Former Reserve Bank of Australia (RBA) Governor Bernie Fraser has thrown his weight behind a controversial overhaul of Australia’s property tax system, telling a Senate committee that abolishing the capital gains tax (CGT) discount is a "step in the right direction" to fix the nation’s broken housing market.
In a pointed intervention that challenges prevailing treasury forecasts, Fraser argued that removing the tax concession would trigger a more significant cooling of house prices than the 1% to 3% dip currently predicted by many mainstream economists.
Appearing before the committee on Thursday, the former central bank chief expressed skepticism over models suggesting that axing the discount would only have a marginal impact on valuations.
Fraser said he "can’t believe" the impact would be as negligible as some suggest, given the current appetite for property among wealthy investors. He told the committee that reform is essential to return housing to its primary purpose: a place for Australians to live and raise families rather than a vehicle for wealth accumulation.
“I would like to see ordinary Australians... have a reasonable opportunity to own homes,” Fraser said, noting that the security and lifestyle benefits of ownership are being eroded by an investor-dominated market.
The call for reform comes at a volatile moment for the mortgage industry. While the International Monetary Fund (IMF) recently praised Australia’s "soft landing," its 2026 Article IV Consultation painted a grim picture of affordability:
Mortgage Stress: New mortgages now consume 47% of median houshold income.
Deposit Gap: The time required to save a 20% down payment has stretched to 11 years.
Supply Shortfall: Annual completions remain stuck at 180,000, well below the 1.2 million target set under the National Housing Accord.
The IMF has echoed Fraser’s sentiment, recommending a phase-out of investor-friendly tax breaks — including CGT discounts and superannuation concessions — to create what it terms a "more equitable and efficient tax system."
However, the push to tax investors is meeting fierce resistance from the construction sector. HIA Chief Economist Tim Reardon has warned that targeting the CGT discount before addressing structural supply issues could "backfire" on the very people it aims to help.
Reardon argued that because investors accounted for over 40% of new construction lending last year, any move to increase their tax burden could stifle new builds and push rents even higher. He likened taxing established homes to taxing used cars, suggesting it would inevitably hurt the market for new products.
"Governments need to first fix housing supply, not seek to increase tax imposts," Reardon said, noting that real house prices have outpaced incomes globally, regardless of specific domestic tax settings.
