By David Hughes

First published in the MRC’s Watercooler newsletter. Sign up to our mailing list to receive Watercooler directly in your inbox.

What worries me most as a parent are the things I can’t control. What will my children be taught at school? Will Australia remain as free and cohesive as it was through much of my life? Will they find secure work, be able to buy a home, and build a good life of their own?

Will they be rewarded for their own effort—or burdened by the mistakes and debts of previous generations?

Even for families just getting by, it's the future that weighs heaviest: what kind of country are we leaving behind? Yet our politics remains stuck in the present — dominated by one-off handouts and headline-chasing announcements.

We should be building a system that gives the next generation a better chance. Instead, we’re leaving them with a heavier load and fewer opportunities.

The Labor Government speaks of fairness, but only in the narrowest and most transactional terms. Borrowing and taxing more to prop up ailing services, instead of running them better. Their approach discourages aspiration, penalises personal success, and channels growing tax revenues into broken systems with no serious plan for reform.

This week the Prime Minister said he thinks that “not every challenge can be solved by Government stepping back”. In truth, he thinks that Government should be stepping forward and involved in everything, no matter the cost.

Whether by design or incompetence, the Government is creating a system where dependence replaces aspiration. The seeds of a great intergenerational injustice are being laid. For an Opposition seeking to recapture relevance, I can think of no better cause to embrace.

The facts speak for themselves:

Interest payments on government debt are now the fastest-growing area of spending, rising at 9.9% annually. Within a decade, debt repayments will surpass what we spend on the Age Pension.
The NDIS will cost $50.8 billion this year, rapidly becoming the most expensive social program, yet there's no credible plan to manage these ballooning costs. Having grown at an average annual rate of 35% over the past four years, it is forecasted to overtake the defence budget by 2027.
In 40 years, the number of Australians aged over 65 will more than double, and those aged over 85 will triple, while the share of people under 18 declines. This demographic shift means fewer working-age Australians to fund essential government services, increasing our reliance on income tax as a source of revenue.
Our tax system increasingly relies on personal income tax—projected to account for around half of total government revenue through to 2034–35. Even after the Stage 3 tax cuts, average personal income tax rates will rise from 24.3% today to 27.5% by 2034, driven relentlessly by bracket creep.
While wages are forecasted to grow by 3.7% annually over the next decade, personal income tax receipts will grow faster at 4.6% annually. This disparity means workers pay increasingly more tax on average, eroding their real wages and take-home pay. Bracket creep disproportionately affects younger and middle-income Australians, pushing their effective tax rates higher while they carry the growing costs of spending on an ageing population.
Government support for younger Australians has stagnated, even as per capita spending on older Australians—in age pensions, healthcare, and aged care—has significantly increased. Over the last three decades, transfers to older Australians have more than doubled in real terms per capita, while support for younger households has barely moved.

The tax and transfer system historically operated as an intergenerational contract: young Australians received education and support, working-age Australians paid taxes, and retirees received benefits through pensions and healthcare. However, this contract hasn’t just drifted off course—it’s on track to become even more skewed in the years ahead. Transfers to older Australians have increased significantly, even as their private incomes, primarily from housing and investments, have grown substantially.

In the decade to 2003, Australians over 60 had post-tax incomes around 61% of working-age Australians. Today, older Australians' post-tax incomes have reached 95% of working-age Australians' incomes—and are 60% higher than that of young adults aged 18–30.

Achieving budget sustainability solely by raising taxes on working Australians—driven by unchecked bracket creep—will deepen generational imbalances, punishing younger and future generations.

This isn’t just unfair; it's unsustainable.

The next generation of taxpayers deserve a fairer system. And at the other end of the spectrum, the next generation of elderly Australians deserve a program of services that's efficient, sustainable and guaranteed.

Our team at the Menzies Research Centre will provide real solutions to these challenges and we will be aggressive in our advocacy to ensure the Opposition and the Government can't ignore these challenges any longer.

If you want to help us deliver change then please support our work by making a fully tax deductible donation to our June appeal. Our work is needed now more than ever and is only possible with your support.

A country worth inheriting?