While inequality is not extreme in Australia by international comparison, it is trending in the wrong direction according to this report.

Executive summary

Excessive inequality in any society is harmful. It is harmful to the ability of people to participate in social and economic opportunities, and it undermines social cohesion. Excessive inequality is bad for the economy. When resources are concentrated in fewer hands, there is a reduction in economic activity. Fewer people are starting up businesses, buying houses, and purchasing goods and services. More people become dependent on government intervention. Excessive inequality is ultimately unhealthy for democracy. Money and power matter in terms of who in society gets heard, who can participate, and whose interests are adequately protected. In Australia, which lacks legal protections for basic human rights, the risks of excessive inequality are magnified.

The risks of rising inequality are becoming increasingly recognised around the globe. In a report published in May 2015, the OECD found that rising income inequality reduced economic growth by an average of around 5% across OECD countries over the two decades to 2010. The main reason for this is that, by widening the rungs in the income ladder, it closes off opportunities for people at the bottom of the distribution. By holding people back from realising their potential, especially through employment, it stunts their contribution to the economy.

The widening gap between middle and top income-earners in most wealthy countries over the past 20- 30 years is also cause for concern. The top 10%, and even much smaller fractions of this group, are pulling away from the living standards of the majority, and increasingly, people at the top end are leading very different lives to the rest of us.

In a country that prides itself on its egalitarian traditions, the reality of income and wealth inequality in Australia comes as a shock to many. The purpose of this report is to use the latest available information to explain in simple, objective terms what is happening with income and wealth inequality, how big the gaps are, whether they are widening, and who is affected.

The Report has found that there is a big gap in incomes and wealth between different groups in society. A person in the top 20% income group receives around five times as much income as a person in the bottom 20%. A person in the top 20% wealth group has a staggering 70 times as much wealth as a person in the bottom 20%.

The Report also finds that these gaps are widening. Over the last 20 years the share of income going to those at the top has risen, while the share flowing to those in the middle and at the bottom has declined. The same is true for wealth, with the bottom and middle having lost ground to those at the top. The wealth of the top 20% wealth group increased by 28% over the  period from 2004 to 2012, while by comparison the wealth of the bottom increased by just 3%.