Pass the smelling salts: an Australian government has used a budget to reorganise the economic system and, by implication, the society. What Treasurer Jim Chalmers and Prime Minister Anthony Albanese delivered on Tuesday is not a comprehensive rebuild. You couldn’t even describe it as extensive – not yet anyway. But it is a definitive attempt to bring down the curtain on an era and begin a new one.
The leading figure in the old era was John Howard. There is enormous nostalgia for the Howard days not just among what’s left of the Liberal Party but in large parts of the media and among economists. It was a stable government, with its prime minister, treasurer and foreign minister occupying their posts through all four terms of office. It changed the country.
On its election in 1996, it nominated as one of its key goals the creation of an “investor society” in which most ordinary folks in the suburbs and the regions – so-called mum and dad investors – took out shares and relied on their investments to build wealth along with whatever they earned through their labours. The privatisation of Telstra kick-started that process. The introduction of the 50 per cent discount on capital gains tax followed in 1999, turbocharging property as an investment in tandem with negative gearing. Increasingly generous changes to the tax treatment of superannuation were another element.
Over a quarter of a century, these changes worked well for many Australians – possibly too well. Housing prices rose at a dramatically higher rate than wages, and the investor society has slowly transitioned into a debt-and-stress society for younger Australians. As a result, there is an intergenerational wrestling match going on and the Albanese government has decided to change the rules on negative gearing and the CGT discount to favour the young against the not-so-young.
The reflexive response by the Coalition has been to aggressively – and all too predictably and contrary to its own best long-term political interests – stick with the not-so-young. It has pledged to fight the changes. The government is going where the bulk of voters, the younger generations who will decide future elections, are. Within that younger cohort, anger about a lack of economic security is rising. The government wants to stem that anger, thus insulating itself from the populist wave that’s started washing over the Coalition parties, by attempting to shore up young people’s belief in the political and economic systems.
Perversely, the government’s trust-building effort is built on breaking pre-election pledges not to fiddle with negative gearing and the CGT discount. A lot is being written and said about these broken promises by the media and the opposition. It’s not clear it will have much effect. Most voters these days don’t pay a lot of attention to this stuff because, whether aged hacks like me are happy about it or not, they don’t hang on every word produced by the media. Nor in an age where everyone has their own truth do they see promises by politicians as having been sworn on a stack of Bibles.
To the extent that voters regard these broken promises as something of note, Labor’s 2026 positions on CGT and negative gearing were party policy advocated at an election 10 years ago and at the election after that. In that light, it’s not exactly new information. Something similar happened in the Coalition’s favour in the 1990s regarding the GST, which was Coalition policy in 1991, ruled out explicitly by John Howard in 1996 and taken up again – from office – in 1997. Labor railed about the broken promise at the 1998 election; Howard won, allowing him to implement his plan. Few believed that Howard was serious when he had said he would “never ever” propose a GST.
After many years of so-so budgets by governments on both sides that have involved minor rearranging of the furniture, it’s been slightly confronting to hear Jim Chalmers speaking explicitly about the government’s identification with working people – that is, those on wages – over the wealthy or investing class. The government’s direction has been evident since its election in 2022 with its first-term wages and workplace policies, but the attempt to redirect investment away from property – mild as it is given the grandfathering clauses – takes that to another level. Chalmers stated this explicitly on Tuesday night regarding the negative gearing changes: “This will help rebalance a system which is more generous to assets than it is to labour.”
It’s not hard to view this year’s budget as stage one of a three-stage budgetary project, with a serious rearrangement of taxes on income and business being in the frame as the 2028 election approaches. Whether the government gets to reach that objective depends heavily on how Donald Trump prosecutes the conflict in Iran.
In the meantime, the focus shifts to the formal response. Opposition Leader Angus Taylor will get the biggest moment of his political career with his budget reply on Thursday night. Given that he is in a subterranean intra-party contest with Andrew Hastie for the right to lead the Liberals to the next election, he cannot afford to blow it.
Three months in, Taylor is struggling. His public pronouncements are consistently hyperbolic, encouraging a “why are you saying that?” response. Last week he described the prime minister as “incompetent, is fraudulent and he’s a liar”. On the weekend, he sought to play down the Liberals’ catastrophic result in Farrer by averring that the party had “always had a mountain to climb” at the byelection. What mountain? At the election a year ago, Sussan Ley won the seat with a primary vote of 43 per cent and a vote after preferences of 56 per cent. Last Saturday, the Liberal vote fell 31 points – 31! – and the Liberals’ main purpose in its hitherto safe seat turned out to be to deliver preferences to ensure the seat went to One Nation. That is pure humiliation.
Taylor is under incredible pressure. What’s happening in our politics borders on the bizarre. There’s a political backlash going on, yet it’s chiefly directed not at the party in office but at the opposition. Perhaps that goes some way to explaining why Albanese and Chalmers feel they have the freedom to overtly dismantle the policy superstructure established by Howard and sustained by the Coalition governments that followed and revered him.
Shaun Carney is a regular columnist, an author and former associate editor of The Age.
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Shaun Carney is a regular columnist, an author and former associate editor of The Age.