Sharri Markson:
All right. As I spoke about a bit earlier, the Albanese government is targeting the capital gains tax discount. They’re going to sell it as fairness for young Australians. But have a look at Liberal Senator Jane Hume saying it’s just another tax grab that won’t help build a single extra home.
All right. We don’t have that comment right now, but joining me now is Institute of Public Affairs Chief Economist, Adam Creighton. Adam, great to see you as always.
You heard what I had to say about the government’s plans on the capital gains tax discount earlier in the show. Do you agree? Do you think there’s going to be any significant impact in the government cutting this, or is it just a tax grab, another way to raise revenue?
Adam Creighton:
Well, look, I think Jane Hume is right. It’s certainly a tax grab. It’s very disappointing. It’s not tax reform. It’s not going to make any difference to house prices. Even the Grattan Institute, I think, says the difference in prices will be 1%. So house prices in Australia have gone up about 80% in the last 10 years, and they continue to increase about 5% every year. So do you think 1% change from this tax change is going to make any meaningful difference to any first home buyer? No, it’s not.
But the funny thing about this proposed change is it’s not even going to raise much revenue. I mean, for top rate taxpayers, the capital gains tax rate is about 24%. So in the UK, in various countries in Europe, they have increased the capital gains tax rate and they have lost revenue, because people simply won’t sell their homes. They won’t sell their assets. Or, they’ll move to New Zealand where there is no capital gains tax at all.
So it’s a very stupid reform. It’s not cohesive reform. And I really hope it doesn’t happen. And you’ll also see a dive into assets in the next few months. If people start to think that this will be grandfathered, you’ll see a huge surge into property to lock in the current tax rate.
Sharri Markson:
We have that comment from Jane Hume now, so let’s have a quick look.
Jane Hume:
When Labour run out of money, they come after yours. If somebody can demonstrate to me that if you remove the capital gains tax discount, a red tape reduction measure, that it’s going to dramatically increase housing supply, I’ll be open-minded.
Sharri Markson:
So Adam, if you’re saying it’s not actually going to generate a significant amount of revenue for the government, is this just about one of their ideological pet hatreds, kind of similar to negative gearing?
Adam Creighton:
Well, look, I think it’s a mix of that. It’s a mix of ideological hatred and just sheer economic stupidity. I mean, I think these people mean well, but they just don’t understand how the economy works. I think they actually think it will raise a lot of money, but it just won’t.
I mean, we are already taxed so much. 47 cents on the dollar is the highest marginal rate, which cuts in at an absurdly low level globally. $190,000 Australian cuts in. In the US, you’ve got that tax rate at something like $600,000 a year. So more and more bright young Australians are leaving the country. They just think that you raise more money from these changes. They don’t. Look, I just think it’s a lack of competence.
The treasury just, they couldn’t even count $57 billion. You must have seen that story, just, oh, whoops. There’s an extra 57 billion of spending that we couldn’t even add up.
So the fact that they’re even recommending this is really embarrassing, frankly.
Sharri Markson:
I want to ask about the rate rise this week. Now, on the show last night, we spoke about how economists are urging the government to do some of the heavy lifting on inflation, just cut government spending. But we’ve seen the treasurer reject the idea that the spending’s making it any worse, and they point to Michelle Bullock’s comments, because she was asked about this, and I suppose understandably she skirted around it. So what’s your view on how much the Albanese government is contributing to inflation and thus the rate rise?
Adam Creighton:
Well, hugely, I think, I mean, the Reserve Bank is the first central bank in the Western world to lift rates. So they can hardly blame global factors. Spending by the federal government is growing the fastest rate since the Whitlam years. If you exclude the COVID period, it’s growing at about 9% a year, nominal. That is huge. Nothing else is growing at that. Not population, not incomes, but federal spending is.
And there are huge budget deficits, about $35 billion a year, I think, as far as the eye can see. And when governments run those deficits, they essentially create money and they pump it into the money supply, and of course that lifts prices. So it’s a huge factor. It’s just bad economics that they deny it.
And these are the people who just before that huge spike in inflation to 7%, said inflation would be 3% in the next year. So they clearly have no idea what they’re talking about. These people don’t understand how the economy works.
Sharri Markson:
I mean, you’re right. The forecasting has been appalling. We were meant to be back in the target band by now, 2% to 3%.
Adam Creighton:
Yes, remarkable.
Sharri Markson:
I mean, the RBA can’t control government spending, but the forecasting has been wildly inaccurate for whatever reason. And now they’re saying it’s not going to be back to target band until 2028 out of …
Adam Creighton:
I know it’s shocking. It’s shocking.
Sharri Markson:
Can you just explain to people-
Adam Creighton:
Well, what about all the…
Sharri Markson:
… what this means in real terms, because Michelle Bullock did make that comment that prices have increased by 20 to 25% basically, because if inflation is sitting at three, or meant to hit 4%, 4.2% by mid this year, just the impact, the cumulative impact that has on butter or a cup of coffee.
Adam Creighton:
Yeah, of course. I mean, hundreds of thousands of households with mortgages are going to be paying many hundreds of dollars a month more. It’s a huge impact. And the fact, there’s a 50% chance now that there’ll be two more rate rises, I think, by the middle of the year. And here’s the government just a few months ago trying to encourage young buyers to get into the 5% deposit scheme.
So here’s young people who’ve got their $50,000 deposit, they’ve borrowed $950,000, and now the interest rate’s going to go up 0.75% and completely wipe them out. So you have to feel sorry for those people. And you also have to realise just how little, again, to go back to my earlier point, they understand how the economy works. Very embarrassing, and it’s a sad day for Australia.
Sharri Markson:
Yeah, it is indeed. All right. Adam Creighton, thank you very much for your time.
This transcript with Adam Creighton talking on Sharri Sky News Australia 5 February 2026 has been edited for clarity.
