Episode Details

Australian workers face wage stagnation as inflation soars, but the latest budget aims to rectify a tax system favoring the wealthy. Wages grew by just 0.76% in the March quarter, dropping to 3.2% annually, the lowest in nearly four years. Real wages are shrinking, disproportionately affecting everyday earners.

Reserve Bank governor Michele Bullock can rest easy on wage-price spiral fears, as data shows no signs of one after thirty-five years. If quarterly growth holds, annual wages might reach 3% at the upper edge of inflation.

The wage stall highlights how tax perks like the capital gains tax discount and negative gearing exacerbate inequality. Median earners receive around $12,356 in benefits, while the top 1% pocket over $732,000—nearly sixty times more. The richest 10% grab 56% of capital gains perks alone.

New Treasury findings reveal the 50% CGT discount pushed investors into rental properties over shares, inflating house prices and leaving fewer than half of early thirty-somethings as homeowners for the first time since World War Two. Someone earning $150,000 in wages pays 29% tax, but investments lower it to 27.5%, saving $2,250 by gaming the rules.

The budget counters with a $250 tax offset for wage earners, a slashed CGT discount, and a 30% tax floor on discretionary trusts. This marks a significant step towards balancing the field, ensuring investors pay closer to what workers do, alleviating the burden as real wages decrease.

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