In all societies some inequality occurs due to differences in ability, opportunity, effort and luck. Institutional and policy constructs can add to this, or detract from it.
Moreover, excessive inequality and entrenched disadvantage can erode social cohesion and hinder growth. It can also sap investment in education and skills and slow productivity growth. Yet there is no precise causative relationship, let alone a consensus on how much inequality matters. It is a topic that continues to draw diverse and competing views.
This study does not directly enter these debates. Rather, its purpose is to contribute a foundation to an informed discussion on inequality and its social impacts, bringing together and taking stock of the latest and most complete evidence measuring the level of and trends in inequality, poverty and disadvantage in Australia via multiple means.
While comprehensive, this study is not exhaustive; other studies examine geographic, racial or gender inequality.
Even this modest level of ambition is not without its challenges. No single metric is sufficient to give a definitive answer to the seemingly straightforward question: have inequality, poverty and disadvantage in Australia risen, fallen or remained steady in recent years?
Our focus, therefore, eschews the specific and often self-serving use of any one measure of inequality. Instead we use an array of indicators that examine the distributions of household incomes, consumption and wealth, their composition and importantly, movement within the distributions over time, and in response to life events, such as transitions to work, divorce and retirement. For poverty and disadvantage our approach goes beyond the standard metrics, giving weight to measures that capture the experience of those households in the bottom part of the distribution.
The broader context for this study has been an evident reduction in global income inequality and poverty since the late 1980s, the time-frame we most often apply. At the same time, however, there has been rising inequality within many developed countries. We review the Australian experience, which is less dire than some would have it, but not exemplary.