Intergenerational Inequity Isn’t a Mystery – It’s a Design Feature
Every few months, another report laments the widening gulf between young and old. Commentators wring their hands about falling home ownership, rising student debt, stagnant wages, and the bleak financial prospects facing younger Australians. Politicians speak gravely about intergenerational fairness. But the sympathy is often hollow – because the policies that drive inequity remain firmly in place.
Intergenerational inequity is not an accident. It is the predictable result of deliberate choices about how we have structured the economy. Once you understand the mechanics, it stops looking like a social tragedy and starts looking like what it is: a transfer of wealth from the young to the old, built into the system.
The core problem is this. Australia has built an economy where future income is capitalised into present asset prices. Land, housing, infrastructure and financial assets are valued not for what they cost to produce, but for the income streams they are expected to extract – rent, interest, fees and capital gains. When those future earnings are priced upfront, asset values rise, the gains flow to existing owners, and the economy must generate ever-larger income streams to service the claims embedded in those prices. The obligation falls on those who do not yet own the assets – overwhelmingly younger Australians.
Older generations bought in before this capitalisation cycle took hold. Younger generations must buy in after it has already happened. That is the essence of intergenerational inequity.
Housing shows this most clearly. For decades, house prices tracked incomes. But once banks were deregulated, credit surged and tax settings rewarded speculation, land values detached from wages. A home became a financial asset priced on decades of expected returns – not just shelter, but capital gain and tax-advantaged wealth accumulation. Young households now devote far more of their lifetime income to servicing inflated land values that older generations captured as tax-free gains.
This is not a moral failing. It is a structural one – and it has public finance consequences that Tasmania is now confronting directly.
The 2026 Fiscal Sustainability Report, released by Treasury last month provided a warning that the financial pressures accumulating in our system are approaching a critical point. The Report projects that without corrective action, total government debt, including government business enterprises, will grow from $8.3 billion to $146 billion. This means debt servicing costs would consume almost half the revenue in 2039/40 – money that cannot be spent on hospitals, schools or housing.
The Report identifies a four-year window in which meaningful corrective action can still prevent that outcome. That is not rhetoric. It is a sober assessment from our own fiscal authorities. It is a warning that has been made before, when the task would have been less challenging.
The Report does not appear in a vacuum. Hydro Tasmania recorded a 96 per cent collapse in underlying profit while borrowing to pay dividends. TT-Line debt will be around $1.4 billion once the vessels are delivered and Terminal 3 completed. TasNetworks saw dividends decline and require concessional finance and equity from the State to fund essential transmission infrastructure. These examples are symptoms of a broader problem: essential public services operating inside a system that prioritises financial extraction over provisioning.
The same dynamic plays out across the broader economy. Electricity and water bills reflect regulated returns on inflated asset bases.
What makes the public debate so frustrating is that those lamenting inequity routinely defend the policies that cause it. Governments cling to negative gearing and the capital gains tax discount. Banks celebrate rising house prices as prosperity. Property lobbies warn that any reform will hurt mum-and-dad investors. Infrastructure continues to be priced for commercial return rather than public service. Meanwhile, the cultural narrative asks young people to work harder and sacrifice more – while requiring them to service the largest stock of private debt in Australian history.
The behavioural story is a smokescreen for a structural problem.
If we are serious about intergenerational fairness, we need to treat this as a system design problem. That means confronting the drivers of capitalised asset values: land speculation, credit expansion, tax incentives for unearned gains, and the privatisation of essential services. It means recognising that housing is not just a supply problem but a land and credit problem. It means acknowledging that States, which carry responsibility for housing, infrastructure and essential services, lack the monetary tools to counteract a national system geared toward asset inflation.
The FSR makes clear that Tasmania cannot simply grow, or build, its way out of this position. The structural pressures are real, they are accumulating, and the window for action is narrow. But the fiscal repair that is needed is not simply a matter of cutting spending. It requires an honest reckoning with why costs are rising, whose interests the current system serves, and what kind of economy we are actually trying to build.
The Commonwealth cannot continue to sit on the sidelines. The pandemic demonstrated that sovereign financing mechanisms can be deployed to stabilise borrowing costs and support long-term investment. A national approach to housing and infrastructure finance – anchored in public purpose rather than private extraction – would do more for intergenerational fairness than any number of summits or productivity reviews.
Intergenerational inequity is not a mystery. It is the outcome of an economy that rewards ownership over effort, speculation over production, and extraction over service. The Fiscal Sustainability Report shows the same pattern in Tasmania’s finances: rising structural pressures, shrinking room to manoeuvre, and a trajectory that asks younger generations to carry the costs of decisions made over decades. It is time to be honest about how we got here and deliberate about where we go next.