Australia’s housing market has become a critical vulnerability, a soft underbelly that hostile actors could exploit to fracture social cohesion. The latest report from economists at the Grattan Institute confirms what intelligence assessments have long flagged: the current tax settings are unsustainable. Negative gearing and capital gains tax discounts have created a strategic liability, channelling capital into speculative residential property rather than productive defence and infrastructure investment. This is not merely an economic imbalance; it is a threat vector that erodes national resilience.
The Grattan Institute proposes a British-style overhaul: phased abolition of negative gearing, halving the capital gains tax discount, and introducing an annual land tax on owner-occupied properties valued above a threshold. These measures could raise AUD 60 billion over a decade, funds desperately needed for cyber hardening, naval capability, and forward-deployed logistics. Yet the political will remains absent, a failure of strategic prioritisation.
Consider the scenario: a state-backed disinformation campaign amplifies intergenerational resentment, fanned by spiralling house prices. Social fracture deepens. Recruitment into defence forces drops as young Australians abandon cities they cannot afford to live in. This is not hyperbole. The UK’s own housing crisis has been a contributing factor to its diminished military readiness. Australia must learn from this intelligence failure.
The report’s authors are correct: the current system is a strategic liability. But the solution requires more than tax tweaks. It demands a whole-of-government pivot, treating housing as a national security issue. Land values, tax incentives, and property speculation are now operational parameters. Any delay in reform is a gift to adversaries watching for seams in our social fabric.
The clock is ticking. Every quarter of inaction is a strategic win for those who seek to weaken Australia from within. The time for cold, hard numbers and ruthless prioritisation is now.
