Wealth Gap Widens in Australia

August 15th, 2014
Australia is one of the wealthiest countries in the world, but there is also an increasing divergence between the rich and poor. For a country that prides itself on fairness and equality, it's interesting to note that both income and wealth distribution are more unequal than ever. This growing disparity is driven by a number of factors, including a drop in the minimum wage and unemployment benefit in relation to average earnings and a rise in property prices.

According to The Australia Institute's paper, Income and Wealth Inequality in Australia, the income distribution gap in Australia is widening. ; Low-income earners are out of step with average-income earners across the country, as both the minimum wage and unemployment benefit fail to keep pace with the rise in average earnings. ; It's not only those at the bottom who are suffering, however, with a significant divergence also occurring between average-income earners and those at the top. ; Senior executive pay is now 150 times greater than average weekly earnings.

The divergence in wealth distribution is even more unequal than income distribution, with the top 20 percent of Australians earning five times more income than the bottom 20 percent but enjoying 71 times more wealth. ; The gap between the haves and have-nots is widest at the extremes, with the wealth of seven individual Australians now exceeding that of 1.73 million households. ; The wealthiest individual on that list, Gina Rinehart, actually called for a decrease in the minimum wage back in 2012.

The Australia Institute's paper shows that in the last eight years, measures introduced by both the Labor and Liberal governments have seen the top 10 percent of earners receive more benefits from taxation cuts than the bottom 80 percent of taxpayers. ; Recent measures put in place by the Abbott government are only likely to widen the gap, especially with plans in the latest budget for welfare payments to grow at a slower rate than wages.

According to ME Bank’s latest biannual Household Financial Comfort survey, the gap between the rich and poor is widening as a direct result of rising property prices. ; According to ME Bank’s consulting economist Jeff Oughton, “Asset-rich households (including self-funded retirees and home owners) have benefited from a sustained rise in global and local equity prices as well as significant gains in residential prices, especially in Sydney, Melbourne and Perth... ; In contrast, limited household income gains and rising concerns about cash savings among most other households have seen their financial comfort falling.”

According to the survey, there are also significant gaps between age groups in Australia when it comes to financial comfort, with those over 65 experiencing a 9 percent increase over the last six months. ; However, while the financial comfort of self-funded retirees was up 8 percent, the comfort of government-funded retirees fell by 15 percent. ; All other life stage groups fell significantly in the financial comfort stakes, in particular Gen X, which fell by 4 percent to its lowest level since the survey commenced.

Despite growing income and asset-based inequality, however, according to Dr Richard Denniss, Australia Institute's executive director, over 80 percent of Australians want the level of social services in Australia to remain as they are or to be increased, ''even if increases mean additional taxation.'' ; The Australia Institute’s paper illustrates solutions to "boost the incomes of those with the least, while only slightly reducing the incomes of the wealthy", saying there is "clear evidence that the tax-and-transfer system has the capacity to redistribute income effectively to reduce inequality."