A new paper from the Australia Institute shows 93% of the benefits of economic growth between 2009 and 2019 went to the top 10%, while the bottom 90% received just 7%.
The paper shows the share of economic growth going to the top 10% over that period was far higher in Australia than in other developed countries, including the US and Canada.
It also showed the phenomenon has been getting worse – in the postwar period, larger shares of the benefit of economic growth have been going to the top of Australia’s income recipients.
Senior economist with the thinktank, Matt Grudnoff, said most Australians would feel “they are not getting ahead” since the global financial crisis in 2007-09.
“It is really a story about wages and profits,” he said. “Most of us – 90% – receive income from wages, which have gone backwards in real terms. But profits are doing very well and the ownership concentration on those profits is that 10% who are benefiting.”
The Australia Institute believes the stage-three tax cuts, legislated to begin from July next year, will make inequality even worse in Australia.
People earning more than $180,000 will see the greatest benefit from the stage-three tax cuts, while low income earners will receive no benefit. The low and middle income tax offset which benefited most Australian workers ended in the last financial year. The Morrison government had designed it to be temporary, whereas the third stage of the tax reform continues in perpetuity.
Grundoff said inequality in Australia had been increasing, even before those stage-three tax cuts. His latest paper examined income per adult on a pre-tax basis, which means it shows how incomes are apportioned before the tax-and-transfer system kicks in to redistribute some income to lower income households via welfare and public services.
It shows what’s happened to Australian incomes through five distinct economic cycles, from the 1950s up to 2019, with each period starting with a recession or economic crisis and ending just before the next economic disruption (what economists call a “business cycle”).
The analysis reveals there has been a complete change in outcomes over those 70 years. In earlier periods, the bottom 90 per cent of income recipients clearly shared the benefits of economic expansion, with higher per adult incomes. Their share has slowly decreased over time, but since the GFC, their share has been dramatically reduced.
The first cycle, from 1950 to 1960, shows the bottom 90% of income recipients received the vast bulk of the benefits of economic growth. But by the final cycle, from 2009 to 2019, that phenomenon had reversed.
“Such an outcome has not been the norm over Australia’s post-war history. In all previous expansions, the bottom 90 per cent received at least 50 per cent of the economic growth, on a per adult basis,” the paper found.
The thinktank uses data from the World Inequality Database, which was developed by leading international researchers on inequality, including the French economist Thomas Piketty.
Inequality has been rising across the globe, driven by a significant rise in income and wealth for households at the top of the distribution.
The WID researchers collect their data from national accounts, household surveys, fiscal data, such as taxes on income and wealth, and wealth rankings, to compile their distributional national accounts that show how the incomes of different groups change over time as economies evolve.
