If intergenerational fairness is what matters, then housing measures are only the beginning

The Albanese government's 2026 Budget has wound back the capital gains tax discount and tightened negative gearing. Bill Shorten took similar policies to the 2019 election which were widely blamed for Labor's loss. For six years, the lesson drawn from that defeat was that the reforms were too dangerous to attempt. The government has now decided that lesson was wrong.

This follows the earlier reversal on the Stage 3 tax cuts, which Labor promised in full at the 2022 election and then redesigned in office. In both cases the government acted on the evidence in front of it rather than on the politics of an earlier election. As the Treasurer put it, the best way to build trust is to make the right decisions for the right reasons.

That principle has wider application.

The Treasurer has been explicit that intergenerational fairness is the organising idea of this Budget. The Prime Minister says his government’s guiding principle is ‘nobody left behind’. These are the right frames. Negative gearing and the CGT discount have transferred wealth from younger Australians, who are often renters, to older Australians, who sometimes own multiple properties. Winding them back is a serious step toward correcting that imbalance.

This shift has been made possible by demographic change. Millennials and Gen Z are now a growing majority of the electorate. They are renters more than owners, and the generation most exposed to climate risk. The constituency for reform is the median voter, and the government has reasonably concluded that the political cost of acting is now lower than the political cost of standing still.

The constituency for reform is the median voter, and the government has reasonably concluded that the political cost of acting is now lower than the political cost of standing still.

But if intergenerational fairness is what matters, then housing measures are only the beginning. Two larger transfers between generations remain in place. Both are policies the government has so far ruled out revisiting. Neither position is consistent with the principle the government has now adopted.

Start with gas. Australia is one of the world's largest LNG exporters and collects almost nothing as payment for the resource. The Petroleum Resource Rent Tax, which is meant to do this, raises a fraction of what comparable regimes in Norway or the UK collect per unit. Successive reviews have found the regime is not fit for purpose. The Prime Minister has nonetheless ruled out changes.

The case for winding back the CGT discount is that an outdated tax break benefits the community unevenly. That case applies with more force to the gas export regime. The resource belongs to all Australians, including those not yet born. Selling it for next to nothing now, and leaving little for the public balance sheet, is an intergenerational transfer running the wrong way.

The same principle applies to carbon emissions. Economic benefits from polluting activities tilt to companies and their predominantly older shareholders. Yet the costs of climate change will fall disproportionately on younger people. The 2014 repeal of the carbon tax has cast a long shadow over every government since, and the unspoken rule has been that explicit carbon pricing remains politically impossible.

The world has moved on. The European Union's emissions trading scheme and carbon border adjustment are in effect. Australian industry will face a carbon price imposed from outside whether or not we impose one ourselves. The Safeguard Mechanism has shown that a form of pricing can operate in Australia without political collapse. The question is no longer whether we will have a carbon price, but whether we design one that is efficient, delivering significant climate benefits public revenues.

The question is no longer whether we will have a carbon price, but whether we design one that is efficient, delivering significant climate benefits public revenues.

Some may see these as harder reforms than the ones in the Budget. As we have seen recently with the debate about gas taxation, changes are fiercely resisted by powerful industry lobbies. But the government has just demonstrated - twice - that the cost of acting on old fears is now greater than the cost of acting on the evidence. Polling from multiple sources suggests there is broad public support for taxing gas and pricing carbon.

The choice is straightforward. The government can apply the principle of intergenerational fairness selectively, and accept that on gas and carbon, the positions of the past will continue to bind. Or it can apply the principle consistently, and revisit the two policies that most directly determine what kind of country the next generation inherits. That choice will determine how seriously to take the government’s fairness framing.