Is everyone getting a fair go in Australia?

Economic inequality is on the rise in many developed nations, and Australia is no exception.  In 2018, the Australian Gini index (a common measure of income inequality ranging from zero to one) was 0.325, ranking 11th in the Organisation for Economic Cooperation and Development (OECD) and slightly above the OECD average of 0.315 [1].  The wealth distribution is also alarmingly uneven, with the richest 20% holding 64% of all wealth, the next 20% holding 20% of all wealth, and the remaining 60% of the population holding a measly 17% of all wealth [2]

These inequalities are embedded across the nation on all scales; within states, cities, and even within suburbs.  Peppermint Grove, a suburb in Perth’s west, has the highest level of income inequality out of any suburb in Australia.  For the 2017-18 financial year, its Gini index was 0.754 [3].  This figure is far higher than the Gini index recorded for any country, signaling a greater degree of economic inequality than that experienced even in developing nations. 

Our country is home to both multi-millionaires and people struggling to make ends meet.  To ensure a fair go for all Australians, managing and reducing this economic inequality will be crucial.

In 2015, the United Nations declared reducing inequality as one of their seventeen Sustainable Development Goals to be achieved by 2030 [4].  Economic inequality is a key issue on the agenda for many governments around the world, including Australia.  So, why do we care about economic inequality? 

Besides from a moral standpoint, economic inequality is often associated with an inefficient society.  Some individuals lack resources and are, thus,  restricted in their ability to participate and contribute to society, while others own an excess of resources.  Inefficiency arises due to a lack of labour force productivity and/or because of economic instability. 

As such, there exists a plethora of scholarly work investigating the impact of inequality on economic facets such as growth, consumption, production, and the financial system.  Economic inequality has been linked to a myriad of other problems too.  Research has shown that inequality is related to issues such as health [5], social participation [6], and environmental quality [7].

It is no secret that the coronavirus disease 2019 (COVID-19) has impacted everyone differently.  Some industries have been able to adjust and stay afloat, while others have been hit hard.  For example, we have seen distilleries swap their product mix from alcohol to hand sanitizer to meet the surge in its demand [8].  This change in business model has allowed some individuals to remain employed whereby they would have otherwise been stood down.  On the other hand, the nature of the activities of certain sectors is such that any significant adjustment in their business model is not viable.  Particularly for Australia, the creative arts industry has suffered drastically.  The Australian Bureau of Statistics reported a devastating 37% drop in employment in the arts and recreation services sector in the second quarter of 2020 alone [9].  The pandemic has undoubtedly exacerbated economic inequality in Australia, with certain segments of society being affected more than others.  Additionally, previous underlying inequality is likely to have mediated people’s ability to react and respond to the virus. 

COVID-19 has brought Australia’s economic inequality to the surface, highlighting how certain opportunities are available to some while not to others.  It will be crucially important for the federal government to address this when formulating future fiscal policies relating to COVID-19.  Of particular interest in this regard will be the ramifications felt by many when the JobKeeper and JobSeeker payments are terminated at the end of March this year.  These ramifications will certainly be unevenly dispersed throughout the country.

What can be done to reduce the amount of economic inequality in Australia?  There are a few ways governments can do this.  Basically, reducing inequality involves a redistribution of resources away from the higher end of the distribution and towards the lower end.  This is predominantly achieved through progressive income taxation (taxing higher income earners more compared to lower income earners), subsidising education, job creation, and other redistributive taxes.  Australia employs a combination of different policies in order to minimise economic inequality.  However, more needs to be done. 

Australians have always been proud to give everyone a fair go.  Is everyone getting a fair go today?  Do we provide each and every Australian with equal opportunities to live prosperous lifestyles?  At the moment, no.  Moving forward, we need fiscal policy that seriously focusses on redistributive allocations.

• References

[1]  Organisation for Economic Cooperation and Development.  (2021).  Income inequality [Data file].  https://data.oecd.org/inequality/income-inequality.htm

[2]  Australian Council of Social Service & University of New South Wales.  (2020).  Inequality in Australia 2020.  Author.  http://povertyandinequality.acoss.org.au/publications/

[3]  Australian Bureau of Statistics.  (2021a).  Personal income in Australia Table 2g.  Total income distribution (Catalogue no. 6524.0.55.002).  https://www.abs.gov.au/statistics/labour/earnings-and-work-hours/personal-income-australia/latest-release#income-inequality-gini-coefficient

[4]  United Nations.  (2015).  Transforming our world:  The 2030 agenda for sustainable development.  Author.  https://sdgs.un.org/publications/transforming-our-world-2030-agenda-sustainable-development-17981

[5]  Pickett, K.E., & Wilkinson, R.G. (2015).  Income inequality and health: A causal review.  Social Science and Medicine, 128, 316–26.  https://doi.org/10.1016/j.socscimed.2014.12.031

[6]  Lancee, B., & Werfhorts, H.G. van de (2011).  Income inequality and participation:  A comparison of 24 European countries (GINI Discussion Paper 6).  University of Amsterdam, Amsterdam Institute for Advanced Labour Studies.  http://www.uva-aias.net/uploaded_files/publications/DP6-Lancee,vdWerfhorst-2.pdf

[7]  Boyce, J.K. (1994). Inequality as a cause of environmental degradation. Ecological Economics, 11, 169-178. https://doi.org/10.1016/0921-8009(94)90198-8

[8]  Masige, S.  (2020, March 24).  A number of distilleries around Australia are now making hand sanitiser, including Bundaberg Rum and Archie Rose.  Business Insider Australiahttps://www.businessinsider.com.au/distilleries-hand-sanitiser-coronavirus-2020-3

[9]  Australian Bureau of Statistics.  (2021b).  Labour force, Australia, detailed (Catalogue no. 6291.0.55.001).  https://www.abs.gov.au/statistics/labour/employment-and-unemployment/labour-force-australia-detailed/dec-2020#industry-occupation-and-sector