Intergenerational budget meets big bank reality: CBA leads the downturn

Budget delivers modest improvement with key tax changes

The 2026-2027 Federal Budget landed broadly in line with expectations. Treasurer Chalmers delivered a modest improvement in the bottom line, with the underlying cash deficit now projected to sit at around 1.0% of gross domestic product (GDP) across the forward estimates. Stronger tax receipts did most of the heavy lifting, while new policy measures amounted to only a small net tightening.

For markets, the real focus was on two key tax changes:

1. Negative gearing

As expected, negative gearing will be restricted to new‑build properties only for purchases of established homes made after budget night. Existing holdings are fully grandfathered, and there is a one‑year grace period until 1 July 2027.

2. Capital gains tax discount

The 50% capital gains tax (CGT) discount is being overhauled, with the system shifting to the taxation of real (inflation‑adjusted) gains from 1 July 2027. The new rules will apply to assets acquired after budget night, again with a one‑year grace period. Existing assets will be taxed under a proportionate blend of the old and new models based on the holding period. A minimum tax rate of 30% will apply to real capital gains. New residential builds will be able to choose between the old and new systems.

These are the most significant changes to the CGT framework since 1999 and apply across most asset classes, not just property.

Policy aims and unintended consequences

The Albanese Government’s stated objective is intergenerational equity – reducing long‑standing tax advantages that have favoured property investors, who are disproportionately older and wealthier, in order to make housing more accessible for younger Australians and first‑home buyers.

However, these changes bring with them some clear unintended consequences.

While they shield existing owners, younger Australians and new investors now face a meaningfully less attractive regime – one of the more heavily taxed CGT systems among developed peers.

Furthermore, many analysts view these measures as likely exacerbating the recent decline in house prices. With residential mortgages making up approximately 45% - 50% of the big four’s total assets, any sustained softening in property prices raises risks around mortgage stress and bad debts. Commonwealth Bank of Australia (CBA) and Westpac are seen as the most exposed to this headwind.

CBA warning highlights sector pressure

This came into sharp focus this morning when CBA became the last of the big four – and arguably the most downbeat – to warn of tougher times ahead, compounding the negative implications of the Budget changes outlined above, which are also expected to dampen broader credit demand given the new tax settings.

In its March‑quarter trading update, operating income was flat, and cash net profit after tax (NPAT) rose 4% year‑on‑year (YoY) to around $2.7 billion, but the result was overshadowed by a $200 million top‑up in collective provisions. Chief executive officer (CEO) Matt Comyn struck a notably cautious tone, citing higher energy prices, interest rates and cost‑of‑living pressures weighing on households and businesses. The dour outlook sent CBA shares tumbling more than 10% to a low of $153.65 – on track for their worst day on record.

How the combination of macro headwinds and Budget changes ultimately plays out remains to be seen. In the short term, however, it has clearly put the big banks – and the financials sector more broadly, the heartbeat of the Australian economy – under pressure.

CBA technical analysis

From the 2023 low at $86.98, CBA staged a spectacular rally of approximately 120%, peaking at $192 in late 2025. This surge was fuelled by resilient banking fundamentals, strong offshore demand, and broader equity market strength.

However, since that $192 peak almost 11 months ago, the stock has traded sideways in a roughly $40 range between $185 and the mid‑$140s. This range trading has the hallmarks of a healthy correction, but it is too early to declare the correction over.

Ideally, the current leg of the correction would extend into the $140 - $132 support zone, which encapsulates the April 2025 low of $140.21, as well as the 200‑week moving average at $132.14. Into this zone, the focus would be on signs of basing before the uptrend resumes.

CBA weekly chart

• _{Source: TradingView. The figures stated are as of 13 May 2026. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}