The current government has shown a preparedness to promote division in the pursuit of policy outcomes. The latest iteration of divisive politics is the ‘intergenerational equity’ agenda driving emerging tax reform and budget settings.
This benign-sounding catchphrase is intended to convey altruistic economic support for young Australians, but the anticipated new taxes are really a repackaging of the unpopular and divisive policies that were brought to Labor’s unsuccessful 2016 and 2019 election campaigns. The expression intergenerational equity must have been designed by a focus group and scored ‘high positive response rates’ because it’s been getting high rotation airplay. It’s repeatedly used in media appearances to justify the introduction of foreshadowed tax policies that have no electoral mandate and are inconsistent with Treasurer Chalmers’ and Prime Minister Albanese’s 2025 campaign promises about taxes.
The use of the intergenerational equity justification to sell these tax changes needs to be properly scrutinised.
First, it’s platitudinous and risks disingenuity. Most people have children. Young people (hopefully) become old people eventually. Age is a continuum. When does one generation stop and another one begin? It’s trite to say that governments should strive to provide a good life for people of all ages, including young people. The government is positioning itself as embarking on some grander policy journey with its rhetoric about concern for younger Australians. Does the government think the voters will believe the government cares more for young people than their own parents, who are the principal targets of these new taxes, many of whom who were intending to use their long- earned assets to financially assist their children?
Second, it is surely contestable that young people generally are suffering under the yoke of generational unfairness. This thesis is mostly viewed through the narrow lens of home ownership rates of younger Australians. Yes, it’s much harder to buy your first home but most Australians under 30 will live much longer and healthier lives than their parents and grandparents. They will have longer productive working lives, are having children later and spending their twenties, thirties, and beyond enjoying the type of consumption, travel, mobility, and economic freedom that many boomers and post boomers could only dream of. This ongoing recalibration of longevity, consumerism, and changed patterns of wealth accretion and leisure time, and the positive impact of better health and technology, is seldom mentioned in the discussion of intergenerational equity. There is also scant regard for the counter inequity in changing the rules mid-game for older Australians and punishing them for responding to the signals sent to them by the governments of the day.
Third, it’s nasty to pit young people against their parents and breeds a victim and grievance mentality rather than fostering collective national ambition. Young people don’t want to hear from old people how tough they had it back in the day. Old people don’t want to hear from young people that older people had it easier and that life is now all too hard. Everything these two groups say to each other, and about each other, is true or false to some extent. Everyone looks at the world through their own eyes. We don’t need the government to use age-related division to sell taxes that really have little to do with generational fairness.
The true motivation for various forms of new asset and wealth taxes is a lot more basic and less altruistic. We have run out of money and need more taxes to support profligate spending and to cater for the effects of the poor economic forecasting and management of the last three or four governments, Labor and Coalition. Our productivity is declining at an alarming rate. We are going through an expensive energy transition which has created inflation and eroded the value of our exports. There are some big global economic headwinds facing us all. Let’s focus on these hard realities which are the real causes of any genuine intergenerational wealth inequalities.
The target of wealth taxes, be they incursions into superannuation concessions, CGT, property taxes, or trusts is the small but relatively wealthy demographic of voters who either vote Coalition, Teal, or increasingly One Nation. This is a proportionately shrinking and aging group, and the government believes it can raise the tax take without losing too many votes in marginal electorates. There are no meaningful offsetting reductions in income or consumption tax planned nor is any root and branch tax reform in prospect. This low- risk target strategy is being sold under the guise of intergenerational equity but there is so far no compelling case presented by Treasurer Chalmers or anyone else that the markers of intergenerational inequality will be meaningfully reduced by these proposed taxes. If the tax reforms are sensible and will deliver overall benefits, they should be sold on their merits rather than on the false premise of intergenerational equity. It should also be better explained why they were not brought to the 2025 election. There is some likely genuine merit in reviewing negative gearing and CGT rates, which have skewed investment incentives and markets, but there are very big questions and risks too. The new taxes could misfire and produce unintended consequences such as higher rents and lower investment. An honest debate should be had rather than relying on the intergenerational equity canard.
Take housing affordability, cited as one of the key drivers for these proposed new taxes. The quickest and most obvious way to fix this problem is to reduce immigration and rebalance housing supply and demand but there is no discussion of intergenerational equity in the context of our immigration policy. Where is the intergenerational equity in massive population growth ahead of our capacity to absorb it and meet housing supply requirements? The real cost of rapid population growth will be borne by younger Australians who will be alive longer to deal with the long tail consequences. Proponents of high immigration have quite clearly failed to make a compelling economic or political case. This is why it’s looming as a big election issue and why so many voters are flocking to One Nation. Whilst it’s too big a topic for this article, we only need to look at house price unaffordability, our declining productivity rates and higher welfare expenditure rates to see correlations if not causal relationships with our high immigration intake.
HECS is another awful drag on young people that needs root and branch review. The forgiveness in 30 per cent of the HECS debt is a nice bonus for student debtors but a more useful policy would be to completely re-design and re- price higher education and training to incentivise useful and productive tertiary and trade courses rather than encourage pointless degrees at huge cost that mostly qualify young Australians for jobs that will be fully AI-replaceable within five years. Young people need to be encouraged to take risks, build businesses, and hold ambitions for wealth and wealth creation, not just for themselves but for others. Home ownership is not the only dream young people should have. By continually emphasising home ownership as the holy grail in public debate all the government does is foster a feeling of helplessness and single measure poverty which is misplaced.
Confiscating the wealth of older Australians accumulated under policies of prior governments that facilitated this wealth creation is not policy, it’s low-hanging fruit at best, or at worst, retribution. It is also being pursued without a critical evaluation of which of those former policies might still be apt to help younger Australians accumulate their own wealth over time, and without developing new policies, which grow rather than redistribute the pie.
Prior governments, both Labor and Coalition, were motivated to deliver wealth and improve the living standards of the populations they governed at the time. They mostly achieved this by looking to incentives to save and invest rather than to spend, and to create opportunities for working and aspiring middle-class Australians to move from labour to owning capital. Ultimately, this remains a sound policy setting. It was the foundational economic principle behind the Hawke/Keating governments. They believed the system should work to allow more workers to save and own assets.
It’s true that some old policy settings have had deleterious lag impacts, such as property or superannuation favoured tax settings. The world has also changed, but equally many of our so-called ‘intergenerational’ inequities have in fact emanated from terrible current government policies of only the last couple of years and there seems no appetite to review these mistakes. Prime examples include the proliferation of middle-class welfare; profligate spending and inflationary ‘fiscal easing’; unsustainable levels of immigration, especially of unskilled workers; sponsoring massive welfare dependency through an unchecked NDIS; burgeoning red, green, and other coloured tape; a confused and incoherent energy policy; failure to develop new trade partners and industries; and an implacable resistance to root and branch tax reform or industrial relations overhaul. Our education system also needs a total rethink. We could go on…
The current government and future governments need to develop a policy agenda that focuses on the real causes of our economic challenges. This will help young people a lot more than increasing the tax rates on family trusts.
