The Hon Andrew Leigh MP
Assistant Minister for Productivity, Competition, Charities and Treasury
Member for Fenner
Address to the ANU Post-Budget Breakfast,
Parliament House, Canberra
Thursday, 14 May 2026
Well thank you Nick and can I acknowledge the Ngunnawal people on whose lands we meet. I acknowledge all First Nations people present, and particularly the many organisations and people here who are engaged in work to close the gaps.
Nick described himself as a lapsed economist. I'm a lapsed professor, and so thank you very much for giving me an opportunity to play that role today. He was very firm on timing. He said, you've got a 10-minute time budget, and there'll be rewards for being in surplus. So I'm going to do my best on that front.
Now, a bunch of you will have heard a whole lot of speeches about the Budget. You will have heard the Budget speech itself and commentary and follow-up and so on. So I'm going to try and put this much more into an economist's frame. And the frame that I want to present to you this morning is that the Budget is about changing the incentives towards building rather than bidding. We're putting together this Budget in a state of unusual global turmoil. War in Iran was not anticipated at MYEFO and has given a significant shock to inflation, as well as necessitating a range of household supports. But nonetheless, I want to make the case to you that this is the biggest reformist Budget we have seen in over a decade, and there's four aspects to that building not bidding Budget that I want to talk about this morning.
The first is moving from asset inflation to asset creation. The negative gearing and capital gains tax changes have been modelled and discussed for decades. Reformers, including Chris Richardson, but also Allegra and the Grattan Institute –many other organisations have talked about the distortions that are caused by the combination of the 1936 change to negative gearing and the 1999 change to capital gains tax discount. Immediately after that, you saw net rental income turn negative as Australians were encouraged to buy a loss-making asset with the notion that in the future, its value would rise. In the old days, we used to call that encouraging speculation. The benefits of that have been modelled through for the average taxpayer since 2000. The cumulative benefits of the negative gearing capital gains tax measures at $12,000. But if you're in the top 1% then the benefits to you have been, on average, $700,000. These policies have been 50 times as beneficial to those in the top 1% as to the average income earner. Changing these policies changes the balance in auctions towards those who are buying their first house rather than their fourth house, and it sits neatly alongside the unprecedented measures we put in place on boosting housing supply, which is of course where the action is if you want to make homes more affordable.
The next big measure is moving from rent seeking to creating. The measures we put in place in business, really about incentivising long-term investment and encouraging the uptake of innovation. Loss carry back, making the instant asset write-off permanent, more venture capital incentives and changes to research and development tax credit that incentivise core research rather than some of those peripheral activities which have been shown not to have the same impact on R&D. All of this is about creating an environment in which there are stronger incentives for creating new knowledge and for diffusing new knowledge. So much of the productivity benefits come not from the first firm to come up with a shiny new technique, but from spreading that technique right across the economy. We've seen that in agriculture, with agricultural extension encouraging the uptake of new techniques on farms and as artificial intelligence spreads across firms, we'll see potentially the next productivity kick up as a result of a technology which has huge general purpose technology potential to improve productivity and to turn around that productivity challenge that Australia has been facing for so long.
The third big theme is moving from clogged markets to clearer signals. Prices work better when supply can respond, and that means that we need to have incentives in our systems which allow people to build homes where they're needed without facing an unnecessary thicket of regulation. Too many builders tell us that it now takes longer to do the paperwork for a house than it used to do to build the house. And so, we're working with states and territories in order to encourage the uptake of modular construction, which is more environmentally sound, can create better jobs and can be more affordable.
We've got measures in the Budget for skills recognition for migrants who are already here but unable to use their skills and they've been estimated to cut the time that it takes for migrants to get their skills recognised by six months. Right now, some builders need to pay to access standards. That is, to pay money to access the standards they need to comply with or be fined. That to me, strikes me as morally outrageous and the economist side of me sees it as a huge productivity drag. Getting rid of those fees, working with Standards Australia saves many of those builders over $1,000 and returns huge productivity benefits to the economy.
We've got national competition policy going again, and our modelling suggests that the benefits of national competition policy could be in the order of $1,200 a household. That's annual, ongoing. Big benefits from getting man economy that is more competitive and more dynamic after decades in which we've seen market concentration and markups increasing and the rate of employing small businesses falling.
The fourth theme is structural fairness. We've got the National Disability Insurance Scheme reforms which are going to see the NDIS grow but at a more sustainable rate. When we came to office, it was growing at 22% a year, and no scheme can continue to grow at 22% a year and still be available to Australians. Means testing the private health insurance rebate for seniors at the same rate at which we means test it for other Australians provides a further sensible saving. The measures that we put in place around negative gearing and capital gains allow us to put in place a working Australian tax offset. $250 initially – not to be sniffed at but also an important measure that can, over time, be increased as we look to incentivise work rather than just investment.
And there's finally a set of reforms to the child support system, which are really vital in terms of ensuring that that system isn't weaponised in family disputes. That it is fairer and that the government is able to step in and collect the money which needs be. More money flowing to kids that need it, more scrutiny around the system.
So in sum, the Budget is about increasing the returns for building what Australia needs, as distinct from just bidding up asset prices. It’s a Budget for builders rather than bidders. I commend it to you and look forward to your questions.
ENDS