In March 2025, inside the federal budget lock-up, Peter Dutton’s Coalition colleagues fell into line behind him to oppose a $17 billion Labor tax-cut package, vowing to repeal it if they won office. The rest is history, but not of the kind the opposition would care to recall.
Angus Taylor lost the argument with Dutton that day. But in opposing and even threatening to repeal Jim Chalmers’ decision in this year’s budget to shift the tax burden onto the investor class through changes to negative gearing and a 30 per cent minimum tax on trusts – or as Taylor prefers to put it, “stand[ing] between hard-working Australians and … toxic taxes” – could the Coalition again be jumping the wrong way?
Anthony Albanese certainly hopes so, as he made that connection in question time on Wednesday.
While the treasurer danced around whether unwinding negative gearing benefits on property and Howard-era cuts to capital gains tax constituted a broken promise, the prime minister who repeatedly made that promise has sought to concede the point and move on. His ability to do so – and the success of Taylor’s line of attack – will depend heavily on what happens next.
Having laid out measures to dampen demand for housing as an investment, it is all the more vital that the government does more work – much more – to tackle the enduringly sluggish supply.
The Coalition is already pointing to Treasury modelling that shows 35,000 fewer houses could be built because of the tax changes. The government is arguing that other measures – such as the $2 billion fund for local infrastructure announced in the budget – will offset those losses and lead to a net increase in housing supply.
At a time when One Nation is reaping the harvest of distrust in both major parties, a “set and forget” approach involving a funding incentive, even if it is counted in billions of dollars, is insufficient. Albanese and his ministers need to get into the weeds of housing construction – the regulations, where it happens, how much of it is affordable or social housing, cost of delivery – to win back the disenchanted, especially in the younger generations it is counting on for future elections.
Another area where the dial needs to be shifted in a dramatic way is productivity, yet as Treasury’s Budget Paper No. 1 makes clear, “the long-term productivity growth assumption remains at 1.2 per cent in the 2026-27 budget”.
The budget’s release of more than $500 million in additional funding from the Medical Research Future Fund is among a number of measures announced with productivity in mind, but broader tax reform is the elephant in the room. We are still over-reliant on tobacco excise at a time when illegal tobacco is a fixture on every shopping strip, and technological changes such as electric cars and artificial intelligence will continue to reshape the taxation landscape.
It should at least be acknowledged that major construction projects, including housing projects, have suffered higher costs and delays due to the activities of the CFMEU and those in its orbit, a problem that is still far from being eliminated.
Each of these issues bites into government’s ability to provide the services the voting public expects, with the spotlight in this budget on the cuts to the National Disability Insurance Scheme. The $2 billion announced for the Thriving Kids program in the budget is meant to soften that blow by absorbing many of those families dropped from the NDIS, but like the targets for housing, the proof of the pudding will be in voters’ experiences with the new arrangements.
But there is an additional, even larger challenge looming over all talk of reform and of ambition, one that Victorians are particularly familiar with. As our senior economics correspondent Shane Wright points out, interest payments on the government’s debt are now “the single fastest-growing expense on the budget. This coming year it will cost taxpayers $31.9 billion, the government’s seventh-largest expense.”
As this masthead’s economics editor Ross Gittins has said, while praising the budget: “If we’re going to be more conscious of intergenerational unfairness, what could be more unfair than our generation leaving a monster debt for the next?”
The Age notes that the treasurer is not planning to spend all the money he has clawed back in this budget, and that is a good thing.
But as COVID and then the US-Israeli war on Iran have shown us, even the most cautious economic assumptions need to have a safety net beneath them.
Addressing the nation’s debt and changing how we are taxed are two sides of a coin that we can’t just assume will always land in our favour.
For all that this budget has done, there are nettles to be grasped if Australians are to approach the future with confidence rather than fear.
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