This article was originially published at The Conversation on May 7 and is replublished here under a Creative Commons license. Read the original article.

Kate Lycett, Deakin University; Georgie Frykberg, Deakin University, and Warwick Smith, The University of Melbourne

This week, the Australian Bureau of Statistics released its refreshed General Social Survey. It tells a story economic indicators can’t capture.

On almost every measure of how Australians experience their lives – trust, connection, cultural openness, financial security, even how healthy we feel – things have gotten worse since the last survey in 2020, which was conducted during COVID.

What the data reveal

The survey results, collected in May and June 2025, show that many aspects of Australian life are shifting.

Compared to the previous General Social Survey in 2020, the new data reveal:

● Cultural tolerance is high, but dropping: 75% of people think it’s good for society to include different cultures, down from 85%.

● Trust in people and systems is falling: 50% agree others can be trusted (down from 61%), and 61% trust the healthcare system (down from 76%).

● Financial stress is rising: one in four households (25%) have at least one cash flow problem in the past year, up from one in five (21%). For single parents with dependents, it’s closer to one in two (48%).

● Fewer people feel healthy: 49% report their health as excellent or very good, down from 54%.

Almost one in ten Australians (9%) report very high mental distress. This is more common in women than men (10% vs 7%), especially in those aged 15–24 (17% of women vs 6% of men).

Although collected differently, mental distress rates are higher than previous ABS survey data from 2020–22, where only 6% reported very high levels.

How satisfied with life are we?

Overall life satisfaction, one of the most widely used measures of subjective wellbeing globally, sits at 7.1 out of 10 – similar to 2020 levels.

The annual Australian Unity Wellbeing Index data collected at the same time in 2025 was similar (6.9), but showed a small rise from its 2024 recording of 6.7.

Perhaps unsurprisingly, when we compare people with low life satisfaction to those with very high life satisfaction, big differences emerge. People with low life satisfaction are far more likely to:

● have very high mental distress (40% vs 1%)

● feel very lonely (47% vs 5%)

● have low trust in others (43% vs 19%)

● feel rushed for time (50% vs 20%)

● and feel they can’t have a say about important issues within their community (62% vs 24%).

Turning data into policy

Politicians talk about delivering a “good life” for more Australians. We now have ABS data on some important markers of a good life that go beyond traditional economic measures like GDP and productivity, or administrative measures like hospitalisations.

But the question remains: how will we use these data to deliver better lives for more Australians?

The Australian government formally acknowledged the limits of economic measurement by introducing its Measuring What Matters Framework in 2023.

The framework tracks 50 indicators of wellbeing across five themes: healthy, secure, sustainable, cohesive and prosperous.

The federal treasury has invested $14.8 million over five years to make the General Social Survey annual from this year onwards. This provides important regular data to help meet the goals of Measuring What Matters.

However, measurement alone changes nothing. A 2024 Australian National Audit Office report found treasury had no arrangements to monitor whether Measuring What Matters was actually being used in government decision-making.

Treasury accepted the recommendation to fix this – but until wellbeing measures are tied to budgets and championed by those in power, they remain a dashboard, not a lever. After all, budgets determine where resources flow, and resources drive outcomes.

States are already doing it

Several state and territory governments have moved beyond just measuring wellbeing and built it into how they make budget decisions.

The Australian Capital Territory government requires a “Wellbeing Impact Assessment” for all new budget proposals.

This involves identifying which areas of community wellbeing the funding will affect and how these impacts will be measured. It also specifically considers the effects on Aboriginal and Torres Strait Islander peoples, women and future generations.

Victoria’s Early Intervention Investment Framework takes a different approach. Through evidence-based budgeting, it invests early in social programs to improve outcomes and reduce long-term government costs, such as avoidable hospitalisations.

Sitting within the state’s treasury department, it also increases cross-collaboration across government departments and portfolios, enhancing coordinated efforts.

Without tools like these, budget processes will default to familiar patterns. Money flows towards addressing problems after they occur, rather than towards longer-term investments that prevent problems from happening in the first place.

Funding what we value

Internationally, many countries have redesigned budgeting systems to serve people and the planet, rather than economic growth. Where this has worked best, citizens have helped shape the journey.

Wales is a standout example where large-scale national conversations about the country’s future shaped the Wellbeing of Future Generations Act, whose seven goals are now embedded in government decision-making.

Community consultation was somewhat light for Measuring What Matters. Many Australians have no idea what it is. A national conversation would help everyday Australians shape the long-term direction of our country.

But we don’t have to wait for a national conversation to begin changing budget systems. Measuring What Matters and the General Social Survey are major steps in the right direction and provide the foundations to be embedded into budgetary decisions and adapted over time.

The five themes could become goals. If a policy proposal cannot demonstrate how it benefits these goals, it shouldn’t be funded. This would mean building wellbeing into how we allocate resources instead of just reporting on it.

What a nation measures signals what it values. What it funds builds on these values to shape better lives.

Kate Lycett, Senior Research Fellow, School of Psychology, Deakin University; Georgie Frykberg, Project Manager, School of Psychology, Deakin University, and Warwick Smith, Honorary Fellow, School of Social and Political Sciences, The University of Melbourne

This article is republished from The Conversation under a Creative Commons license. Read the original article.

This article was originally published at The Conversation on April 20, 2026 and is republished under a Creative Commons license. Read the original article.

Warwick Smith, The University of Melbourne

The Reserve Bank of Australia (RBA) will look at the latest unemployment figures – 4.3%, roughly 650,000 people out of work – and see a labour market that is still “too tight”.

In other words, not enough people are unemployed for inflation to come down. Although that figure reflects almost none of the economic fallout from the war in the Middle East, it will strengthen the case for further interest rate hikes.

The logic of these expected rate hikes is to slow spending by pushing up mortgage repayments and, ultimately, pushing more people out of work. Those people will land in an employment services system that, as a 2023 parliamentary inquiry found, treats them more like fraudsters than citizens who need help.

The fact the RBA is intentionally lifting the unemployment rate is rarely said out loud. However, Governor Michele Bullock came close in a speech in 2023:

If unemployment remains too low for too long, inflation expectations will rise, which will make it that much harder for the monetary authorities to bring inflation back down.

Our current inflation management framework is problematic in theory, in practice and in impact.

The theory on unemployment

At the heart of the RBA’s framework is a concept only an economist could come up with: the Non-Accelerating Inflation Rate of Unemployment, or NAIRU. This is the theoretical lowest unemployment rate the economy can sustain before wages push up inflation.

The RBA considers a range of factors in its decisions, but the NAIRU is central to how it thinks about the labour market. The trouble is that nobody can directly observe the NAIRU; it must be inferred from models.

For years, the Reserve Bank estimated it was around 5%. Then unemployment fell well below that without triggering inflation, and the estimate was quietly revised down. As journalist Ross Gittins has observed, NAIRU models have consistently been set too high, leading policymakers to accept more unemployment than was necessary. https://www.youtube.com/embed/XouhknMpomk?wmode=transparent&start=0

The NAIRU also treats the labour market as a single entity, which obscures important dynamics. In sectors like aged care, disability support and early childhood education, we face chronic labour shortages even while macro settings aim to increase overall unemployment. This tension suggests the problem is not simply excess demand, but how labour is distributed across the economy.

The Reserve Bank has a dual mandate: price stability and full employment.

But the bank has made clear which takes priority. As Bullock has put it, low and stable inflation is “a prerequisite” for employment growth – so when the two objectives conflict, as they do now, unemployment comes second.

The blunt tool – interest rates

When inflation is above the central bank’s target of 2–3%, the RBA will typically respond by raising interest rates.

Since the explosion of household debt that began in the 1990s, this works mainly by squeezing mortgage holders, reducing their spending, weakening overall demand in the economy and – by design – increasing unemployment.

The current situation exposes the limits of this approach. The inflation now driving rate expectations is largely a global oil supply shock caused by conflict in the Middle East. Higher interest rates can’t address the supply problem, but will cost jobs and add to mortgage stress.

The harsh treatment

If the system deliberately creates unemployment, you might expect it to treat the unemployed with some recognition of their role in the broader economic strategy.

The opposite is true. A 2023 parliamentary inquiry found more than 70% of participants had been subjected to payment suspensions — the system’s penalty for failing to meet mutual obligation requirements. Yet there was no evidence that anything close to that proportion were not actively seeking work. The parliamentary committee described the system as follows:

It’s harsh but true to say that Australia no longer has an effective coherent national employment services system; we have an inefficient, outsourced fragmented social security compliance management system that sometimes gets someone a job against all odds.

The assumption underpinning employment services – that unemployed people need to be monitored, impoverished and coerced – is in direct contradiction to an interest rate policy framework that requires a certain level of unemployment to control inflation.

What are the alternatives?

It is sometimes argued that this cruelty is regrettable but unavoidable – that there is no other way to manage inflation.

History and contemporary economics say otherwise.

From the end of the Second World War until the 1970s, Australian governments of both persuasions used fiscal policy, public investment and a range of other tools in addition to interest rates to manage inflation.

Over this 25-year period, unemployment in Australia averaged 2%, a rate so low that “long-term unemployment” didn’t exist as a concept.

Today’s economy is different, but lessons can still be learned from the postwar boom years. Economists Ross Garnaut and Peter Dawkins recently argued the best way to find the real floor for unemployment is not to rely on backward-looking models but to expand the economy’s productive capacity.

This means targeted investment in the areas where we face real constraints: training and retaining workers in care, health and education; building housing; accelerating the energy transition.

Inflation often happens when demand exceeds capacity. So expanding capacity in targeted areas of labour shortages won’t add to price pressures. It’s anti-inflationary.

Fiscal policy tools such as targeted public investment and well-designed tax reform can also address inflation without relying exclusively on the blunt instrument of interest rates.

Full employment should certainly be our goal. But if we are going to maintain a system that deliberately creates unemployment, the least we should do for those who bear the cost is income support that’s above the poverty line and services that genuinely help. The current system is both ineffective and unnecessarily cruel.

Warwick Smith, Honorary Fellow, School of Social and Political Sciences, The University of Melbourne

This article is republished from The Conversation under a Creative Commons license. Read the original article.

This article is republished from The Conversation on March 19, 2026 under a Creative Commons license. Read the original article.

Warwick Smith, The University of Melbourne

Former Treasury Secretary and chair of the Henry Tax Review, Ken Henry, has described the intergenerational injustice built into Australia’s tax system as an intentional “act of bastardry”.

Treasurer Jim Chalmers also seems convinced there is a problem that needs solving and has recently been using the phrase “intergenerational fairness” when talking about the government’s plans for tax reform in the upcoming May budget.

This week, a Senate inquiry into the operation of the capital gains tax (CGT) discount handed down its final report.

This tax applies to the capital gain when an asset such as a house or shares is held for more than a year. It currently includes a “discount” of 50% on the total gain as an offset for inflation.

The committee found the current discount:

• distorts investment decisions
• skews housing ownership away from owner-occupiers and towards investors, and
• has significant implications for wealth inequality — including between generations.

So, what impact would reducing the discount have on the housing market?

How the arguments stacked up

Tax and Transfer Policy Institute academic Robert Breunig’s evidence to the inquiry was almost as colourful as Henry’s commentary. But rather than framing the problem as intergenerational, Breunig sees it as a divide between the asset-owning class and the rest.

We’re heading back to some kind of neo-feudal society where the opportunities that you have in life are determined significantly by the relationship that your parents have with real estate, land and property.

The distribution of opinions on CGT reform is telling.

Virtually every substantial submission to the committee advocating for leaving the discount unchanged came from those who directly benefit from the current system. This includes the Property Investment Professionals of Australia, the Property Council, and the Real Estate Institute.

Meanwhile, those calling for substantial reform include academics, civil society organisations and unions.

The Liberal Party members of the committee drafted a dissenting opinion. They used the same argument Liberal leader Angus Taylor has been making — that reducing the CGT discount will reduce housing supply. Taylor has said:

If you tax something more, you get less of it.

This is, being generous, an exaggeration. CGT is not a tax on homes, it’s primarily a tax on speculation — buying an asset with the hope of selling it for more than you bought it.

The committee reported Australian landlords made a total of $219 million profit on their rental properties in 1999 before the CGT discount was introduced. By 2023, this had turned into a staggering $11 billion loss. This is the direct result of combining negative gearing with the capital gains discount, because losses made on the rental investment are tax deductible.

Also, according to the committee, 92% of investor finance flows into established homes rather than new builds.

That doesn’t create a single new dwelling. It just inflates the price of existing ones by giving tax-advantaged investors a bidding advantage over first-home buyers. Reducing the incentive to speculate should mean fewer speculators, lower prices, and more houses available to owner-occupiers.

Efficiency in the eye of the beholder?

Economists are fond of the word “efficiency”, often wielding it as if it were a neutral, scientific benchmark. But in the world of tax policy, the real question is: efficient at doing what?

There are legitimate reasons for some form of CGT concession, which was initially introduced to encourage investment in shares.

Without one, investors tend to hold assets longer than they should, just to defer their tax bill (what economists call the “lock-in effect”). Part of any nominal gain is simply due to inflation.

Prior to 1999, the discount was benchmarked to actual inflation rather than the current flat 50%. The flat 50% discount overcompensated for inflation and created a subsidy for speculation.

The system distorts decisions

Our current CGT regime is remarkably “efficient” at distorting investment decisions. It incentivises Australians to chase tax-advantaged capital growth rather than productive investment.

It is “efficient” at funnelling capital into existing housing stock, resulting in higher prices.

And it is “efficient” at concentrating wealth in a handful of leafy, high-income electorates. Taxpayers in Wentworth in Sydney’s east receive nine times the national average benefit of the CGT discount; those in Kooyong (which includes Toorak in Melbourne) receive more than five times.

The case for meaningful tax reform

But there is no technically correct way to design a tax system. Like all public policy, getting it “right” depends on our collective values.

When industry groups defend the discount, they aren’t defending an objective economic truth. They are defending a value set that prioritises asset price speculation over housing stability and affordability for owner-occupiers.

Reducing the CGT discount in isolation won’t suddenly make housing affordable in Australia. The interaction with negative gearing of property losses and other issues, such as land tax, public housing and barriers to moving, also need to be considered. But the way we tax capital gains is an important part of the puzzle.

Meaningful reform requires us to decide what kind of country we want to be: one where everyone has access to a stable, long-term home, or one where your life’s opportunities are dictated by your parents’ relationship with real estate.

Warwick Smith, Honorary Fellow, School of Social and Political Sciences, The University of Melbourne

This article is republished from The Conversation under a Creative Commons license. Read the original article.