Reflections Following a Discussion with Angus Taylor on Housing, Negative Gearing and Capital Gains Tax
Australia’s housing debate has become increasingly polarised.
On one side are those who argue that negative gearing and capital gains tax concessions are the primary causes of housing unaffordability. On the other are those who insist the problem is entirely one of supply and that tax reform would achieve little.
The reality is that both sides are only partially correct.
Housing affordability has become one of the defining social and economic challenges facing Australia. Yet the housing debate is not fundamentally about tax.
It is a debate about what kind of society Australia wishes to become.
Following a recent discussion with Opposition Leader Angus Taylor, I found myself reflecting not merely on housing policy, but on the broader question of whether Australia remains faithful to the vision that underpinned much of its success throughout the twentieth century.
At its heart, housing affordability is a debate about the future of the Australian middle class.
Housing and the Australian Project
Australia’s housing system did not emerge by accident.
From the earliest days of colonial settlement, land, population growth and wealth creation were closely linked. The nineteenth-century colonial theorist Edward Gibbon Wakefield argued that immigration and land development should work together. Population growth would create demand for land, rising demand would increase land values, and those values would support economic development and further settlement.
In many respects, elements of that model remain visible today.
Population growth continues to support housing demand. Rising demand contributes to higher land values. Existing property owners often capture much of the resulting increase in wealth.
Yet modern Australia was never intended to be merely a land appreciation scheme.
The Australia that emerged after the Second World War was built upon a far more ambitious vision.
Governments encouraged migration, invested heavily in infrastructure, expanded suburban development, supported home ownership and built the institutions required to absorb a growing population. Housing was not viewed simply as shelter. Nor was it viewed merely as an investment.
It was viewed as a pathway to stability, family formation, wealth creation and social cohesion.
The architects of post-war Australia understood that a successful nation requires more than economic growth. It requires citizens who have a tangible stake in society.
Home ownership became one of the primary mechanisms through which Australians acquired that stake.
Menzies and the Forgotten People
Robert Menzies famously spoke of Australia’s “forgotten people” — the broad middle class of working families, small business owners, professionals and tradespeople who formed the backbone of the nation.
Central to that vision was the belief that ordinary Australians should be able to acquire skills, build careers, own homes, raise families and accumulate assets over time.
Yet it is important to understand what home ownership meant in that vision.
Home ownership was not simply access to a mortgage.
Nor was it a lifetime commitment to servicing debt.
The aspiration was ownership itself.
The objective was that ordinary Australians would eventually own their homes outright and enjoy the security, dignity and independence that accompanied that achievement.
A home was not merely a financial asset.
It was a source of freedom.
It represented a point in life where a family could move beyond economic survival and begin building economic opportunity.
This distinction is increasingly important today.
Australia risks measuring housing success by rising property values rather than by the number of Australians who can realistically achieve secure ownership.
A society where households spend thirty or forty years servicing ever-larger mortgages is not necessarily becoming more prosperous. It may simply be transferring a growing share of national income into housing costs.
The question is not whether Australians can obtain a mortgage.
The question is whether Australians can realistically aspire to own their homes outright within a reasonable portion of their working lives.
That was far closer to the post-war aspiration.
The economic significance of this extends well beyond housing.
A secure homeowner possesses something profoundly valuable: the capacity to take risks.
The freedom to change careers.
The freedom to retrain.
The freedom to start a business.
The freedom to relocate for opportunity.
The freedom to invest in new skills.
The freedom to withstand temporary setbacks.
Economic dynamism does not emerge from insecurity.
It emerges from confidence.
Historically, some of the world’s most successful middle classes have been built upon a foundation of security that enabled individuals to take productive risks.
When people are consumed by concerns about housing, healthcare and basic economic security, they naturally become more cautious.
When those foundations are secure, people become more willing to innovate, invest and pursue opportunity.
This is particularly important in modern Australia.
Our median age is approaching forty years and continues to rise. Future prosperity will depend less upon simply adding workers and more upon increasing the productivity, skills and adaptability of those already participating in the workforce.
That requires continuous reinvention.
Workers will need to reskill throughout their careers.
Professionals will need to adapt to new technologies.
Businesses will need to innovate.
Entrepreneurs will need to take risks.
A nation seeking to build a dynamic, high-productivity, high-wage economy must therefore provide the foundations that make productive risk-taking possible.
Those foundations are not limited to housing.
They consist of three pillars.
Secure home ownership.
Accessible and affordable healthcare.
High-quality education and lifelong learning.
These should not be viewed merely as social policies.
They are economic policies.
They are investments in human capability.
They provide the psychological and financial security that enables individuals to take risks, pursue opportunities and contribute to economic growth.
This was implicit in much of the post-war Australian settlement.
The objective was not simply economic growth.
The objective was to build a society in which ordinary people possessed sufficient security to participate confidently in that growth.
Home Ownership, Family Formation and Demographic Renewal
There is another consequence of housing affordability that receives far less attention than it deserves.
Housing shapes demographics.
Historically, the journey from education to employment, home ownership, marriage and family formation formed a broadly attainable pathway for many Australians.
Today that pathway is becoming increasingly difficult.
Young Australians are entering the housing market later in life. Deposits take longer to save. First-home buyers are assuming larger debts. Increasingly, home ownership depends upon two full-time incomes for much of a household’s working life.
These pressures inevitably shape family decisions.
Couples postpone having children.
Many have fewer children than they originally intended.
Others conclude that the financial burden of raising a family is incompatible with the economic realities they face.
The result is visible across much of the developed world.
Fertility rates have fallen below replacement levels throughout most advanced economies. Populations are ageing. Governments increasingly rely upon immigration to maintain workforce growth and offset demographic decline.
Immigration will remain an important part of Australia’s future, just as it has been an important part of Australia’s past. Yet there is a deeper question that deserves attention.
Why are so many young people across advanced economies delaying family formation, postponing home ownership and choosing to have fewer children than they desire?
The answer is rarely cultural alone.
It is often economic.
Housing has become more expensive.
Education takes longer.
Career pathways have become more uncertain.
Household formation occurs later in life.
Economic security takes longer to achieve.
In many countries, the transition into adulthood itself has become delayed.
Australia should aspire to address these underlying causes rather than merely their symptoms.
A nation that enables young people to acquire skills, establish careers, own homes and form families with confidence will enjoy advantages that extend far beyond the housing market.
It will enjoy stronger social cohesion, healthier demographics and a more resilient economy.
This should not be viewed as an argument against immigration.
Australia has benefited enormously from successive waves of migration and will continue to do so. Apart from Indigenous Australians, whose connection to this land stretches back tens of thousands of years, Australia is fundamentally a nation built through successive waves of settlement and migration.
The challenge is not immigration itself.
The challenge is whether Australia can create a society capable of renewing itself both through immigration and through stronger family formation among its own citizens.
A society in which families can realistically achieve secure home ownership, manageable living costs and economic stability is more likely to experience stronger family formation and healthier demographic outcomes than one where housing insecurity becomes a permanent feature of adult life.
This is another reason why the distinction between home ownership and mortgage indebtedness matters.
The goal should not merely be helping people enter the housing market.
The goal should be helping people achieve genuine housing security.
A nation where ordinary households can realistically acquire a home, pay it off within a reasonable period of their working lives and enjoy the security that follows is more likely to experience stronger family formation, greater social stability and healthier demographic outcomes.
This is not simply social policy.
It is long-term economic policy.
Most advanced economies are now grappling with ageing populations, declining fertility and slowing workforce growth.
Australia has an opportunity to chart a different path.
By restoring a pathway to genuine home ownership, maintaining affordable healthcare, investing in lifelong education and fostering productive economic growth, Australia can position itself as a model for both economic and demographic renewal.
We should aspire to become a nation capable of renewing itself economically and demographically.
We should not merely seek to manage these challenges.
We should seek to lead.
The Role of Negative Gearing and Capital Gains Tax
There is little doubt that Australia’s tax system encourages investment in residential property.
Negative gearing allows investors to deduct losses against other income, while the capital gains tax discount rewards long-term capital appreciation. Combined with a highly leveraged banking system and decades of declining interest rates, these settings have helped make residential property one of Australia’s preferred investment vehicles.
Critics argue that these policies distort capital allocation, direct savings toward existing housing stock rather than productive business investment and contribute to rising house prices.
Supporters counter that removing these concessions would reduce rental supply, undermine investor confidence and create instability within the housing market.
Both arguments contain elements of truth.
Tax settings undoubtedly influence investor behaviour.
However, it is equally difficult to argue that abolishing negative gearing or significantly reducing capital gains tax concessions would, by themselves, restore housing affordability.
The housing challenge runs far deeper than tax policy alone.
Tax reform may influence demand at the margin, but affordability ultimately depends upon the relationship between housing supply, population growth, infrastructure capacity and productivity.
Immigration and Housing Must Work Together
Australia’s immigration program has contributed enormously to the country’s success, a point that Liberal leader Angus Taylor rightly endorsed during our conversation.
New arrivals, like generations before them, have helped address labour shortages, expand the tax base, strengthen entrepreneurship, enrich Australian society and support long-term economic growth.
Historically, Australia’s migration success was accompanied by nation-building.
Population growth was matched by housing construction, transport infrastructure, schools, hospitals and utilities. Immigration policy and housing policy operated together.
The challenge facing Australia today is not immigration itself.
The challenge is ensuring that population growth remains aligned with the nation’s capacity to provide housing and supporting infrastructure.
Population growth is not the same thing as prosperity.
An economy can become larger without necessarily becoming wealthier on a per-person basis.
If housing supply, infrastructure and public services fail to keep pace with population growth, living standards inevitably come under pressure even while headline economic growth remains positive.
Immigration policy, housing policy and infrastructure policy must once again become components of a coherent national strategy. Liberal leader Angus Taylor appeared to recognise this challenge when he pointed to Canada’s adoption of similar measures to address housing affordability. We are hopeful that he will continue to develop this philosophy and use it to sharpen his policy agenda, linking population growth, housing supply and infrastructure investment within a clear framework for sustainable prosperity.
Population growth should support economic growth, not overwhelm it.
The Bigger Challenge: Productivity
Housing affordability ultimately reflects a deeper challenge confronting Australia.
The country’s productivity growth has slowed materially over the past two decades.
Productivity is not an abstract economic concept.
It is the primary source of rising real wages and, by implication, greater purchasing power and higher living standards.
Over long periods, real wages rise because workers become more productive. Businesses invest more. Innovation expands. New industries emerge. Living standards improve.
This is where the housing debate often misses the larger picture.
Australia needs more homes that Australians can realistically own outright within a reasonable portion of their working lives, rather than a system that defines success as access to ever more expensive housing financed by ever larger mortgages.
But Australia also needs more productive businesses, stronger investment, better infrastructure, higher educational attainment, greater innovation and a workforce equipped for the technological changes ahead.
A nation cannot rely indefinitely on rising property prices as its primary source of wealth creation.
Long-term prosperity comes from creating more value, not merely bidding up the price of existing assets.
A Challenge for the Liberal Party
This is where I believe the debate becomes particularly important for the Liberal Party.
The challenge is not simply to defend existing housing tax arrangements.
Nor is it to engage in a narrow debate about negative gearing or capital gains tax concessions.
The challenge is to rediscover and modernise the deeper vision that sat behind Menzies’ philosophy.
A vision centred on opportunity rather than entitlement.
A vision centred on ownership rather than dependency.
A vision centred on productive enterprise rather than asset inflation.
A vision that seeks to expand the middle class rather than merely protect existing wealth.
A modern Menzian agenda would not measure success by the median house price.
It would measure success by the proportion of Australians who can realistically own their homes outright, raise families with confidence, continuously upgrade their skills and participate in a dynamic, high-wage economy.
The purpose of economic policy should not simply be to increase national wealth.
It should be to broaden ownership of that wealth and create the conditions under which future generations can flourish.
Australia should aspire to become a nation of high-value businesses, highly skilled workers and globally competitive industries.
The next generation of prosperity will not come from ever-higher land values.
It will come from world-class companies.
From advanced manufacturing.
From artificial intelligence.
From healthcare innovation.
From technology.
From research and development.
From workers continually upgrading their capabilities throughout their careers.
Most importantly, it will come from people having the confidence to take risks.
That confidence is built upon security.
A secure home.
Affordable healthcare.
Access to lifelong learning.
These are not competing priorities to economic growth.
They are among its most important foundations.
Population growth should support economic growth.
Economic growth should drive productivity.
Productivity should support rising wages.
Rising wages should support home ownership.
That was broadly the post-war Australian compact.
It remains a worthy ambition today.
Rebuilding the Australian Dream
Australia’s housing challenge did not emerge overnight and it will not be solved overnight.
The solution is unlikely to be found in any single policy announcement.
It requires increasing housing supply, investing in infrastructure, aligning immigration with capacity, improving productivity, encouraging business investment and strengthening education and skills.
Above all, it requires a renewed national vision.
The real question is not whether negative gearing should stay or go.
The real question is whether Australia can once again become a society in which ordinary families can realistically acquire skills, find meaningful and high-value work, own a home outright, raise a family and participate in a growing economy.
A successful nation cannot rely indefinitely on rising asset values to create prosperity, nor indefinitely on importing younger populations to offset demographic decline.
The stronger path is to build a society in which ordinary families can afford to own homes, raise children with confidence, access quality healthcare, continually upgrade their skills and participate in a dynamic economy.
Such a society generates both economic growth and demographic renewal from within.
Because the true measure of a housing system is not how expensive houses become.
It is how many Australians can achieve the security of ownership.
Ownership is not merely about property.
It is about freedom.
Freedom to take risks.
Freedom to innovate.
Freedom to build businesses.
Freedom to pursue opportunity.
Freedom to contribute to a growing nation.
The Australian dream was never meant to be a mortgage.
It was meant to be ownership.
Ownership that provides security.
Security that encourages risk-taking.
Risk-taking that creates innovation, enterprise and productivity.
Productivity that supports rising wages, stronger families and long-term prosperity.
That was the promise that sat beneath much of Australia’s post-war success.
In an ageing world grappling with housing stress, declining fertility and weaker social mobility, Australia has the opportunity not merely to preserve that promise, but to renew it.
We should not merely seek to remain prosperous.
We should seek to lead.
– Max Riaz
