Class is the missing link in Australia’s generational inequality crisis

Australia’s housing crisis is not just a conflict between generations, but also a deepening class divide lurking beneath “fair crack” rhetoric, writes Professor Carl Rhodes.

JUST DAYS before the Labor Government’s May Budget is due to be announced, it has now been confirmed that: Property tax will finally be reformed. Although details are yet to emerge, capital gains tax and negative gearing will be overhauled in a bid to rein in investor-driven inflation in the housing sector.

How quickly politics can change. The Labor Party, which went into the Federal Election this time last year, was categorically rejected such reforms. Tapping the property tax status quo was framed as electoral suicide.

Today, the same ideas are being reshaped as political common sense. What has changed is that intergenerational economic inequality has finally become a mainstream political concern, with housing affordability at its center.

But this is where the current debate starts to get misleading. The housing crisis isn’t just a generational story. This is also a class story.

‘A fair crack’ but for whom?

The desire to change property tax settings is partly a political response to a demographically changing voter population. Australians Those aged 18 to 35 now make up nearly a quarter of the population (about 6.2 million people), outnumbering the once-dominant Baby Boomer generation.

This growing group of voters is presented as the primary affected group, and housing affordability is identified as a key driver of intergenerational inequality.

As reported by Institute of ActuariesThe ratio of home prices to income among millennials is now twice what it was in the 1980s; Rising rental costs also prevent them from saving for a mortgage deposit. It’s hardly surprising that homeownership rates among 25- to 34-year-olds have fallen from just over 50% to around 39% since 2000.

Prime minister Anthony Albanese seems alert to this change, stating last weekend:

“I want Australia to be a land of opportunity for the future and the reality is that young people feel like they’re not getting a fair chance right now.”

But what this fails to acknowledge is that some young people achieve far less “fair success” than others.

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Treating “young Australians” as a single, homogeneous group hides more than it reveals.

Some young people are entering adulthood with the support of inherited wealth, family property portfolios or the Bank of Mum and Dad, allowing them to get on the housing ladder early and benefit directly from the tax breaks currently under review.

Others, lacking family assets or financial support, are stuck renting permanently, absorbing the increased costs with a much lower prospect of capital gains, tax benefits or long-term security.

This distinction is already very sharp. Grattan Institute data It shows that among households aged 25 to 40, the poorest quartile has a net worth of less than $78,000, and none of them have home equity. The richest quartile has more than $554,000, while the top 5 percent has over $1,500,000. In other words, wealth inequality is already deeply ingrained within younger generations themselves.

Framed entirely as an intergenerational conflict, property tax reform risks becoming a symbolic gesture rather than focused on creating a fair economy where everyone has the opportunity for a secure life.

Without a class perspective, it is entirely possible to claim that we are helping “young Australians” while leaving large numbers of people slightly better off and the most privileged more protected than before.

Property reform is not enough

The conclusion is that, while meaningful reform of the capital gains tax and negative guidance is important, it should be understood as only a beginning if the goal is economic equality.

Property tax reform may reduce speculative pressure and temper the worst excesses of investor-driven inflation, but it leaves untouched the deeper dynamics that separate winners from losers long before housing enters the equation.

The scale of intergenerational inequality requires much more fundamental reforms. This means resetting the policies that determine how income and wealth are accumulated, maintained and transferred over time.

If the Government is serious about creating a “fair crack” for everyone, the focus cannot stop on property. It should cover the broader structure of income and wealth taxation.

What should be on the tax policy agenda going forward is taxation of wealth, preferential treatment of capital over labor, light taxation of large inheritances, and a tax system that routinely favors existing wealth over earned income.

Without developing and implementing policy that changes these structural settings, reforms to CGT and the risk of negative gearing operate as targeted fixes within a much larger system that continues to reward ownership over business and inheritance over effort.

It’s time to face the class

The changes expected in the May Budget will be welcomed. Reforming capital gains tax and negative gearing would mark a clear departure from a model that treats housing primarily as a tax-advantaged investment. But unless these reforms are understood as merely a first step, progress will be limited.

The real test of the seriousness of tax reform goes beyond ownership. If inequality is reproduced through unequal access to stable housing, inherited wealth, and lightly taxed capital, then economic justice will not follow from property tax reform alone.

A broader reckoning is needed about how Australia taxes wealth, rewards capital over labour, and normalizes inheritance over opportunity and effort. Generational inequality is part of this agenda, but not all of it.

Real changes will depend on whether policymakers are willing to name and confront the class.

Carl Rhodes is Professor of Business and Society at the University of Technology Sydney. Wrote several books On the relationship between liberal democracy and contemporary capitalism. You can follow him on X/Twitter @ProfCarlRhodes.

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