Ignoring elephants in rooms
Based on the 2026–27 Federal Budget, the Australian Government expects its comprehensive tax reform package – anchored by changes to Capital Gains Tax (CGT) and negative gearing – to raise just over $40 billion over 10 years. On an annual basis, this averages approximately $4 billion, though revenue will increase from a lower base over time due to the grandfathering and transitional rules built into the legislation.
As an aside, it has triggered widespread condemnation because, despite the changes being so significant, they weren’t taken to an election.
But even more concerning is the claim that the budget changes help young people buy a home. Treating a structural supply crisis – caused by a demand crisis – with marginal tax tweaks completely misses the scale of the affordability gap. By grandfathering existing property portfolios and limiting negative gearing changes to future purchases, the policy creates a ‘lock-in’ effect in which investors hoard older, cheaper properties, starving the market of entry-level homes. At the same time, funnelling investors exclusively into new builds forces young buyers into fierce competition with cashed-up landlords for house-and-land packages, driving up prices in the very sector meant to help them. This dynamic, paired with industry warnings that restricted tax breaks will prompt landlords to raise rents, traps young people in an expensive rental cycle that actively prevents them from saving a deposit.
Ultimately, a forecasted 3 per cent softening in house prices does nothing to reverse decades of property values outstripping wages, nor does it solve the crushing reality of high interest rates and strict bank borrowing limits.
Because the budget relies on minor adjustments, it leaves the economic drivers of the housing crisis intact. And those minor adjustments also do far less for tax revenue than fixing much larger problems would.
Transfer pricing
One of those giant problems is the revenue lost from multinational companies shifting billions of dollars overseas to avoid tax.
According to independent bodies like the EU Tax Observatory, the Tax Justice Network (TJN), and the Centre for International Corporate Tax Accountability and Research (CICTAR), using global country-by-country reporting data to model how much profit is artificially moved to low-tax havens like the Netherlands, Ireland, and Singapore, multinational corporations shift up to 40 per cent of their foreign profits globally into tax havens. For Australia, previous United Nations (UN) linked studies similarly pegged the baseline loss at around US$6 billion (A$9 billion) annually. And that estimate – equivalent to about 0.4 per cent of Australia’s Gross Domestic Product (GDP) was in 2020.
Perhaps surprisingly, the global watchdogs’ estimates are based on tracking aggressive tax exploitation structures – meaning profit shifting that technically follows the letter of international tax law but violates the spirit of it.
Recently, the AFR reported, “Google, which owns YouTube, Gmail and its dominant search engine, and Meta, which owns Facebook, Instagram and WhatsApp, transferred at least $11 billion out of the country to related entities last year as part of internal transfer pricing deals buying advertising space, which they then on-sell to Australians.”
Instead of fixing a yawning chasm of lost tax revenue, these changes will negatively impact the young and their mums and dads.
Of course, they could also cut spending.
Since they were elected, for every $2 billion Labor have saved, they have spent $3 billion.
As a consequence of this spending, Australians are paying the highest taxes in a generation. The budget revealed $50 billion in higher taxes, and yet living standards are expected to decline, inflation to rise, unemployment to increase, migration to increase, real wages to decline, record levels of debt to rise further, and deficits to widen for at least the next decade.
National debt is estimated to exceed the legislated ceiling of $1.2 trillion.
In September 2025, it was estimated that since coming to office, the government has benefited from a record revenue windfall, totalling more than $370 billion over its first four budget years alone. Much of this was due to higher taxes, particularly via bracket creep on hardworking Aussies.
But after Treasurer Jim Chalmers disposed of the previous government’s quantifiable fiscal rules, which, as an aside, former Treasury Secretary Ken Henry and former Reserve Bank of Australia (RBA) Governor Phillip Lowe as well as leading international organisations like the IMF, have urged the Albanese Government to restore, debt has risen because spending has exceeded the revenue windfall.
The Federal Budget has expanded significantly since the 2022 election of Labor. If we use the pre-election 2021–22 year as a baseline, total federal government payments were roughly $616 billion, inflated by late-stage pandemic support. In 2023–24 non-pandemic spending then rose steadily. The Institute of Public Affairs (IPA) revealed that average federal spending exceeded $70 billion per quarter during this period, roughly 50 per cent higher than the pre-2020 average. Now, according to the latest federal budget, total annual program spending has reached $785.7 billion for the 2025–26 financial year and is projected to reach $833.3 billion for 2026–27.
So, in absolute terms, the federal government is spending roughly $170 billion to $200 billion more per year now than when it first took office.
This extra spending has to be funded somehow, and young people might be left holding the bill.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
He is also author of best-selling investment guide-book for the stock market, Value.able – how to value the best stocks and buy them for less than they are worth.
Roger appears regularly on television and radio, and in the press, including ABC radio and TV, The Australian and Ausbiz. View upcoming media appearances.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
