Bill Kelty, a mastermind of reforms that set up Australia’s modern economy, says Anthony Albanese and Jim Chalmers are fuelling One Nation and “insulting” voters by welcoming lower house prices as they preside over a fall in real wages that is making houses even more unaffordable.
The Labor luminary and former union leader made one of the sharpest and broadest critiques of the federal government’s economic record in an interview with this masthead on Thursday, declaring “this country has got real problems” as he predicted more pain to come due to expected interest rate rises.
Days after Westpac revealed first homebuyer loan applications were down 30 per cent since the May budget, compared with a 26 per cent fall among investors, Kelty said: “The PM is telling the country with glee that the price of property is falling, yet the unaffordability rate is increasing.”
“Because interest rates are rising and real wages are falling,” he said, with high inflation, long-term poor productivity, war and the AI boom making another rate rise at the end of this month likely.
“Real wages have fallen by 5 per cent [since 2021, according to the OECD]. Real wages are not improving in any significant way – they’re falling.”
Only New Zealand, Italy, the Czech Republic and Sweden experienced similar wage falls. Housing affordability slumped to its lowest level on record in the June quarter, according to two separate metrics, but the government hopes that the market correction and its property tax changes eventually lead to more affordable homes.
Kelty also slammed Chalmers for making the point as recently as last week that workers’ share of gross domestic product was at a high point, arguing the esoteric measure had no real-world effect.
“You had the treasurer say workers should be happy because their wage share is increasing, but their real wages are falling,” Kelty said. “It’s just ridiculous and people get offended by it. They can’t pay the bills, and you tell them your share of GDP is growing.
“Don’t insult me: that’s what they are saying. Build more housing and increase real wages, please.
“All you’re doing is saying to me, I’m battling in life, I’m a driver earning 80k a year, and I should be happy and say the share of GDP is going up.”
Kelty worked with Bob Hawke and Paul Keating in the 1980s and ’90s to bring workers and bosses together to create consensus on pro-market reforms that delivered a social dividend.
The reform period also led to the modern superannuation system, with Kelty now critical of One Nation’s proposal to use super to top up wages.
“It’s like Santa Claus stealing from the kids’ money box to buy them their Christmas presents,” he said, arguing that super was a national treasure that had taken pressure off the pension while other countries struggled with the cost of an ageing population.
Kelty, who is close to Albanese’s former leadership rival Bill Shorten and has criticised Labor previously, backed the government’s environmental planning reforms, Medicare investment, HECS cuts at the last election, and some of its industrial reforms.
But on the whole, Kelty was highly critical of the nation’s economic settings and called for a major reset. He said that income tax was far too high for young people, infrastructure blowouts and construction costs were at near-historic highs and hurting productivity, too few aged care beds were being built, childcare was flawed, and the bargaining system needed reform to drive up wages.
His view on the nation’s economic malaise puts him in sync with many business leaders, a small group of Labor MPs who are worried about the lack of focus on growth, and outspoken former Labor adviser Lachlan Harris.
After Labor unveiled a bold and polarising redistributive budget, Kevin Rudd used a speech in Canberra this week to issue a wake-up call to the nation’s elites of all political stripes, arguing that “incrementalism will no longer work for Australia” if it wants to remain prosperous and resilient in a region China plans to dominate.
The alternative, the former prime minister warned, was “to slide into becoming a second-rate country”.
Kelty remains close to Keating, who applauded Labor’s budget but fought to overturn Chalmers’ tax on unrealised superannuation gains and is a long-running opponent of AUKUS and Labor’s positioning on the grand contest between the US and China. Kelty told this masthead that Labor had not allowed an honest public discussion about the higher tax burden required to fund AUKUS.
There is deep frustration within the cabinet about the repeated criticisms made by figures such as Keating and Kelty. Ministers believe that Keating and others such as former foreign minister Gareth Evans hold outdated views on policy areas, including the China threat, as the government focuses on boosting productivity through a series of smaller reforms rather than big-ticket changes.
Chalmers consistently points out that nominal wages have grown above 3 per cent annually under Labor, and that the nation’s credit rating has remained at the highest level after two budget surpluses driven mostly by unexpected revenue upgrades.
Chalmers outlined a $10 billion productivity package in the budget, but some business leaders and entrepreneurs have said the overall effect of changes to capital gains tax could hurt investment. The Resolve Political Monitor shows Labor two points behind the Coalition on economic management.
In 2024, Albanese said that Kelty had been a legendary union leader but claimed: “Many people will look back at the past and romanticise the past.”
Kelty said One Nation’s support was no longer an aberration, and though it was the political right that was fracturing, “we are giving them an opportunity to get to our base too”.
“It’s hurting Labor. Labor is getting 28 or 29 per cent,” he said. “So to get to government you need the discipline of the Green vote coming to Labor through preferences. But One Nation is actually hurting that primary vote.”
He said that voters may well come back to Labor, were not shifting to the Greens, and that Albanese would still probably win the next election, which is due in 2028. But Labor must get the economy moving for working people, he said.
“Just f—ing reform it,” he said of the income tax system in which the top marginal rate of 47 per cent is both high by international standards and kicks in at a relatively low wage point.
He said the rate should be lowered to about 39 per cent and designed with a laser focus on building wealth for younger wage earners “who have no access to privileges”.
“Not for the rich and powerful, but for a 28-year-old who wants to get ahead and save for a home.”
Once workers paid GST, income tax, HECS debts and rent, many young people “have got f—ing nothing, they’re really struggling”, Kelty said.
He said the taxation of labour and capital income, which Chalmers wanted to make more equal in the budget, were fundamentally different, though he acknowledged the gap was previously too large.
While Kelty applauded Albanese’s two election wins and the government’s political acumen, he said: “In the end you’re not measured for political results … You’re measured for what you actually do for people.”
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Paul Sakkalis Chief Political Correspondent. He previously covered Victorian politics and won a Walkley award and the 2025 Press Gallery Journalist of the Year. Contact him securely on Signal @paulsakkal.14.Connect viaXoremail.
