Australia’s longest serving treasurer has warned that Labor is “softening up” Australians for tax increases to pay for its large spending agenda.

Former Liberal treasurer Peter Costello, who served between 1996 and 2007 under John Howard, spoke at the Aspire conference in Sydney on Tuesday on the efficiency of Australia’s tax spend.

“The difference between what government gets from tax and what it spends is growing,” Mr Costello told the Aspire conference, per The Australian.

“Both are rising but spending is growing faster.”

He noted that tax per person has risen about 16 per cent since 2007.

This lift, of almost one per cent per year, has meant tax per person is up to $23,800 – and Mr Costello warned Labor could look to take more.

“The government is softening us up for tax rises again,” Mr Costello said.

His analysis shows that government spending per person is up about 32 per cent per person since 2007 when adjusted for inflation, meaning the government is borrowing heavily.

“To pay for this massive spending, the government is borrowing more than ever,” Mr Costello said.

“20 years ago, we had no net debt. Today net debt is just under $20,000 per man, woman, child and baby.”

Mr Costello warned that future generations could be in strife as the government’s net worth has taken a dive.

He stressed that government capital has run down $700b over the past 20 years in a blow to younger and future generations.

“This will particularly disadvantage the young.”

The Howard-era treasurer’s warning comes as he calls back to the first Intergenerational Report in 2002 that warned about Australia’s declining birth rate.

The prospect of future generations facing higher taxes and lower productivity was a motivator for the Howard government to cap spending programs while establishing the Future Fund.

“For a while Australia was successful. And then we lost direction.”

He related this to Australia’s productivity and economic speed limit – major problems currently sparking concerns from economists.

Productivity sits near historic lows at about 0.8 per cent per annum, while the recent uptick of inflation was blamed on Australia’s economy having tight capacity constraints.

“The US economy is growing around four per cent but inflation is contained because productivity is growing. Australia used to be able to do that,” Mr Costello’s speech read.

“But with poor productivity inflation has broken out even though our economic growth is a paltry 2 per cent. Our economic speed limit is much lower these days.”

Fixing productivity will require “patience and sustained effort”, core virtues needed to tackle the problem in the “instantaneous on-demand world”.

“Short-term fixes are beguiling. Our leaders lost long-term focus,” Mr Costello said.

“Government programs dramatically expanded. Much of it was haphazard, poorly designed and wasteful.

“This expansion created new expectations and further demands.”

This caution comes as government spending sits at its highest level in 40 years – outside the pandemic – and spending as a portion of GDP will be 26.9 per cent in 2025-26.

Labor is also considering undoing the 50 per cent capital gains tax discount introduced by Mr Costello in 1999 for property investors.

The deduction means investors receive a 50 per cent tax discount on the profit of an asset they have held for at least 12 months and then sold.

Geoff Wilson, a leading fund manager who led the campaigns against Labor’s 2019 franking credits policy and tax on unrealised gains, said paring back the CGT discount should come alongside tax breaks for businesses to bolster productivity.

“Any change needs to be revenue neutral and reallocate existing tax concessions to better support economic growth and the Australian economy,” he said in a statement to SkyNews.com.au.