they won’t say it on the record. They’re getting an earful from the aspirational voters in seats like Bennelong and Deakin, who drifted to Labor since 2019. Chinese- and Indian-speaking communities are already debating the tax hit in their own channels. Even Bill Kelty, the old union warhorse, reckons Chalmers should have cut the top marginal rate and properly indexed brackets instead of this half-arsed tinkering.
But the real kicker are the negative gearing carve-outs that turn the whole ‘intergenerational equity’ sermon into a bad joke. The collective of Labor and Greens MPs who have amassed lucrative property portfolios exempted themselves from paying a cent of the new taxes, including the PM himself, who owns multiple houses, including a clifftop mansion, and recently turfed out his long-term renter in order to sell the property for a cool million-plus. When questioned on this, Albanese simply turned and stalked off.
Still, smart homeowners will quickly figure out how to work around the new taxes, too.
Millions of Australians will still be able to negatively gear their homes after July 2027 through a carve-out allowing owner-occupiers to later turn existing homes into investment properties.
Grandfathering means anyone sitting on an owner-occupied home bought before budget night can move out, rent it and still write off the losses against their other income. KPMG chief economist Brendan Rynne nails the perverse incentive: “What that’s going to mean is that that housing turnover is probably going to be a bit less than what we’ve seen in history.”
In other words, older homeowners who might have downsized will now cling to the family pile like barnacles on a wharf. This is the exact distortion economist Thomas Sowell has documented with rent controls: government meddling in the market doesn’t fix shortages, it makes them worse. People stay put. Supply dries up. Prices keep climbing. Young buyers stay locked out.
And while Labor blatherskites about ‘equity’, the Reserve Bank is watching the inflationary bonfire the government have lit, with both hands on the interest rates lever.
Australia’s central bank was watchful of more inflationary shocks to the economy, with Reserve Bank assistant governor Sarah Hunter warning the central bank is “more worried now than we have been in the past”.
In other words, expect even more rate hikes. Young mortgage holders already stretched to breaking point will get another kicking while their Boomer parents sit pretty in negatively geared McMansions.
So much ‘intergenerational equity’.
The hypocrisy doesn’t stop there. Chalmers’ shiny new working Australians tax offset, the $250 handout meant to ease bracket creep is so sloppily designed that even billionaires qualify.
Some of Australia’s wealthiest, who would receive the WATO, say that unless the handout is means tested or the tax thresholds fully indexed then it’s bad policy.
The billionaire founder of logistics company Linfox, Lindsay Fox, said he paid tax and would likely be eligible even at the age of 89 for the $250 WATO when the permanent annual tax offset was applied in the 2028 financial year.
Hands up who thinks pollies will do the same?
This is Labor economics in a nutshell: rob Peter to pay Paul, create loopholes wide enough to drive a B-double through, then wonder why the young are furious. The CGT changes were sold as fixing housing affordability. Instead they’ll discourage business investment, reduce housing turnover and punish the very aspirational voters Labor needs to hold those suburban seats. The productivity package and start-up incentives look like window dressing next to the perverse incentives baked into the tax system.
Tell me this isn’t a socialist Labor government.
This budget wasn’t just unloved. It was actively self-sabotaging. And when the rate hikes bite and the young realise they’re still locked out of the property ladder their parents are refusing to vacate, the electoral bill will come due. Scott-no-mates indeed.
