The good, the bad, and ugly from the federal budget

Ajouté : 2026-05-22

[00:00:00]Common [music] sense ain't that common anymore.

[00:00:05]Seems common sense [music] is past tense, just like the dinosaur.

[00:00:11]Political correctness has got a lot to answer [music] for cuz common sense ain't that common anymore. Now on [music] weekends, the Treasury of Common Sense. Yes, the great man that is Leith van Onselen macrobusiness.com.au.

[00:00:28]It's the Treasury of Common Sense. Hello my friend. Good day, Luke. How's things?

[00:00:32]Very well. What a week you've had. I mean, this has got to be Christmas for an economist, isn't it? Mate, I'm I'm pretty tired actually. Did about 13 media interviews this week. Right.

[00:00:42]>> Couple of TV. Flew up to Sydney actually, mate. Did the Karl Stefanovic show. Ah, how was that? It was good, yeah. Karl's a Karl's a ripper bloke. I met Clive Palmer as well. He's actually a ripper bloke as well. So, yeah, that was that was really good, but obviously pretty exhausting cuz I had to fly from Melbourne and just for the day and [clears throat] fly home, but yeah, certainly a massive massive week for me personally. Did um Did Karl say, "Hey, I listen to you speak to Luke every Saturday." Did he say that? No, no. He didn't.

[00:01:07]>> Ah, come on, Karl.

[00:01:09]>> [laughter] >> But I got to got to say, mate, you know, often when you meet famous people, you sort of hope that they're the way you think they're going to be.

[00:01:16]And Karl's pretty much exactly the same as he is on the Today show. So, he was he was you know, he he he doesn't put on a public persona and then act differently >> I agree.

[00:01:24]Good man.

[00:01:25]>> Yeah, he he he he's he's a he's a generally good bloke. So, let's go to the budget. I agree with all Well, that.

[00:01:30]Let's go to the uh federal budget. Um this is tax reform. I know that because uh because Dr. Jim told me, right?

[00:01:38]Yeah, mate. It's actually more of a tax grab. So, you know, obviously a lot of the changes that were flagged before the budget uh pretty much came to fruition. So, you know, we sort of knew what was going to happen. So, obviously from 1 July next year um that the government's only going to allow to negatively gear uh you know, property uh if it's a newly existing uh sorry, a newly built dwelling. So, anything that's already built you won't be able to negatively gear.

[00:02:03]People who who own property before budget night will be fully grandfathered so they can keep negative gearing. And the the intent here is obviously to push investor demand away from established homes and toward new housing supply which is fine. I'll get I'll get to why there there's some issues with the stuff later, but also they obviously as they mentioned that the capital gains tax system is going to change from 1 July next year.

[00:02:24]So, we're going to go back to basically the pre-1999 method whereby you get taxed on your real gains. So, that's your gains in in excess of inflation.

[00:02:32]And again, the the gains up to 1 July next year will be measured under the old way and and going forward under the new way.

[00:02:39]Now, there was a little bit of a hand grenade which they didn't mention beforehand and they basically put in a minimum 30% tax on capital gains on real capital gains. So, what that is being designed for which this is my reading of it. They basically want to hit self-funded retirees. So, basically if you're someone who's built up assets over your working life and then you retire and then you sell those assets.

[00:02:59]Obviously, when you're not working you've got low marginal tax rate. They want to basically charge a 30% minimum minimum capital gains tax on that. So, that's sort of designed to squeeze more out of self-funded retirees.

[00:03:10]Now, my my and also I should also mention that they've also implemented a 30% minimum tax on on discretionary trusts to basically try and limit tax avoidance. So, people set up trust structures they can you know, minimize their personal income taxes that sort of thing.

[00:03:24]Now, my my main issue with this well, there's there's there's a few problems. So, first of all, the the government claims that these changes are trying about you know, improving housing affordability and helping out young people etc. and taking some investor demand out of the market will put some downward pressure on prices. It should help first home buyers cuz they won't have to compete as hard against investors and it should modestly increase the home ownership rate. So, that's all good, but the problem with that is the budget also upgraded its net overseas migration forecast by 55,000.

[00:04:01]So, this financial year they expect 35,000 more than they expected last budget and during the December MYEFO.

[00:04:09]And next year they expect 20,000 more migrants.

[00:04:12]So, at the same time as they're saying, "Oh, you know, we're we're we're we're helping out first home buyers, blah blah blah, we're going to level the playing field and all this sort of thing."

[00:04:19]They're importing more people, 55,000 more than they expected, who obviously need housing, and that's going to put upward pressure on rents because, you know, migrants when they come here they rent, and it's going to put upward pressure on demand at the same time as we've got rental vacancy rates at record lows.

[00:04:34]Rents have soared by about 50% since the end of 2019 nationally, according to CoreLogic.

[00:04:39]Tenants are getting absolutely squeezed, and then that also hurts first home buyers because first home buyers typically rent before they buy. So, if you're paying more in rents, it takes longer to save up a deposit, and also obviously high net migration also puts some upward pressure on prices. So, there's one of these, you know, giving with one hand taking the other, but that's that's not my only problem with it.

[00:04:56]After these After these changes, Australia's going to have among the highest capital gains taxes in the world. Now, I don't really care so much that they're going to hit, you know, people who buy buy established homes harder or even shares My biggest issue is they're going to My reading is they're going to basically apply this capital gains tax regime to new businesses and venture capital.

[00:05:19]And I think that's a mistake because the last thing Australia wants to do is discourage new businesses from starting up, and we also don't we also we also don't want to discourage venture capital from funding new businesses in Australia. And if And if obviously we make that more expensive by jacking up capital gains taxes, we're going to get less business formation in Australia.

[00:05:38]So, that's one area which I think the government needs to backtrack on, and and to its credit in the budget papers it did mention that it's going to consult on that issue. So, hopefully that after they consult they will unwind that for you know, new businesses and venture capital because we don't want but that that's something that Australia doesn't want.

[00:05:55]And my other major issue with it, Luke, is that the Treasury expects to raise billions of dollars in extra tax revenue from these types of changes, but they offered zero permanent relief for workers through personal income taxes. So, Australian workers have been absolutely hammered over the last five or so years with this high inflation. Even though our real wages have fallen by about 6%.

[00:06:16]Are we talking here about bracket creep?

[00:06:18]Yes, we are. We are. So, so So, basically Australian workers have gone backwards. So, we we our earnings haven't kept up with inflation for the last several years.

[00:06:27]We're we're our real wages are about 6% below their peak. But because we've had this nominal wage growth, so that's your wage growth that hasn't kept up with inflation, but your wages have gone up.

[00:06:37]Um we we we've been pushed into higher tax brackets.

[00:06:40]And we're actually paying more tax.

[00:06:43]And according to the federal budget, personal income taxes account for 52% of the total tax take take, and the federal budget actually forecasts that personal income tax is going to keep rising over the next few years, and they're going to actually account for 50 4 and 1/2% of the federal government taxes by 2030. Now, now that and the federal budget actually upgraded the personal income tax take by 15 billion dollars versus December last year. So, so we've got a government which is basically squeezing us harder every year. We're paying more and more tax every year because of inflation.

[00:07:14]Uh yet our wages aren't keeping up with inflation, so we're going backwards. Yet they're squeezing us harder and harder for for tax. Now, my um according to the Australian Bureau of Statistics, the median full-time salary in Australia or earnings is about 100,000. Right.

[00:07:29]>> And the top marginal tax rate here kicks in at 190,000. So, you only have to earn 1.9 times the median full-time earnings to pay the top marginal tax rate. And and that's an absurdly low figure.

[00:07:37]That's amongst the lowest in the world.

[00:07:40]And according to the federal budget's own own forecast of wage growth, by by mid-2028, the median full-time earnings in Australia is going to go going to rise to 108,500.

[00:07:52]And by that time, if they don't adjust these scales, you'll only have to earn 1.75 times that, the median full-time earnings to pay the top marginal tax rate. So, this is a major problem here.

[00:08:02]It's insane.

[00:08:03]So, Australians are going to keep getting gouged as long as they don't adjust these tax scales. And And here's the thing that sucks about it, Luke.

[00:08:10]They They adjust fuel excise, you know, petrol excise or sorry, fuel excise, tobacco excise, all sorts of excises get adjusted up every year by inflation. But they don't adjust the tax scales by inflation. Yeah. And that's That's This is my biggest problem with this budget.

[00:08:25]They've basically it's a tax grab, it's not tax reform because they've they've closed all these so-called loopholes to raise extra tax, but then they haven't used that money to then give relief to person to wages and wage and salary earners Yeah. who continue to pay more and more tax every year simply because of inflation, because of bracket creep, even though their real wages are falling. Well, mate, they And then they say, "Oh, you know, we'll throw you a couple of hundred bucks this year and then we'll throw you another couple of hundred bucks next year." And they think they've they've got everyone's back, but those figures on that chart, they're stunning. So, in the current year, you've got to earn 1.94 times average earnings to be at the top rate.

[00:09:06]And you've only got to You've only got to go forward what, 5 years? 1.94 becomes 1.7 becomes 1.6.

[00:09:14]That That is I heard someone in the through the Week in Politics say, "They're taxing uh inflation." And And now that makes a bit of sense to me.

[00:09:24]That That's what That's I mean, they're laughing all the way to the bank, aren't they? Yeah. Yeah. So, So, the personal income tax is uh designed to basically grow every year with you know, uh without the government doing anything, just by inflation. So, it's the single biggest earner for the government, and it's the fastest growing component of tax revenue for the government. And they can simply do nothing and just let inflation push us all up into higher tax brackets, even though we're going backwards once you adjust for inflation. You know, we're not we're not earning enough to keep up with inflation. Yet, we get taxed harder and harder every year. And and and that's my biggest issue with this budget. They've raised all this extra tax by by, you know, closing the loopholes or so-called loopholes and negative gearing capital gains taxes, trusts, or that sort of thing. Yeah. But they haven't been using the extra money they're getting to index the marginal tax scales to inflation, so that so that that so that we don't get this continual bracket creep. Because in the end, the government can do nothing, just raise all these extra billions, then just waste our money. Yeah.

[00:10:21]As long as we have this process in place whereby they do nothing and their tax revenue goes up every year because of inflation, yeah, that's just more money for them to waste. And it and it basically instills poor discipline on spending.

[00:10:32]And that's my biggest issue with this budget. All right. Let's do this now.

[00:10:37]>> [music] >> And that would be to announce a clown of the week. Wow, what a surprise. Who've you found?

[00:10:48]Yeah, look, it's it's actually Prime Minister Anthony Albanese or the Albanese government, I should say. So, so just in the in the lead-up to the budget, they they canceled the Inland Rail project. So, the Inland Rail project was basically a big rail freight project between Melbourne and Brisbane.

[00:11:01]It was designed to basically improve the efficiency of freight so that we can you actually export things in this country, you know, things that get produced in the regions, which is where most of the nation's wealth comes from.

[00:11:12]Um you know, but they're they're going to improve the railway line between Melbourne and Brisbane. Now, now the project obviously wasn't the project wasn't perfect. And it was forecast to, you know, cost about $45 billion and be completed by by, you know, basically in decades' time, which is below which is which is taking longer than they expected.

[00:11:30]And that the government basically canceled it they said, "Oh, it's too expensive." Right? Now, that that that on its own you might go, "Oh, okay, you know, fair enough." But but at the same time, the Albanese government has instead committed billions of dollars to Melbourne's Suburban Rail Loop, right? So, they've basically canceled an inland rail project which would help regional Australia and make us more export competitive. For the Suburban Rail Loop in Melbourne, which is the biggest boondoggle project I've ever seen. Like, pretty much nobody thinks this project is a good idea. It's failed every cost-benefit analysis, right? And you know, former premier uh Jeff Kennett, he in Melbourne who's actually who who was Australia It was Melbourne's last good Victoria's last good premier, called the Suburban Rail Loop the greatest white elephant of any public project in Victoria's [clears throat] history, which it is.

[00:12:17]So, my my my issue with this is Prime Minister Anthony Albanese has completely screwed over the regions.

[00:12:25]And he's canceled a project which would help the regions in order in in order to channel that money instead to bail out his incompetent Victorian government, which has been an absolute clown show, and in order to pander to inner-city voters in Melbourne with a rail line that makes absolutely no sense economically or socially, and most Melburnians don't actually support it. We think it's a joke. Mhm.

[00:12:48]>> Right? Purely to bail out his Victorian mates or his Victorian uh you know, Allan government.

[00:12:54]And in doing so, he's completely screwed over the regions. And I think this is this is poor. I'd absolutely poor. And once again, Australia's regions have been have been absolutely ripped off. And and ultimately, taxpayers in New South Wales and Queensland who obviously listen to this show, you are going to be spending some of your hard-earned money to fund a ridiculous project in Melbourne. Mhm. Uh we we we which which should never, you know, been undertaken in the first place. And you you you you're going going it to basically bail out the Victorian government, which is a absolute incompetent mess. Wow.

[00:13:30]Great stuff, mate. Have a terrific weekend. I'll talk to you in a week's time.

[00:13:34]Yeah, thanks, Luke. Thank you. Lee Van Onselen, macrobusiness.com.au.

[00:13:38]That's a really strong point he made in relation to uh that rail funding. I mean and the returning election is in November.

[00:13:47]And he's doing everything he can to uh Oh, look, I don't want to say deck chairs and Titanic in the same sentence, but it kind of Anyway.

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