“Things That Make You Go Hmmm…” as hip hop group C+C Music Factory asserts in their 1991 dancefloor banger, are those sweet mysteries and ironies of life that crystallise from time to time, which is how it feels after one of those weeks in Australian politics that might just have heralded what Germans call a “Wende”.

As debate over the federal government’s budget tax hit on wealth and assets continues to reverberate, one can’t help but wonder how it’s going down among the gen Zs and millennials it’s ostensibly been designed to impress.

If nothing else, they’ve been given a lesson in political economy trade-offs, broken promises and cold hard electoral calculation.

For the younger ones in this audience, a generation at least partly weaned on the sentiments of the early 2010s Occupy Wall Street movement and Thomas Piketty’s best-selling tome on why capitalism leads to inequality, this week’s budget offers both affirmation and refutation.

For the former, it’s confirmation that capitalists will always squeal like piglets when Labor clips their arrogant wings. (Do pigs have wings? You might ask).

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Keating weighs in

As Paul Keating put it this week — in his defence of the government’s decision to collect more taxes from capital gains — wealthy people “want to split off start-up capital and shares as if the individuals commenting have not made a feast of it already”.

“They want to retain a preference for capital over wage and salary income.”

For the latter group — many of whom have been busy on social media this week sharing viral memes about Anthony Albanese becoming their silent business partner — their riposte might be that you promised you wouldn’t do this.

For two elections in a row, Labor vowed to keep the current system of providing a 50 per cent discount on capital gains.

Until very late in this year’s budget deliberations, changes to the CGT discount were going to be limited to investment in existing properties.

Instead, the government has indicated it took Treasury’s advice to hit everything, outraging the start-up community and anyone else who’s ventured into riskier waters in lieu of a longer-term pay-off.

Younger voters haven’t had much truck with the Liberal Party in recent years if polls and election outcomes are any guide.

To them, the Liberals are a sad low-energy boomer outfit dominated by grumpy grey men who think climate change is a crock and spend too much time looking like trench-coated Hyde Park weirdos obsessed with culture wars.

Labor’s base of salaried workers

“The Coalition are terrible at demographics,” Redbridge pollster Kos Samaras said this week.

“They’ve never grasped how small the class they’ve always represented actually is.” 

Whereas Labor’s base, and One Nation’s for that matter, is made up mostly of salaried workers, he added.

That is no doubt true but many of those workers get their incomes from the private sector.

And it would be a mistake to think those workers aren’t acutely aware of how their financial wellbeing is aligned to the success of their employers.

Labor’s tax changes, according to former Kevin Rudd staffer Lachlan Harris, threaten to disincentivise ongoing re-investment of company earnings and dividends.

Founders are better off paying themselves more in wages that fall below the 47 per cent top income tax threshold than risk waiting for a distant pay-off that could see their capital gains taxed at a number not far below 47 per cent.

In other words, critics say Labor’s changes incentivise a business owner to extract more value from the company early, rather than grow the business.

Millennials and gen Z are also the kings and queens of the side-hustle; the business you build in your spare time to birth the unicorn that carries you into the enchanted forest. Or a buyout or Initial Public Offering.

And for those that don’t have the wherewithal to dream of turning into the next Elon Zuckerbezos, the pathway to a first home is increasingly paved by shares and ETFs.

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A generation that has been dealt a dud hand when it comes to buying property have had to look at alternative ways to create wealth. And now they’re facing additional taxation of that strategy.

So, for at least some of these new-wave battlers, this week has turned out to be a leopard face-eating moment.

(For older readers, that’s a tweet meme: “I never thought leopards would eat my face,” sobs woman who voted for the Leopards Eating People’s Faces Party”.)

And that’s a bitter pill for those in Labor who have worked to counter the slur that the party is anti-growth and anti-ambition.

In private conversations this week, parts of Labor are more than alive to these trade-offs.

A central weakness in the budget 

Premier Chris Minns, a leading figure in the NSW state Labor right, rather unhelpfully for the Labor left-dominated federal government, lamented Australia’s outsized reliance on income taxes.

“Whether it’s in this budget or it’s in the future, we do need to make sure that we’re doing everything we can to give more money back to working Australians,” Minns said on Wednesday.

It was another one of those “hmmm…” moments.

Aside from the factional tremors and tensions with the federal government over infrastructure funding, GST-share, and aluminium industry policy that might be at play between Minns and Canberra, the remark exposed a central weakness in the budget.

It has no obvious winners.

The pre-budget story was that it would help young people compete against wealthy older property investors.

Whether that happens is still to be determined. So it’s too soon to tell and fair-minded voters should be hoping it works.

But Treasury’s modelling suggests the changes to capital gains and negative gearing on property investors could lead to 35,000 fewer houses being built.

One Labor figure pointed out this week that the real lesson from the ill-fated 2016 and 2019 election promise to raise taxes on capital was not that it’s bad to tell people you’re planning to hike taxes.

It’s that the pain needs to produce winners, ideally via income tax cuts.

Even more so when the starting point involves broken election promises.

Last week’s budget was unable to do that in any meaningful way (such as fully offsetting bracket creep) because there are so many spending pressures. And there’s the justified fear that immediate income tax relief could stoke inflationary pressures.

Instead it promised a “Working Australians Tax Offset” of up to $250 as a down payment. Though you won’t see it until mid-2028.

A sliding doors moment 

Last week’s budget looks like a sliding doors moment for other reasons as well.

Government sources tell this column there was no question that cabinet was considering scrapping the off-road diesel fuel rebate, forecast to cost $10.7 billion in 2026-27.

However, the war in the Persian Gulf ended that idea, just as the conflict saw the prime minister extinguish calls from the ACTU for a 25 per cent tax on gas exports.

An issue Pauline Hanson revived with her announcement on Thursday at a major gas producers’ conference, with her pledge to kill the PRRT and replace it with a wellhead tax.

And she’s stolen a page from Labor’s interventionist industry policy by committing the Commonwealth to taking an equity stake in future gas developments.

Hanson’s participation in the conference was an eye-brow lifter for another reason as well, as it saw the gas industry grant the One Nation leader equal billing to Angus Taylor, who also spoke.

She’s also not alone in her skepticism about the PRRT, which was reworked a few years ago but continues to disappoint as a revenue source.

“It annoys you like a dud vending machine. You can see the chip packet is about to fall but it just doesn’t,” one Labor source told this column.

The government is still confident it can weather the storm of its 2026 budget, which it’s moving to legislate as swiftly as possible in coming weeks.

But there’s a volatile political mood afoot.

An extraordinary poll published in today’s AFR Weekend suggests that an election held today would deliver nothing short of a political revolution.

Usual caveats apply to the RedBridge “MRP” survey, which is a snapshot only of more than 6,000 voters, including a near-10 percentage point error range.

It shows Labor’s 94-seat majority would be reduced to no more than 82 seats and as few as a 70 seats, forcing it into minority government.

One Nation would become the nation’s official opposition party with as many as 59 seats, and a minimum of 46 seats.

The Coalition would collapse to between seven and 21 seats. In its worst-case scenario the National Party would cease to exist in the House of Representatives.

Were that to transpire at the next election due two years from now, forget much of what you thought you knew about Australian politics.

Jacob Greber is political editor of ABC’s 7.30 program.