"The economist claims this to be one of the worst budget in decades. Our team of specialists believe that SMSF is still a property safe haven that investors can may be able to turn to."
A veteran economist has delivered a blunt verdict on the federal budget, warning its housing and tax measures risk worsening affordability, deterring investment and leaving younger Australians worse off.
Speaking on the Savings Tip Jar Podcast after the budget release, Emeritus Professor of finance at the University of New South Wales Peter Swan said the strategy fails on its stated goals - particularly housing supply and intergenerational equity.
“I’ve been following budgets for 40, 50 years, but this is the worst one I’ve ever seen in my life,” he said.
Treasurer Jim Chalmers has framed the budget as a response to global shocks, saying it will help build “a stronger, fairer, more productive and more resilient nation".
The budget forecasts inflation to peak around 5% this year, with growth slowing to 1.75%.
At the centre of the critique is housing, with the budget introducing investor tax changes alongside new spending aimed at boosting supply.
The government will limit negative gearing to new builds and replace the 50% capital gains tax discount with indexation, part of a broader push to “level the playing field for first home buyers".
It has also committed to $47 billion in housing investment, including infrastructure to support around 65,000 new homes.
Professor Swan argues the changes could instead deter investors and reduce rental supply.
“If you can no longer deduct interest, then there’ll be no investment in rental housing,” he said.
He added that policy uncertainty would weigh on long-term decisions, particularly in a market dependent on stable rules.
The government has framed the changes as improving intergenerational equity, with support for first-home buyers and tax reforms aimed at rebalancing the system.
The Treasurer said the measures would “make the tax system fairer… for workers, first home buyers and future generations".
But Professor Swan said demand-side support risks pushing prices higher in a supply-constrained market.
“All the government budget measures, such as subsidies to provide 5% deposits for younger people, which is their measure for intergenerational equity, are completely nonsensical because all that does is push up the price of housing,” he said.
He warned the net effect could be fewer opportunities for younger Australians to build wealth if investment declines.
Beyond property, Professor Swan expects capital to shift toward equities as housing becomes less attractive.
Higher capital gains taxes could also discourage selling, reducing turnover.
"The only way to avoid the much higher and minimum capital gains tax rate of 30% is not to trade, not to sell assets... We're going to see less trading and higher dividends because companies don't want capital gains,” he said.
While the government says its tax reforms will encourage investment and innovation, Professor Swan warned Australia risks becoming less competitive globally.
The government says the budget will help “take the pressure off inflation” while delivering cost-of-living relief, including a $250 tax offset for workers and fuel excise cuts.
It also points to $63.8 billion in savings and a projected $31.5 billion deficit next financial year.
But Professor Swan said the approach risks adding to inflation.
“The way to reduce inflation is very simple. Stop spending,” he said.
He argued that rising expenditure and bracket creep are expanding the government’s role while crowding out private investment.
Gross debt is projected to reach $982 billion this financial year, though the government says it will peak earlier and lower than expected.
“By far… the most rapidly growing element of government expenditure is interest on the trillion-dollar debt,” Professor Swan said.
With an election approaching, the budget is likely to face continued scrutiny as economists and voters assess whether it delivers relief or risks compounding key challenges.
Source: Savings.com.au
Garcia, B. (2026, May 14). “Worst in 50 years”: Budget slammed as housing fears grow. Savings.com.au. https://www.savings.com.au/news/budget-under-fire-as-economist-warns-of-housing-fallout