Tax reform is necessary, but on its own it cannot fix an economy shaped by housing speculation, resource dependence and weak productivity.

Michael Keating is right about the moment.

A rare alignment is emerging: a large Labor majority, Senate support from Greens and independents, mounting inequality, and visible fiscal pressure. Windows like this do not open often in Australian politics. His piece captures that sense that something which has long been politically blocked may now be briefly possible.

He is also right that the case for reforming the capital gains discount is strong. A 50 per cent discount made more sense in a different inflation environment. Today it operates less as a technical adjustment than as a structural gift to wealth holders, especially those accumulating assets through housing. He is right too that negative gearing and capital gains concessions together have helped entrench a system in which wealth grows faster than work, and in which younger Australians face a far more difficult path into home ownership than earlier generations did. And he is surely right that Australia remains a relatively low-tax country trying to sustain the expectations of a far more substantial public realm than its revenue base comfortably supports.

In that sense, Keating’s article is useful because it reminds readers that tax reform is not some fringe obsession. It is a necessary part of any serious attempt to deal with inequality, budget pressure and democratic strain.

But the article is still too limited for the scale of the problem Australia faces.

The weakness in Keating’s argument is not that he is wrong. It is that he is not comprehensive enough in his diagnosis. He treats tax reform mainly as a matter of fairness and fiscal repair. It is both of those things. But it is also something larger than that. Tax is not only a way of collecting revenue and moderating inequality. It is one of the main ways a society rewards some kinds of economic behaviour over others.

In Australia, that matters enormously, because the deeper problem is not simply that the tax system is unfair. The deeper problem is that the whole economic model is too dependent on speculation, extraction and passive wealth accumulation.

Australia has spent decades rewarding land, existing assets and mineral rents more generously than innovation, value adding and productive complexity. That has helped produce a distorted economy in which too much investment flows into housing and property, too much national income depends on digging up and exporting raw materials, and too much business activity is shaped by low-risk, low-innovation habits.

In that setting, tax reform should not be seen only as redistribution after the fact. It should be understood as part of reshaping the structure of the economy itself.

That is why housing cannot be treated simply as a supply problem, even though supply matters. Keating is correct that changing capital gains tax and negative gearing will not on their own solve the housing crisis. But it is not enough to say that supply is the real issue. Housing in Australia is not merely undersupplied. It has been turned into a financial asset, a tax shelter and a social model of security all at once.

Prices rising faster than incomes is not an accidental malfunction in this arrangement. It is deeply embedded in how the system works. If capital gains reform occurs without a wider shift in where capital is encouraged to flow, then the system will bend but not break.

This is where Keating stops short of the bolder case that now needs to be made. Tax reform should not be framed simply as a way to make the existing model fairer or more fiscally sustainable. It should be part of a national strategy to move Australia away from a rent-heavy, low-value-adding economy and towards one that is more productive, innovative, sustainable and socially grounded. Resource rent reform should not just patch up the budget. It should help finance industrial deepening, public capability and downstream processing. Carbon pricing should not be treated only as an environmental instrument. It should be linked to building a green industrial base and accelerating economic transition. Housing tax reform should sit alongside a major expansion of public, community and non-market housing rather than being left to the private market alone.

Without that wider purpose, tax reform risks becoming a technocratic exercise rather than a transformative one.

There is also a political limitation in Keating’s optimism. He is right that the parliamentary arithmetic is unusually favourable. But political opportunity is not just a matter of numbers. It is also a matter of governing philosophy. The Albanese government, like the Malinauskas government in South Australia, has shown that it is much more comfortable with adjustment than with structural confrontation. It is far more willing to repair around the edges than to challenge the entrenched power of property, extraction and established capital. That is why even when the case for reform is strong, the instinct is often to soften it, delay it or narrow it to something that does not threaten the underlying model.

So the real question raised by Keating’s article is not simply whether this is the moment for tax reform. It is whether this government is willing to use tax reform for something larger than budget management and modest fairness gains. Is the goal to stabilise the existing economy, or to help build a different one?

That is the real divide.

A fairer version of the same underperforming model would still leave Australia too dependent on housing inflation, resource extraction and low-ambition capitalism. It would still leave the country vulnerable to long-term relative decline. It would still leave younger generations paying the price for an economy that distributes gains too narrowly and builds too little of lasting value.

Keating is right that tax reform is needed. But Australia does not just need tax reform. It needs tax reform tied to economic transformation. It needs a government willing not merely to tax entrenched wealth a bit more fairly, but to change the incentives that keep reproducing an unequal, low-productivity and increasingly brittle economy.

That is the larger task. And that is the one Australia still hesitates to face.