AAA<\/p>\n
Independent economist Saul Eslake welcomed last month\u2019s budget. Not everyone agrees.<\/p>\n
Fitz: Mr Eslake. Thank you for making the time at such short notice.<\/p>\n
SE: Pleasure, Peter I remember meeting you at that banking function in Queenstown 15 years ago, when you had to drive through that storm because all the flights were cancelled.<\/p>\n
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Independent economist Saul Eslake at home in Acton, Tasmania.Australian Financial Review<\/p>\n
Fitz: I remember, but didn\u2019t think you would! You and I talked till late, and I was struck then that you had a singular capacity to explain economic theory and practice in terms that even the more economically obtuse of us could grasp \u2026 which is why I turn to you now, as the backlash against the federal budget still goes on. The Herald\u2019s own Ross Gittins is a hard marker, and he thought it a good one.<\/a> What about you?<\/p>\n SE: I think it is the best budget that [Treasurer] Jim Chalmers has brought down, in the sense that at least by scrapping negative gearing, other than for \u201cnew builds\u201d, and abolishing the 50 per cent capital gains tax discount for assets held longer than 12 months he was trying to use some of the tools at his disposal to achieve meaningful reforms, something that he hasn\u2019t tried to do, or I suspect hasn\u2019t been allowed by his prime minister to do, in the four budgets he brought down previously.<\/p>\n Fitz: Go on \u2026<\/p>\n SE: That\u2019s because political conventional wisdom in Australia now is that you cannot win government from opposition for the first time on a platform of bold reform because the government of the day will use all the vastly superior powers that it has at its disposal to frighten the bejesus out of voters as to what would happen if by some chance the opposition ever won. The last person to win an election on a platform with bold reform was Gough Whitlam in 1972<\/a>. And subsequently John Hewson and Bill Shorten showed that if you try to do the same thing again, you\u2019ll lose an election that everyone expects you to win.<\/p>\n Fitz: While the \u201ctrue believers\u201d, and those who\u2019ve \u201calways believed in miracles\u201d, celebrate \u2026<\/p>\n SE: Yes, so, the only way you win an election for the first time is to promise not to do anything at all, just to do it more competently than the mob that you say have been there too long. That\u2019s how John Howard got elected in 1996, saying that there\u2019d \u201cnever ever be a GST<\/a>\u201d. It\u2019s how Kevin Rudd got elected in 2007. It\u2019s how Tony Abbott got elected in 2013, saying, \u201cthere\u2019ll be no cuts to education health and the ABC and SBS<\/a>\u201d. And it\u2019s how Anthony Albanese got in, in 2022, and repeated the dose at the 2025 election. \u201cVote for me and you\u2019ll get more of the same.\u201d And one of the problems that he and Chalmers have had in selling what I think is essentially good policy is that they said they wouldn\u2019t do it.<\/p>\n Fitz: Bearing in mind my own economic illiteracy, my understanding is that Chalmers was trying to rebalance the seesaw so that things are less favourable for my generation of Boomers and make it easier for the 20-somethings, 30-somethings \u2013 including making it easier to get their first home. But the problem that he\u2019s got, is that to make it easier for first home buyers, he\u2019s got to make housing prices come down. But now they are coming down, everybody\u2019s screaming blue murder?<\/p>\n SE: Yes, that\u2019s exactly right. I\u2019ve been saying for a long time that we in Australia have a massive double standard when it comes to housing. The Consumer Price Index<\/a> which measures inflation is divided up into 87 different categories, and if the price of 86 of them falls, everyone will welcome it and the government of the day will try to claim credit for it. But when it comes to a fall in the 87th \u2013 housing \u2013 there\u2019s hell to pay. Despite the fact that housing is the biggest component of the CPI, nobody wants house prices to fall and nobody certainly wants to claim credit for house prices falling.<\/p>\n Related Article Fitz: It\u2019s politically intractable?<\/p>\n SE: Yes. We saw that in last year\u2019s election, which was supposedly about the cost of living. Despite the fact that the biggest component of the cost of living is the cost of housing, both Dutton and Albanese explicitly said they want house prices to keep going up, and they both offered policies that were designed to produce that result. The government offered the 5 per cent deposit scheme for first home buyers<\/a>, which I call the \u201c95 per cent loan scheme\u201d, which was bound to put upward pressure on prices, and it did. And the opposition was promising an even dopier scheme, allowing people to take 40 per cent of their super out and use it as a deposit to get a big mortgage. So thank God they didn\u2019t get the chance to implement that.<\/p>\n Fitz: I still can\u2019t see any solutions up ahead?<\/p>\n SE: I\u2019ve been saying for a long time that the reason our housing affordability problem would never be solved was because a very large majority of Australians don\u2019t want it to be solved, and politicians know it. So for all the megalitres of crocodile tears that politicians of all persuasions routinely shed for the difficulty faced by would-be first home buyers, they know that in any given year there\u2019s only about 150,000<\/a> of them. And even if you assume that for every one of them that succeeds in buying a first home in any given year, there\u2019s five or six who\u2019d like to, but can\u2019t \u2026 that\u2019s only a million votes for cheaper housing. Whereas there are 11 million Australians who own their own home, and there are 2 million or so who own an investment property. And even though they overlap a lot, there\u2019s still at least 11 million votes for more expensive housing, so even the dumbest of our politicians can do the maths.<\/p>\n Fitz: That\u2019s a hard calculus to overcome.<\/p>\n SE: That\u2019s 11 million votes for more expensive housing, whereas for, say, 30 years after WWII, most people and all politicians thought that housing existed to serve basic human needs for shelter and security, and for a stake in the community in which you lived. Over the last 35 or so years, Australians have come to think of housing as a means of accumulating wealth, or as people like to say these days, \u201cgetting ahead\u201d without ever asking \u201cahead of whom?\u201d. The answer to which is, of course, their own kids and grandchildren and their peers.<\/p>\n Fitz: But, here\u2019s the thing. When I said something along the lines of the changes to CGT and negative gearing were about moving towards intergenerational equity, some of the blowback was, \u201cwell, it\u2019s okay for you, you bastard, you\u2019ve already accumulated your wealth. How will younger people in their 20s and 30s generate theirs?\u201d<\/p>\n SE: Well, yeah, and that\u2019s not an unreasonable point, except that the number of people in their 20s who are accumulating wealth in that way is tiny. Fewer than 5 per cent of individuals under the age of 35 have rental income in their tax returns, and only 4.3 per cent of people aged between 18 and 34<\/a> have capital gains in their income. This is compared with 19.7 per cent of people aged 55 and over with rental income, and that income is 45 per cent of the total amount of rental income. What is more,11 per cent of people over 55<\/a> claim capital gains, and the capital gains which they have, account for 62 per cent of all the capital gains. So, this idea that the budget is an attack on the way young people are accumulating a deposit is just simply not true. Yes, there are some people doing it, but probably they are ones who have rich parents, or who have finished their double degree in law and commerce and are now working for Goldman Sachs.<\/p>\n Fitz: That still leaves many of us Boomers in an inordinately lucky position. <\/p>\n Related Article SE: Yes. I don\u2019t like \u201cgrandfathering\u201d the fact that the budget changes only apply to future investments, while existing investments keep the old tax treatment, because that\u2019s in effect privileging people on the basis of birth order. It does give some substance to the charge that you\u2019re kicking the ladder away from the next generations to do what you have done. I wish they wouldn\u2019t grandfather it, but the judgment they make, and it\u2019s not difficult to see why they make it, is that they have to grandfather it, otherwise they would never survive the next election, because too many people who\u2019ve had their snouts in the trough for decades would be pissed off at being told they have to take their snouts out of the trough.<\/p>\n Fitz: All up though, you make the case that house prices coming off, despite the media hullabaloo and the outcry from those who are homeowners, is actually helpful for us as a society?<\/p>\n SE: Yes. But with one caveat. If house prices were to fall by, say, 25 per cent in a year, like they did in America, Spain, Iceland, Greece, or Ireland during the financial crisis<\/a> two decades ago, that would threaten the stability of the banking system as many people would owe more money than their homes are worth. No-one wants house prices to fall 25 per cent. But if they were to fall by five or 10 per cent, which some people are forecasting, it would be no bad thing.<\/p>\n Fitz: And yet they\u2019re not saying that?<\/p>\n SE: Precisely! None of Jim Chalmers and Anthony Albanese and Housing Minister Claire O\u2019Neil are willing to say it out loud. O\u2019Neil, who\u2019s no fool \u2013 she\u2019s an intelligent, capable person \u2013 couldn\u2019t bring herself to say on TV the other day that the solution to housing being too expensive is \u2026 cheaper housing. None of them can say it, they know that there are 11 million voters who think that more expensive housing makes them better off. The truth is the only people who are actually worse off with these changes are people with investment properties.<\/p>\n Fitz: In terms of the politics of all this, you are an independently professional economist, and must survey the political landscape to see what\u2019s coming. Right now, the big political noise is coming from One Nation. For the life of me, I can\u2019t discern that they have any nuanced economic policy per se on things like housing. Can you, or not?<\/p>\n SE: I don\u2019t think they have either, other than the belief that adopting a net zero immigration policy will reduce the demand for housing and hence make it cheaper. The more substantive point is the people who are attracted to Pauline Hanson \u2013 like the people who are attracted to Donald Trump in the US and Nigel Farage in the UK, and all the other weirdo parties in France and Germany, and so forth \u2013 don\u2019t care about policy, they just want to chuck the bastards out and bring the system down.<\/p>\n Fitz: And? What would happen? If One Nation did get power \u2013 let\u2019s say in a coalition with the Coalition, or whatever \u2013 what would that do to the economy?<\/p>\n SE: Send it backwards. My only uncertainty is whether it would happen quickly or slowly.<\/p>\n Related Article Fitz: But why, ipso facto, backwards?<\/p>\n SE: Because the kind of populist policies that they would implement would first of all cost a lot of money that they have no idea how to pay for, other than put it on the tab. So we\u2019d run bigger deficits. Hanson wants to bring back tariff protection that \u2013 just as it did for 90 years \u2013 once again forces Australians to pay higher than necessary prices for badly made goods.<\/p>\n Fitz: When I interviewed the treasurer,<\/a> he made the point that Tim Wilson was the third shadow treasurer he\u2019d faced in the last 12 months. What do you do make of him? Do you lean forward when he speaks? Does he make sense?<\/p>\n SE: It is part of my job to form a view about what might happen if the other guy gets to be treasurer, so I do pay some attention to it. But I\u2019m more focused on his leaders. I\u2019ve said \u2013 although I don\u2019t think anyone\u2019s quoted me as saying it \u2013 that Angus Taylor and Jane Hume together were the least effective shadow economics team I can remember since Gareth Evans and Bob McMullan after Keating lost the 1996 election. But at least Gareth Evans and Bob McMullan can claim significant achievements in their prior ministerial careers, which neither Taylor nor Hume can. Right now, I suspect Wilson will be more effective than Taylor was when he was shadow treasurer, but that\u2019s not exactly setting the bar very high.<\/p>\n Fitz: Last question. If a 25-year-old Australian asked you whether they should spend the next decade trying to buy a house, move overseas, or simply rent and invest elsewhere, what would you tell them?<\/p>\n SE: I would begin my answer by asking that person what he or she thought was most important in his or her life. If it was stability, a sense of belonging, \u201ca place to call home\u201d then I would say try to buy a house and don\u2019t worry about whether it goes up in value or not. If that isn\u2019t one of your life goals, then by all means rent and invest \u2013 you could change your mind later in life, in which case if you\u2019ve invested well you will be better placed to change your mind. And moving overseas doesn\u2019t have to be a permanent choice. Indeed, probably the only significant regret I have about my life is that I never lived or worked overseas (at least not as an adult). But then again if you get to 68 and only have one major regret, you\u2019ve had a pretty good life!<\/p>\n Fitz: Thank you for your time.<\/p>\n Get a weekly wrap of views that will challenge, champion and inform your own. Sign up for our Opinion newsletter<\/a>.<\/p>\n Save<\/p>\n You have reached your maximum number of saved items.<\/p>\n Remove items from your saved list<\/a> to add more.<\/p>\n![\"Boomers](\"https:\/\/www.newsbeep.com\/au\/wp-content\/uploads\/2026\/06\/3c7e5af8e2a0fed7ccd177bd0e8b93092ddd95f0.jpeg\")
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Peter FitzSimons<\/a> is a journalist and columnist with The Sydney Morning Herald.Connect via X<\/a>.From our partners<\/p>\n","protected":false},"excerpt":{"rendered":"June 21, 2026 \u2014 5:00am Save You have reached your maximum number of saved items. Remove items from…\n","protected":false},"author":2,"featured_media":749621,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[64,63,99,164],"class_list":["post-749620","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-au","tag-australia","tag-business","tag-economy"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/749620","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=749620"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/749620\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/749621"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=749620"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=749620"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=749620"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}