Paul Keating has thrown his weight behind Labor’s proposed capital gains tax changes, dismissing complaints from the Coalition and parts of the startup sector as overblown and saying the reforms are needed to repair a tax system that has favored wealth over wages for decades.
The former prime minister said the changes were “marginal” and said the real distortion had been created long ago, when John Howard and Peter Costello introduced the 50% capital gains tax discount in 1999. Keating said that decision helped push house prices from nine times the average household income to 16 times the average household income, leaving housing unaffordable for a whole generation.
His intervention lands at a moment when Labor is under growing attack over the package, which would replace the 50% discount on profits with a new cost-base indexation model and impose a 30% minimum tax rate. The government is arguing that the changes would tax gains after inflation and rebalance the system, while some tech founders say the plan could discourage investment and damage entrepreneurship.
Keating rejected that argument outright. He said wealthy individuals had benefited from preferential treatment for investments for decades, leaving wage and salary earners at a disadvantage, and he singled out critics who, in his words, want to preserve “a preference for capital over wage and salary income.” He also used Canva as an example of a successful startup whose valuation would make any tax debate secondary, saying punters with a big idea would not be put off by “some marginal change to the tax rate.”
The former Labor leader saved his sharpest criticism for Howard and Costello, saying their 1999 changes had distorted the tax system and helped “used car selling and dodgy accounting mates.” He said the broader problem was that income is taxed too heavily while capital is taxed too lightly, and that imbalance has warped housing markets for years. For Keating, the argument is no longer about a niche tax tweak. It is about whether Australia keeps rewarding assets over work while a generation of wage earners pays the price.
Prime Minister Anthony Albanese said on Wednesday that misinformation and dishonesty were behind the backlash to the changes, and said the government was taxing more equally the income earned from working and the income earned from assets. Treasurer Jim Chalmers has said the government is still consulting the tech sector, but he has offered no firm indication that the policy direction is changing. The Coalition, through shadow treasurer Tim Wilson, has taken the opposite line, calling the budget an abuse of trust and warning that Labor would kill the startup sector in Australia.
Keating’s statement gives Labor a rare and forceful defence from one of its most prominent economic voices, but it also sharpens the political fight. The government is not retreating, the opposition is escalating, and the tech sector is still pressing its case. What happens next will turn on whether Labor treats the backlash as noise to be absorbed or a signal that the policy fight over capital, wages and housing is only just beginning.
