Reform should not be about fairness, intergenerational equity, social cohesion or getting back at “greedy multinationals”. All have been cited as reasons for changes to the capital gains tax discount, negative gearing and taxes on gas exporters.
Economic reform is about making the country richer by working smarter and improving incentives within the tax, welfare and industrial relations systems. It’s about making governments at all levels more efficient.
It’s not about a tax grab to help a lazy government pay off the nation’s debt, or to help finance an endless expansion of public sector employment.
The reforming Labor governments of Bob Hawke and Paul Keating in the 1980s and ’90s told voters upfront that the world does not owe Australians a living.
Hawke and Keating floated the dollar, opened the economy to international competition, deregulated banking and industrial relations and, cut personal and company tax rates.
John Howard’s Coalition government introduced a GST and privatised lazy government-owned businesses.
These governments wanted Australia to be able to compete with the rapidly growing open economies of Asia.
Their reforms gave Australia 30 years of productivity improvements that underwrote growth and kept the nation out of recession.
Political wins today come from giving away free money on the national credit card.
Prime Minister Anthony Albanese won the May 2025 election with handouts to subsidise soaring power prices. He cancelled $16bn of student debt accumulated by people who would go on to become high-income earners.
He signalled subsidised childcare for families earning up to $530,000 a year and an $8bn boost to bulk billing that gave doctors $3 for every dollar saved by patients.
The only tough thing his government has promised since 2022 was last week’s decision to limit NDIS growth to 2 per cent a year and cut 160,000 people from the scheme. The big question is will it happen or is it just a number for the forward estimates when Treasurer Jim Chalmers hands down the budget on May 12?
Albanese last Wednesday linked possible changes to the 50 per cent capital gains tax discount and to negative gearing to building national resilience. Seriously?
The PM believes populism is rising globally because people feel governments are not listening to them. Yet he thinks this can be solved with minor tinkering to taxes on investments.
Albanese and Chalmers say changes to the tax treatment of housing would deliver more “intergenerational equity”, yet they refuse to deal with the biggest threat to future generations – the $1 trillion national debt.
The Australian’s economics correspondent Matthew Cranston on April 25 reported Chalmers was likely to axe the 50 per cent tax discount introduced in 1999 for all assets held for more than 12 months, not just housing.
Tax will be paid on an inflation accounted basis, so only real gains will be taxed.
Cranston said negative gearing could also be axed for existing properties, but the change would be grandfathered. He reported on Wednesday that several within the government wanted revenue from the changes handed back as tax cuts, an idea the PM and Chalmers do not support.
Just as well, given the likely savings would be minimal, would not pay for meaningful PAYE tax cuts, and won’t even do much to boost housing supply for the young.
As this column pointed out on February 22, such changes will only increase rents as investors offset costs the only other way possible. The government seems unable to move the dial on housing supply, partly because it is also unable to control immigration.
Such tax changes will not improve productivity or increase incentives to work and save. Yet much of the media – especially the ABC, Guardian Australia and Nine’s city tabloids – has treated these meagre plans as serious reform.
Many journalists of the left never accepted voters were correct to reject these policies when they were put forward by then Labor opposition leader Bill Shorten in 2019.
Imagine how Australia would have been placed had Shorten’s huge spending program been met less than 12 months later by the Covid pandemic. Smart governments save in good times so they have the finances to handle bad times.
The best that can be said of the latest property plans is they won’t do much damage. But as a PhD student of Keating, Chalmers should know the last time Labor scrapped negative gearing in 1985 it had to reverse course 18 months later because investors stopped building homes.
More dangerous is the idea being floated by the anti-reform crowd at the Greens and their favourite think tank, the Australia Institute.
Institute boss Richard Denniss, the Greens and federal independent senator David Pocock have been pushing for a 25 per cent federal charge on all gas export revenue.
Senior journalists such as ABC 7.30 host Sarah Ferguson and ABC Melbourne Radio’s Ali Moore have treated the proposal reverentially, apparently unaware Labor’s favourite post-war economist Ross Garnaut actually designed the much-maligned PRRT (Petroleum Resources Rent Tax).
The PRRT is a virtual super profits tax payable once development costs of a project have been paid down. Today’s gas exporters will end up paying 60 per cent tax on all profits, not as high as Norway but Norwegian taxpayers are co-investors in big resources projects and Australians are not.
Resource operators here also pay state royalties for onshore gas plus payroll tax, so the idea we are giving our resources away for free is silly. Yet ABC online has run pieces making that claim. Journalists seem unable to understand most large gas export projects in Australia are relatively new and just at the start of their PRRT liabilities.
At least the Prime Minister ruled this out last week. A large new tax on projects that have cost more than $400bn since 2010 is precisely the wrong strategy during a global energy crisis as he tries to secure oil products from countries that buy our gas.
Journalists should apply scepticism to a resources tax proposal from a think tank that has long advocated against gas and all fossil fuels. Yet many reporters covering this story reserve their scepticism for critics of the tax plan, claiming arguments against it are “gas industry talking points”.
Moore, like the Greens-led Senate inquiry that took evidence over three days from April 21, even gave airtime to a social media activist, Punters Politics host Konrad Benjamin, to advocate for the tax idea.
Benjamin and Pocock have been claiming the gas industry pays in PRRT less than the annual excise on beer. The comparison does not account for the imminent ramp up of the PRRT. The gas industry last year paid $22bn in tax, and the PRRT will eventually be a multiple of that.
This is how far journalism has fallen. Journalists who can’t understand a 40-year-old tax think it’s OK to give airtime to social media activists with no tax or resources background.
Centre for Independent Studies boss and former editor of this newspaper and editor-in-chief of The Australian Financial Review Michael Stutchbury got it right in the AFR last Saturday week. Labor should use the energy crisis to give certainty to international investors so Australia can become the world’s leading gas exporter, he wrote.
That would be a reform to make our children wealthier. A retrospective 25 per cent tax based on revenue would ensure investors never put money into another gas project in Australia.
