The government has not reformed the system so much as photographed itself reforming it, taking care that no one who already owns feels a thing. That is not boldness. It is passivity in a better suit, writes Professor Vince Hooper.
AUSTRALIA TELLS ITSELF A FLATTERING STORY: mateship, the fair go, no masters and no airs. It is the one boast the country never tires of. Yet Britain, for all its inherited titles, at least admits its hierarchy exists.
Australia does the opposite: it denies the structure even as that structure hardens into something close to caste.
Not caste in the formal sense. There is no scripture, no bar on intermarriage, no ritual of rank. But strip away the egalitarian branding and the architecture is unmistakable: opportunity, wealth and influence pool among those who arrived early and stayed put, while the young and the newcomers do the carrying.
Start with the young Australian. They leave university with a debt that indexes against their income each year, enter a labour market casualised at the edges, and find the one asset that once defined a settled life, a home, priced beyond any wage they can earn.
They pay full marginal tax on every dollar they work for, while the cohort above them is taxed lightly on wealth it mostly sat on. They delay the house, then the children, then the sense that effort compounds. Thrift no longer buys what it bought their parents. The ladder has not merely grown longer; the lower rungs have been sawn off.
The migrant fares no better. Same qualification, same experience, yet those here two to six years earn a tenth or more less than comparable locals, and for highly educated women the gap reaches a third; catching up takes the better part of fifteen years.
The international student pays two, three, sometimes four times the domestic fee for the identical degree, then works a casual shift at a wage they dare not dispute, because their visa is the collateral. We import the skill and refuse to price it; we charge the student a premium and call them a guest.
Now the frame that matters. Housing.
Wealth in Australia is no longer chiefly earned. It is held. The older cohort bought land cheaply and has spent forty years long a call option on appreciation that policy itself underwrote: negative gearing, the capital gains discount, the family home exempt from the pension test, franking credits refunded in cash.
The young sit on the other side of that trade. They are short the same option, forced to buy at strikes inflated by the very concessions that enrich the holders. One cohort collects the premium. The other writes it.
This is where the word "caste" earns its keep. A life cycle gap closes as the young grow old. A caste does not, because the advantage is now inherited. The decisive variable in whether a thirty-year-old owns a home is no longer income or thrift. It is whether a parent owns one. The "bank of mum and dad" has become the hereditary principle Australia swears it abolished, sorting the next generation before they have earned a cent.
And here the state reveals its hand. For a decade Canberra would not touch the concessions at all. In May it finally moved, narrowing negative gearing and trimming the gains discount from 2027.
Read the fine print and the nerve evaporates. Existing investors are grandfathered. New builds keep the lot. The change does not even begin until the middle of 2027, and the two largest shelters of all, superannuation and the family home, are left untouched.
The government has not reformed the system so much as photographed itself reforming it, taking care that no one who already owns feels a thing. That is not boldness. It is passivity in a better suit: the politics of protecting the cohort that votes, banks and donates, dressed as concern for the cohort that cannot yet afford to do any of the three.
It is the carriers who absorb the tail risk. When the shock comes, whether a rate rise, a recession or a pandemic, it is the casual, the renter, the temporary visa holder and the leveraged first home buyer who take the loss in full. The protected cohort, cushioned by equity and concession, barely feels the move.
Fairness is not only about the average. It is about who bears the variance, and in Australia the variance falls almost entirely on those least able to carry it.
The remedies are not mysterious; the country half knows them and flinches anyway. Begin with the shortage, because beneath every tax argument sits plain arithmetic: Australia promised 1.2 million homes by 2029 and will fall as much as a fifth short, with no state on track.
The cheapest repair costs Canberra almost nothing: it merely has to stop forbidding construction. Across most land near where the jobs are, density is effectively illegal; legalise the missing middle, hold planning to a deadline, and lay the pipes and wires that turn a zoning map into a street. The blockage was never money, but a tier of government too frightened of its own homeowners to rezone the next suburb.
Then, stop taxing the making of wealth more heavily than the holding of it.
Stamp duty punishes the family that dares to move; a land tax punishes the investor sitting on a block, waiting for the unearned gain. So swap the one for the other, the reform economists have urged for a generation and politicians have dodged for just as long. End the grandfathering. Bring superannuation and the family home, the two shelters the budget so carefully spared, into scope above a sensible threshold.
And drop the first home buyer grants and shared equity schemes: every dollar handed to a buyer in a fixed market is a dollar added to the price. They poll beautifully, and they are kerosene sold as relief.
None of this is beyond us; the levers are built, several half pulled already. What is missing is the nerve to let them reach the people who already own. So the ambitious newcomer and the striving young do what rational agents do when the payoff is bad: they leave or stop trying.
Australia can keep telling itself the fair go is alive. But fairness is a question, not a slogan, and the question is simple.
If we believed in it, we would ask why the people doing the most climbing are also the ones carrying the heaviest packs, and then we would take some weight off their backs, rather than legislate to keep it exactly where it sits.
Professor Vince Hooper is a proud Australian-British citizen and professor of finance and discipline head at SP Jain School of Global Management with campuses in London, Dubai, Mumbai, Singapore and Sydney.
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia License
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