Prices have soared beyond wage growth, rents keep rising, and even some well-intentioned government initiatives, including those announced by Labor and the Coalition at their election campaign launches on the weekend, risk driving up demand.

What’s gone wrong?

The Grattan Institute says increasing housing supply is essential to maintain price stability over time, but notes we are not making enough progress.

Australia will miss its goal to build 1.2 million new homes within five years if we stick to the current housing policies and construction practices.

Why it’s not working

There is a wide range of reasons why Australia is failing to provide enough housing:

Fragmented policy approach: A national approach involving all levels of government aligning their policies, rules and regulations is needed.

Planning bottlenecks: Some projects face years of delay due to local council regulations and zoning requirements. The Productivity Commission has reported Australia’s planning system has excessive barriers to new projects, including medium-density developments.

Land release delays: State governments are slow to release new land for housing. This is often because of community opposition, political considerations and market dynamics. This results in limited availability, which leads to higher costs for land that can be developed.

Skills shortages: Recent immigration restrictions have worsened the shortage of skilled tradespeople in the residential construction sector.

Demand-side subsidies: Government programs, such as first home buyer grants, help some people buy homes. However, they also make housing less affordable because they can result in increased prices.

What could work without raising prices

There are various changes that could be made without necessarily raising prices.

Duplication and logjams could be removed if a national housing strategy was introduced. This should integrate policies and regulations across federal, state and local jurisdictions.

Federal grants and incentives should be tied to states meeting targets for land release, re-zoning permits and streamlined approvals.

Using innovative construction technologies can cut construction time by as much as 50%. These include prefabricated and modular building parts, which are made in factories and later assembled at the construction site.

A government update of land use and zoning permits would make it easier and faster to build medium-density housing near transport and job hubs. This is a quick way to add dwellings without sprawl.

Governments could also offer tax or planning concessions for developments that lock in affordable rents. This would help create stable, long-term rental options.

Learning from other countries

Australia can get ideas for increasing housing supply without raising prices from the experience of other countries.

Through substantial investments in social housing, Finland has significantly reduced homelessness and created stable housing options for families with limited income.

Large-scale prefab public housing originated in Singapore decades ago as a method to accelerate construction timelines and reduce expenses. Prefabrication is only used in 8% of projects in Australia at the moment.

Sweden has adopted advanced modular construction techniques, which result in 80% of homes being built off-site.

Germany employs municipal-led housing associations along with rent controls to maintain price stability and tenant protection.

And in the UK, inclusionary zoning regulations mandate that new developments either contain affordable housing units or contribute to a fund that supports affordable housing in different locations. This helps create diverse housing options in most neighborhoods.

Election promises versus real change

Significant reforms are needed – not election sweeteners. To make genuine progress, we need to invest heavily in modern construction techniques, transform housing approval processes and ensure states promptly release essential land.

The solution requires a coordinated response from federal, state and local governments. This would enable more Australians to obtain homeownership and secure rental options.

Our politicians must avoid short-term promises during elections because these threaten to return us to the destructive pattern of escalating prices and dissatisfied homebuyers. Long-term policy reform is what we need.

Ehsan Noroozinejad, Senior Researcher, Urban Transformations Research Centre, Western Sydney University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Helen Hodgson, Curtin University

Federal elections always offer the opportunity for a reset. Whoever wins the May 3 election should consider a much needed revamp of the tax system, which is no longer fit for purpose.

The biggest challenge that should be addressed through tax reform is the level of inequality in Australian society.

The five-yearly Intergenerational Reports lay bare the intergenerational squeeze. The future burden of supporting the ageing population will increasingly fall on younger Australians who generally don’t enjoy the same financial wellbeing of previous generations.

But there is also rising inequality within generations. Not all younger Australians can rely on inherited wealth, including the bank of mum and dad. And superannuation balances at retirement vary wildly, given they are tied to work history.

Proper systemic tax reform would play a crucial role building a fairer society.

Reform freeze

But to define what is meant by tax reform, we need to think about some of the big picture concerns that affect our economy.

Arguably we have not successfully pursued a tax reform agenda since the introduction of the GST in 2000. Various governments have changed the tax rates, but that doesn’t constitute genuine reform.

The Henry Review, commissioned by the Rudd government, set out the long-term horizon for reform – including resource taxes and road user charges for the transition to a net-zero economy. However, the Henry blueprint has not been adopted by any succeeding government.

Politicians like to boast of “reform agendas”. Despite the political rhetoric, the tax system has not yet adapted to the 21st century.

Wealth inequality

The biggest gap in our tax base relates to the concessional taxation of wealth and assets, which is an area ripe for reform.

According to the Treasury, the top six revenue losers all relate to superannuation, capital gains and negative gearing. In 2024–25, the estimated revenue foregone for these concessions are:

• $29 billion for the concessional taxation of employer superannuation contributions
• $27 billion for the main residence Capital Gains Tax exemption (discount component)
• $26 billion for rental deductions (this is partly offset by rental income)
• $24.5 billion for main residence Capital Gains Tax exemption
• $22.73 billion for CGT discount for individuals and trusts
• $22.2 billion for the concessional taxation of superannuation earnings

The distributional analysis for superannuation and the Capital Gains Tax discount shows the greatest benefit goes to older taxpayers in the higher earnings brackets. So wealth inequality is perpetuated.

Addressing these overgenerous concessions to broaden the tax base should be the starting point for any meaningful reform in this country.

Taking another look at death duties, which were abolished from the late 1970s, should also be considered.

Death duties were applied to assets transferred to beneficiaries on death. If they were reimposed with a starting threshold set at an appropriate level, they would limit the intergenerational transfer of wealth, which is generating much of the inequity.

Wealth creation tools

The Capital Gains Tax discount was introduced following the 1999 Ralph Review to direct productive capital into Australian businesses.

The 50% discount sparked the boom in residential investment, which combined with negative gearing, has supercharged the inefficiencies in our housing market.

Superannuation is another wealth-creation tool. Again, the design of superannuation, whereby tax was paid at 15% on the three stages of contributions – investment, earnings and withdrawal – was subverted in search of simplicity in 2007 when the Howard government exempted superannuation withdrawals from tax.

Case study

By comparison, the age pension is taxable, if the recipient earns other income. So too are earnings from work allowed under Centrelink rules. This not only allows estate planning advantages, but creates an unfair outcome for retirees who have not had the opportunity to accumulate substantial balances.

Consider the cases of “Jean” and “Kim”, who are both single homeowners aged 68.

Jean has no financial assets and receives the full pension of $1,194 per fortnight plus $512 per fortnight from part-time work. She has a taxable income of $43,816 per annum and, after tax offsets, pays $2,595 in tax including $209.70 medicare levy.

Kim has a superannuation balance of $880,000 and draws a super pension of $44,000. Kim is not eligible for the pension, but pays no tax and no medicare levy.

Is our tax system really delivering a fair go for all Australians?

Tax relief is not reform

Ahead of election day, both the government and opposition are promising tax handouts. Labor is offering top-up tax cuts starting July 1 2026. The coalition says it will temporarily halve the fuel excise.

But meaningful reform will not be achieved by politicians trading off various interest groups to win votes.

Nor do we need yet another review: many of the solutions to Australia’s tax problem were identified by the Henry Review 15 years ago.

And we must avoid cherry-picking incentives that lead to perverse outcomes. For example, cutting fuel excise will slow down the transition to a net zero economy.

Consensus needed

Whoever forms government after the election could build a coalition of business and community sector leaders to seek consensus and pursue holistic reform. The focus must be on addressing the inequality that is emerging as a challenge to the economy and our way of life.

As Ken Henry recently stated, successive governments have fuelled inequality by failing to do three things

one, manage financial risks arising from the erosion of the tax base; two, maintain the integrity of the tax system; and three, have regard to intergenerational equity.

Without significant tax reform, Australia’s wealth divide will continue to deepen with young people and future generations left to suffer the brunt.

This is the sixth article in our special series, Australia’s Policy Challenges. You can read the other articles here

Helen Hodgson, Professor, Curtin Law School and Curtin Business School, Curtin University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

James Giesecke, Victoria University and Robert Waschik, Victoria University

The Trump administration has announced a 90-day pause on its plan to impose so-called “reciprocal” tariffs on nearly all US imports. But the pause does not extend to China, where import duties will rise to around 125%.

The move signals a partial retreat from what had been shaping up as a broad and aggressive trade war. For most countries, the US will now apply a 10% baseline tariff for the next three months. But the White House made clear that its tariffs on Chinese imports will remain in place.

So why did President Trump back away from the broader tariff push? The answer is simple: the economic cost to the US was too high.

Our economic model shows the fallout, even after the ‘pause’

Using a global economic model, we have been estimating the macroeconomic consequences of the Trump administration’s tariff plans as they have developed.

The following table shows two versions of the economic effects of the tariff plan:

• “pre-pause” – as the plan stood immediately before Wednesday’s 90-day pause, under a scenario in which all countries retaliate except Australia, Japan and South Korea (which said they would not retaliate)
• “post-pause” after reciprocal tariffs were withdrawn.

As is clear, the US would have faced steep and immediate losses in employment, investment, growth, and most importantly, real consumption, the best measure of household living standards.

Heavy costs of the tariff war

Under the pre-pause scenario, the US would have seen real consumption fall by 2.4% in 2025 alone. Real gross domestic product (GDP) would have declined by 2.6%, while employment falls by 2.7% and real investment (after inflation) plunges 6.6%.

These are not trivial adjustments. They represent significant contractions that would be felt in everyday life, from job losses to price increases to reduced household purchasing power. Since the current US unemployment rate is 4.2%, these results suggest that for every three currently unemployed Americans, two more would join their ranks.

Our modelling shows the damage would not just be short-term. Across the 2025–2040 projection period, US real consumption losses would have averaged 1.2%, with persistent investment weakness and a long-term decline in real GDP.

It is likely that internal economic advice reflected this kind of outlook. The decision to pause most of the tariff increases may well be an acknowledgement that the policy was economically unsustainable and would result in a permanent reduction in US global economic power. Financial markets were also rattled.

The scaled-back plan: still aggressive on China

The new arrangement announced on April 9 scales the higher tariff regime back to a flat 10% for about 70 countries, but keeps the full weight of tariffs on Chinese goods at around 125%. Rates on Canadian and Mexican imports remain at 25%.

In response, China has announced an 84% tariff on US goods.

The table’s “post-pause” column summarises the results of the scaled-back plan if the pause becomes permanent. For consistency, we assume all countries except Australia, Japan and Korea retaliate with tariffs equal to those imposed by the US.

As is clear from the “post-pause” results, lower US tariffs, together with lower retaliatory tariffs, equal less damage for the US economy.

Tariffs applied uniformly are less distortionary, and significant retaliation from just one major partner (China) is easier to absorb than a broad global response.

However, the costs will still be high. The US is projected to experience a 1.9% drop in real consumption in 2025, driven by lower employment and reduced efficiency in production. Real investment is projected to fall by 4.8%, and employment by 2.1%.

Perhaps we should not be surprised that the costs are still so high. In 2022, China, Canada and Mexico accounted for almost 45% of all US goods imports, and many countries were already facing 10% reciprocal tariffs in the “pre-pause” scenario. Trump’s tariff pause has not changed duty rates for these countries.

What does this mean for Australia?

Much of the domestic commentary in Australia has focused on the risk of collateral damage from a US-China trade war. Given Australia’s economic ties to both countries, it is a reasonable concern.

But our modelling suggests that Australia may actually benefit modestly. Under both scenarios, Australia’s real consumption rises slightly, driven by stronger investment, improved terms of trade (a measure of our export prices relative to import prices), and redirection of trade flows.

One mechanism is what economists call trade diversion: if Chinese or European exporters find the US market less attractive, they may redirect goods to Australia and other open markets.

At the same time, reduced global demand for capital, especially in the US and China, means lower interest rates globally. That stimulates investment elsewhere, including in Australia. In our model, Australian real investment rises under both scenarios, leading to small but sustained gains in GDP and household consumption.

These results suggest that, at least under current policy settings, Australia is unlikely to suffer significant direct effects from the tariff increases.

However, rising investor uncertainty is a risk for both the global and Australian economies, and this is not factored into our modelling. In the space of a single week, the Trump administration has whipsawed global investor confidence through three major tariff announcements.

A temporary reprieve

Tariffs appear to be central to the administration’s economic program. So Trump’s decision to pause his broader tariff agenda may not signal a shift in philosophy: just a tactical retreat.

The updated strategy, high tariffs on China and lower ones elsewhere, might reflect an attempt to refocus on where the administration sees its main strategic concern, while avoiding unnecessary blowback from allies and neutral partners.

Whether this narrower approach proves durable remains to be seen. The sharpest economic pain has been deferred. Whether it returns depends on how the next 90 days play out.

James Giesecke, Professor, Centre of Policy Studies and the Impact Project, Victoria University and Robert Waschik, Associate Professor and Deputy Director, Centre of Policy Studies, Victoria University

This article is republished from The Conversation under a Creative Commons license. Read the original article.