Australia has become very good at debating how wealth should be divided, yet we've become much less interested in how it's created. Housing affordability, interest rates, negative gearing, capital gains tax and the cost of living all deserve serious attention, but almost every argument begins halfway through the story. Before wealth can be taxed or redistributed it has to be created and somewhere along the way that simple truth seems to have slipped away from the conversation.
This year's debate offers a useful test. The Federal Government has changed the tax treatment of future residential investment, directing negative gearing towards new builds from July 2027.[1] At the same time, the Productivity Commission's housing inquiry has found that planning rules, slow approvals and poorly coordinated infrastructure are making it harder to build homes where people want to live.[2] We can disagree about the best tax settings, but neither investors nor first-home buyers can purchase a home that never gets built.
The larger question is how we encourage people to build businesses, create homes, employ others and invest for the long term. If we make one activity less attractive, what will people do with their money instead? It might fund something more productive here, but it could just as readily move into an existing asset or an overseas market. Good policy has to consider that next decision as well as its immediate effect.
Housing is more than a tax argument
For generations, owning a home and, when circumstances allowed, investing in property gave ordinary Australians a practical route to financial security, alongside a family business, superannuation or a modest share portfolio. It was never a perfect system, and rising prices have made the first step much harder, which helps explain why housing has become so emotional. Parents wonder whether their children will own a home, while the young wonder whether working and saving will ever be enough.
Investors, developers, foreign buyers, migration, planning and tax concessions have all been put forward as the cause of the problem. Each can influence the market, but the price of a home also reflects land-use rules, infrastructure, construction costs, finance, employment and the number of people who need somewhere to live. No single villain explains all of it, nor can one change to the tax system make up for years of inadequate supply.
There is a real case for questioning concessions that encourage investors to compete with first-home buyers for established homes. Buying an existing dwelling changes who owns it, but does not, by itself, increase the number of homes and equally, an investor selling a rental property does not make the dwelling vanish. It might become an owner-occupied home or be bought by another landlord, and the effect on renters, buyers and prices depends on who takes the next step.
New housing requires someone to finance the land and construction, as well as someone willing to buy or rent the finished home, so private capital is part of the chain even if it should never be the whole answer to housing need. Public policy I suggest should ask a sharper question than whether it favours or punishes investors: does it encourage additional homes in places people can actually live and work? The Productivity Commission's interim report points to land-use reform and better coordination of infrastructure as two of the strongest ways to improve that supply.[2]
The investment ladder is getting harder to reach
Housing affordability is usually discussed as a question of whether young Australians can buy a place to live, but it is also a question of whether they can begin building assets. The Australian Institute of Health and Welfare reports that home ownership among 30 to 34 year-olds fell from 64 per cent in 1971 to 50 per cent in 2021.[3] That comparison does not mean every young person wants to own a home at the same age as their parents did, but it does show that a route available to many earlier households has become less common.
The problem is much bigger than whether someone gets the keys to their first home. If more and more of your income is disappearing into rent and the deposit keeps drifting further out of reach, where exactly are you supposed to start building wealth? Save, invest, start a business, take a calculated risk, get some skin in the game? Of course there are other routes, shares, super, business ownership, but we can’t keep telling younger Australians that property is too expensive, then make the alternatives harder as well, and expect them to feel remotely optimistic about getting ahead.
We should be doing everything we can to help younger Australians build something of their own, whether that’s a home, a business, an investment portfolio or simply a stronger financial future. First-home buyer assistance has its place, but if we don’t build more homes and help people earn and save more, all we’re really doing is giving one buyer a little more firepower to compete with the next. That doesn’t solve much. The real issue is bigger than the property ladder, it’s whether the next generation can still see a credible ladder to wealth at all.
Capital has a choice
Capital moves. It always has and it always will. People put their money where they believe the opportunity is, whether that means buying a rental property, backing a growing business, investing in shares or looking overseas. Change the risk, change the return or make the rules harder to read, and people will change what they do. That is why policy should be judged not only by what it is trying to achieve, but by what investors are likely to do next.
There is nothing inherently wrong with investing overseas. Diversification matters, Australian companies earn money abroad and plenty of sensible investors will always want exposure to global markets. The concern is more basic than that: are we creating enough worthwhile opportunities here to keep Australian capital working in Australia? We cannot simply assume that money will stay at home because we would prefer it to. We have to give people a reason to keep it here.
And not every dollar invested in Australia does the same job. Buying an existing asset can make someone wealthier without adding a single home, job or piece of productive capacity. Funding a new development, helping a business buy equipment, backing a growing company or supporting a project that creates employment is different because it adds something. That is where I think the real conversation should be heading, not telling Australians where they must invest, but making sure the opportunities here are good enough that they actually want to.
The businesses behind better wages
If people are to save more and afford more, quite simply their incomes have to grow. Sustainable wage growth depends on businesses becoming more productive, more profitable and better able to invest, expand and pay people more. The Australian Small Business and Family Enterprise Ombudsman reports that businesses with fewer than 20 employees accounted for 97.3 per cent of Australian businesses in June 2025.[4] That is a share of businesses, not a share of employment, but it tells us how many individual decisions to invest, hire or stand still are being made at a small scale.
Think of a small builder deciding whether to take on an apprentice, a manufacturer considering an investment in new equipment or a service business looking at opening its first interstate office. Those decisions come down to demand, access to finance, skills, energy costs, stable rules and, above all, confidence that the investment will pay off. Governments do support small business in various ways, and sensible regulation is essential, but the real question is whether the system helps a good business grow and pay people more, or simply leaves the owner spending too much time and money fighting their way through it.
I do not believe we can make housing permanently more affordable by focusing on prices alone. More supply matters enormously, as do better jobs, stronger businesses and the ability for people to save. If incomes stagnate and productive investment slows, even the best-intended housing policy risks leaving the next generation chasing a moving target.
A better direction
The choices are more practical than the political shouting suggests. We can make room for more homes near jobs and transport, plan roads and utilities before land sits idle, and make approval times more predictable without lowering safety standards. We can also test housing incentives against the homes they actually help deliver, while being honest about their effects on both renters and first-home buyers. These are difficult reforms, but they address our capacity to create something new rather than simply changing who wins the next auction.
The same discipline should apply beyond housing. Sound businesses need better access to capital and skills, as well as rules clear enough for someone to commit money for years without having to guess how the next change will affect a project. Younger Australians need credible ways to build assets over time, while our superannuation funds and private investors need worthwhile domestic opportunities without being told that investment overseas is disloyal.
None of this asks us to abandon fairness, remove every regulation or preserve every tax concession. Good government provides the infrastructure, education and clear rules on which private enterprise depends, while recognising that a worker, a small business owner, a developer and a prospective investor all need a reasonable prospect of improving their circumstances. The test of a policy should be whether it widens that prospect while dealing honestly with its costs and trade-offs.
Australia has long talked about giving people a fair go, and to me that means more than helping someone win a contest for an existing asset. It means giving more people a realistic chance to work, save, own, invest and build something that lasts. A country that creates those opportunities can support better homes, better wages and stronger public services, while one that only argues over the wealth it already has will eventually find that argument getting harder.
Australian money will go overseas, as it should when the opportunity is right. The question is whether we are creating enough worthwhile opportunities for that money, and for the next generation of Australians, to build prosperity here.
Sources: [1] Treasury tax changes [2] PC housing report [3] AIHW home ownership [4] ASBFEO business counts
Photo: David Syphers / Unsplash