Commission research paper: Rising inequality? A stocktake of the evidence.

A self-initiated Productivity Commission report on inequality shows that the past 27 years of sustained growth have delivered significantly improved living standards for the nation and for most of us individually but that poverty remains unchanged.

The report brings together and takes stock of the latest and most complete evidence measuring the level of and trends in inequality, mobility and persistent disadvantage in Australia.

‘It was important that we not just look at the distribution of income in assessing inequality, but consider wealth and consumption too. For example, many retirees live on low incomes, but have high wealth. And many young adults have higher consumption than income,’ Commissioner Jonathan Coppel said.

The reports shows that Australia’s tax and transfer systems substantially reduce income inequality and that relative to other OECD countries, Australia redistributes less income, but does a much better job of targeting this redistribution to low income earners.

The report also looks at economic mobility — the gauge of whether the rich always remain rich, and the poor always poor. A healthy level of mobility is an indicator of economic opportunity. Mobility in Australia is higher than in most OECD countries — there is widespread movement across the income levels; around 75% of people in the top income group had moved to lower income groups 15 years later.

Key findings

  1. In every decile, the average household has benefited from income growth in recent decades. The bottom 10% of income earners were at the average growth of 2 per cent. The top 10% grew higher than the average. The remaining deciles grew at 2 percent or slightly less, reducing slightly for each lower decile with the exception of the bottom group.
  2. Australia’s level of income inequality is middle of the pack among developed countries.
  3. Over the course of their lives people’s incomes change a lot: education, work, family, retirement.
  4. People move up and down the income ladder with life events.
  • Top income group
    • 26% of the top remained at the top
    • 15% of the top moved slightly down
  • Middle income group
    • 12% of the middle moved slightly up
    • 11% of the middle remained in the middle
  • Bottom income group
    • 28% of the bottom moved slightly up
    • 22% of the bottom remained at the bottom.
  1. But it’s not all good news… poverty has remained stubbornly high. Between 1988-89 and 2015-16, the relative poverty rate has hovered around 10%.

Read the full paper.

(Source: Productivity Commission | Media release)


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