Intergenerational fraud, by any other name

the budget aims to address intergenerational inequality. but increasing taxes on wealth in effect limits the ability of young australians to utilise the same tax incentives which have benefited previous generations. by david hughes.

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

Each year the Government provides us with a glossy Budget Overview document which takes all the seemingly good measures from the budget and presents them in isolation from everything else. Despite the fact that the 2026 Budget shows Government spending increasing as a proportion of GDP, the Budget Overview document creatively includes a table called 'Budget Improvements'. Let’s explore the top five ‘improvements’ from this list.

The largest budget improvement is a $37b cut to the NDIS. If I had told you 10 years ago that a Labor government would one day book a $37 billion saving from the NDIS, you would have expected a political firestorm. Instead, it has been accepted in silence, for which the Government should be grateful because they are simply fixing a problem of their own creation. 

Yet, on Tuesday night, the Treasurer turned to his colleagues for the applause he felt he'd earned while claiming “this budget delivered the largest savings package on record”.  All this in ignorance of the fact that these savings are derived entirely from a cut to the NDIS, three new tax increases, and a decision to cut the private health insurance rebate for pensioners. But they celebrated nonetheless and, in doing so, confirmed our right to be disillusioned with the state of Australian politics in 2026. 

Next on the list of 'budget improvements' are the three tax increases on ‘wealth’ and the cut to health insurance for over 65s. These measures are aimed at addressing “intergenerational inequality”. In effect, they limit the ability of future generations, workers, families and business owners to utilise the same tax incentives which have benefited previous generations. Intergenerational inequality is simply a ruse to place Australians at war with each other. That's the type of political battle where the government feel safest. 

Historically, Labor has done well by pitting Australians against each other. Rich versus poor. Investors versus renters. Young versus old. Thankfully, Australians don't think this way in 2026 and will hopefully see through such nonsense. 

What the Budget hides about income tax

For the last three years, the MRC has been pointing out the real challenge facing younger Australians. Our ageing population is increasing the reliance on working age Australians. This budget reveals half of government revenue will be derived from taxing workers’ income. The average income tax paid by workers this year is around $21,000, which will rise to around $25,000 in five years. Income tax rises from around 12.4% of GDP to 14.5% of GDP by 2036, with the average tax rate paid by workers rising from 24 per cent to 28 per cent.

Income tax is the only major tax base projected to grow as a share of GDP. 

This makes bracket creep the Budget’s silent revenue machine. Income tax revenue rises from $364 billion to $450 billion by 2030 and delivers roughly $1.4 trillion in additional revenue over the decade.

Our recent report on bracket creep offers a solution. Within the OECD, there are 17 countries that automatically adjust tax brackets to offset inflation. Australia automatically adjusts the age pension every year to keep pace with inflation, so what not tax thresholds? If the Government were serious about intergenerational fairness, it would address the largest transfer of wealth from young to old built into the tax system: bracket creep. Thankfully, Angus Taylor and the Coalition are now on board. 

Immigration

This week, the Opposition also adopted another common sense policy which we have been campaigning for. Under the Coalition, the number of migrants we welcome to Australia will not exceed our levels of domestic housing supply. Surprisingly, the advocates for a ‘big Australia’ and unchecked migration are already attacking the move, no doubt from the comfort of the home they already own. 

To counter such claims, we will be releasing data showing how for successive years, net overseas migration has exceeded housing supply. We will also show the levels of migration Australia can afford. We need your support to finish this project so please consider making a tax-deductible donation here.