Discussion paper

The economic data shows that inequality is getting worse in Australia. This includes data from the Australian Taxation Office, the Australian Bureau of Statistics and the OECD. The share of income going to the top is growing at the expense of low and middle income earners.

Data from 1996, when the Howard Government was first elected, until 2016, the latest period for taxation statistics, show that total incomes for the top 10 per cent have grown far more than those of any other decile. They have grown so fast that the top 10 per cent is the only decile to see their share of total income increase.

Figure 1 shows the growth in total income of middle income earners (5th decile) and the top 10 per cent of income earners. It shows that the incomes of very high income earners are growing much faster than those of middle income earners.

Australian Bureau of Statistics data also shows that the Gini Coefficient of income, the most common measure of inequality, has worsened. Figure 2 shows income inequality for gross income as measured by the Gini Coefficient in Australia. There is some short term volatility over time but the clear long term trend has been towards worsening inequality.

OECD data shows that Australia is more unequal than the OECD average and that over the last 10 years it has become more unequal compared to other developed countries.

Inequality is not just a political problem. Research from the International Monetary Fund, as well as other prominent economists, has shown that high rates of inequality can lead to slower economic growth. The economic data is clear: inequality is getting worse in Australia and governments and policy makers need to prioritise policies that will reduce inequality.

Despite this the government’s policy priorities are taking Australia in the opposite direction. The government’s proposed tax cuts in the 2018 budget are likely to make this inequality worse. If the tax cuts are implemented in full then it will reduce the tax burden on high income earners and increase the tax burden on low and middle income earners.

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