Increasingly Australians feel that they cannot get ahead. That the economy is failing to work for them. If people don’t have a stake in our society, they are more likely to turn to more extreme solutions.

An important reason for this is that economic reform has stalled.
Tax reform in Australia is not just hard; it is diabolical. Scare campaigns have been very successful and now governments on both sides are very reluctant to make any real change.

This lack of reform is making people’s lives worse. But it is happening so slowly that it can take years to register.

Take housing affordability. House prices started rapidly increasing in the early 2000s, just after the Howard government introduced the capital gains tax discount.

At first most people welcomed higher house prices as it made homeowners feel wealthier. But over time people were increasingly unable to buy a home as more houses were snapped up by investors. Now, 25 years later, it is one of the biggest issues facing Australia and a big reason that young people feel that the Australian economy is working against them.

Because real reform has become so hard, even after the problem was clear to everyone, nothing substantial has been done about it for years.

Growing inequality has created the same problem. Tax loopholes the wealthy use have reduced the amount of tax they have to pay. This has made the whole tax system more reliant on people who work for a living.

The political fear of reform is why the government’s changes to negative gearing, capital gains tax, and discretionary trusts are so special. These are the biggest changes to the tax system since the introduction of the GST in 2001.

These reforms are designed to change how Australian taxes work. The budget papers point out that people who mainly earn their income from owning assets, like investment properties and shares, on average pay less tax than people earning the same amount of income mainly from wages and salaries.

This is fundamentally unfair. It also highlights why so many people feel they are missing out. Most people earn most of their income from wages and salaries.

The tax changes in the budget are about levelling the playing field. They create a minimum rate of tax for trusts and capital gains of 30 per cent. For too long a small number of very rich people have been reducing their tax by using these loopholes.

The changes to negative gearing and the capital gains tax discount will stop the rapid increase in house prices. In the past six years, median house prices have increased at an average rate of $60,000 a year. In the past year they increased a staggering $115,000.

No wonder young people despair that they will never be able to afford a home of their own.

But this budget doesn’t just try to bridge the tax gap between wage-earners and asset-owners by taxing asset-owners more. It also has targeted tax cuts directed at people who work for a living.

This includes the Working Australia Tax Offset (WATO), which will cut the amount of tax paid on wages by $250 a year. It also gives a $1000 instant tax deduction for work-related expenses, even if you don’t have any receipts. You just need to earn income from a wage.

If you earn your income from wages, you will be better off from this budget.

If you want to buy your first home, you will be better off from this budget.

Despite what the polling might be saying, most people are going to be better off from this budget.

In the past, scare campaigns have proved very successful at stopping change. But if Labor holds its nerve, these changes will show their true worth.

Scare campaigns work only when there is doubt and uncertainty. Over time, reality will show that people are better off.

They will realise that the scare campaign was just the very rich trying to avoid paying more tax. Paying tax at a rate closer to what the rest of us must pay.

I have covered more than a dozen federal budgets, and this is the first that has filled me with hope that we will get real change.