Seven stories from 'Rising inequality? A stocktake of the evidence'
Speech
Chairman Peter Harris teamed up with Commissioner Jonathan Coppel to deliver a speech to the National Press Club in Canberra on 28 August 2018. Download, watch or read the speech below.
Download the speech
Seven stories from 'Rising inequality? A stocktake of the evidence' (PDF - 59 Kb)Watch the speech
Transcript of the speech
Peter Harris: It’s a pleasure to be addressing the Press Club today.
Many years ago, I played the occasional game of Kelly pool upstairs. I generally left my money in the pocket of some member of the Press Gallery. It still hurts, four decades on.
A few years later, Michelle Grattan spoke to me and later sent me a book. It was on the anti‑apartheid struggle, a passion of mine, and at the time I worked in PM&C on southern Africa for Malcolm Fraser. As a young public servant, I felt deeply compromised by this. Was I now that fearful object, a source?
But of course I didn’t know anything — or anything much.
And Michelle never called me again.
I’m not sure what was worse — the fear of being a possible source or the reality of being too unimportant to be one.
And I have come to this very room with Bob Hawke who delivered my treasured two and a half sentences about road and rail reform in a 1990 speech announcing a new Commonwealth–State process to deal with structural reform in Australia — the Special Premiers Conferences, as COAG’s progenitor was christened.
They were simpler times, no doubt. Problems rose up. Leaders dealt with them, even at great personal cost. Governments changed but the task of updating public policy mostly persisted.
Today, the environment is different.
We are going to talk this afternoon about the multiple stories of inequality and entrenched disadvantage, which some may find hard to link to their preferred concept of the Productivity Commission, despite our track record with disability and aged care and child care and currently, veteran’s entitlements.
But we focus today on this issue because the environment for policy‑makers is not of that once and simpler time. And context matters if you are in the public policy design game, as the Productivity Commission certainly is.
So before we get to the detail of our latest own‑motion research work, let me lay out the context as I see it.
On more than one occasion, Scott Morrison has said to me that there are few low‑hanging fruit left in micro economic reform, and there is surely some truth in that.
On the other hand, as economists like to say, not all the fruit back then were low‑hanging by any means.
And, more importantly today there is surely also an argument that reaching for a higher branch might be a significant political differentiator in this decade’s febrile political environment, where ideas float up and then just as quickly burst and disappear.
What a stand‑out then would be a commitment to a structural reform plan that had a shelf‑life of, say, five years.
There is such an option.
And its principal beneficiaries are people, rather than firms — broadening the appeal of structural reform by focusing on:
- higher workforce participation and personal wellbeing through preventing chronic disease
- more adaptable workforce skills through practical improvements to secondary and tertiary teaching
- Hilmer‑style reforms to planning and zoning to make it cheaper and easier to live and work in our congested cities.
Moreover, it’s not expensive, no more than the cost of reform to the sharing of GST amongst the States and Territories. All of us struggle to recall that, even if it was only a few weeks ago. Yet the benefits are multiple times that cost, and perpetual.
This plan, released by the then Treasurer in October last year for consideration amongst all Treasurers through 2018, is Shifting the Dial — the Productivity Commission’s response to a specific request from the Treasurer on what could be done to address Australia’s flagging productivity level.
Because it is the case that, despite occasional spurts of growth, the engine that drives growth in our economy is sputtering, insufficient to put any power into wage growth amongst other impacts.
For some, this is a recent discovery. But in my first speech as Chairman of the Productivity Commission in 2013, we made that very suggestion: that income growth would fall by about half in the coming decade, if productivity performance this decade was as poor as it had been in the previous decade.
And so it has proven to be.
This contributes today to the general feeling of dissatisfaction which the Committee for the Economic Development of Australia found with its April 2018 survey — that 44% of Australians do not feel they have gained at all from nearly three decades of uninterrupted growth.
Productivity growth has indeed been in serious decline around the developed world since 2004, enough time to show up as more than a statistical novelty.
At the same time, around the developed world but most evidently in the northern Atlantic, a broad sense of anger and dissatisfaction with the sharing of the benefits of globalism emerged.
The two trends are not linked other than that the ability of governments to respond to the rise of populist sentiment is deeply hampered by being in an extended low growth phase; and having incurred outsized debt burdens during the GFC.
Moreover, some of the most powerful and reliable mechanisms of seeing economies return to higher growth — innovation, and removal of trade barriers
— are guaranteed to raise the hackles of populist leaders.
These solutions thus are not easily advanced any more, effective though they have been in benefiting most of us. The evidence from our Rising Inequality? research released today shows in depth just how widely these benefits have been shared in Australia.
What we are yet to see in Australia is the kind of angry dissatisfaction expressed in the North Atlantic economies.
But we have our own — and not just in the recent past with disappointingly low wage growth. Six years ago, former RBA Governor Glenn Stevens spoke on what was reported then as the ‘glass half full’ speech. This sentiment has been developing for a while.
And so as we look out on a fourth straight decade of uninterrupted economic growth, we need to consider dispassionately why it is that so many of us feel we have missed out.
To do that effectively is not to indulge in the hand‑wringing of self‑criticism.
It requires us to show how sound public policy has generally worked for the largest number of us, while acknowledging its weaknesses for some.
The research we release today on Inequality is a contribution to that effort.
Unlike North Atlantic nations now caught up in a populist vortex, the benefits of income growth since the last recession in 1990 have been fairly evenly shared across every income decile in Australia.
And the bottom decile, the 10% with least income, have done as well if not slightly better than most deciles. As Jonathan will later show, our tax and transfer system has ensured a sound effort in sharing income growth and governments of all stripes have generally maintained its effectiveness, viewed over 27 years.
This will be instantly rejected by some, since it is not the popular perception. But it is the unquestionable fact. And, moreover, we are clearly not the same as the UK or the US.
There are many ways of further slicing and dicing income data in the report, which we investigate in depth so that there can be no doubt about the veracity of what we say: regardless of how it is viewed — decade by decade; or by periods of high and low productivity; or periods of high and low investment — only in the early 90s did all income groups not experience at least some income growth.
But as we also know, income growth is not the same as inequality.
While it is generally used as a comparator between nations, the Gini co‑efficient is not the only way to measure inequality, and Jonathan will take you through what we have discovered in a deep dive on inequality data.
Jonathan Coppel: Thank you Peter.
Let me begin with a fundamental question — the one posed by our report’s title.
Is inequality rising?
It is a question that draws diverse and competing views.
Some of you might be saying to yourself now, yes, it has risen based on this or that indicator. Others might say no, it has actually fallen, based on a different metric.
This is not a good place to begin a discussion on inequality and its social impacts.
For a serious discussion, it is first necessary to have a thorough and authoritative grip on where we stand today and how we got there.
This is the contribution our report seeks to make and hence its subtitle
“A stocktake of the evidence”.
But it’s not a straightforward question to answer.
Unlike economic growth, no single metric is going to give a definitive answer.
So what we have done is to bring together and take stock of the latest and most complete evidence measuring the level of and trends in inequality, poverty and disadvantage in Australia.
We did this primarily using household level data and adjusting for the size and composition of the household.
This takes account of larger households needing more resources to achieve the same standard of living as smaller households, and for some economies when sharing living costs.
And it is on this basis that we reach our bottom line conclusion that inequality has risen slightly over recent decades.
This is most evident with respect to the distribution of wealth and consumption.
The trend in income inequality is more contested territory. Some data reveal a small upward tick and others show no change since the early 2000s.
One could get easily distracted dissecting the reasons for these differences. But this would blur the bigger picture.
The key point is that just looking at the distribution of income in isolation gives you a lopsided view of inequality.
A few examples help to illustrate why:
- Many retirees, for instance, live on low incomes, but have high wealth.
- There are also many young adults with higher consumption than income and little wealth.
- And income patterns alone do not capture the importance of in‑kind transfers from government, such as health, education and government housing.
This is why our approach deliberately eschews the specific and often self‑serving use of any one measure of inequality, or make simplistic international comparisons.
Another reason why commentary on income inequality is contested territory is because the data reveals no uniform trend. It varies over time — sometimes in unexpected ways.
We were surprised, for example, to discover that ABS data since the GFC shows a decline in income inequality.
In fact, most of the uptick in income inequality over the past 27 years occurred during the mining boom period when wages growth was relatively strong.
It suggests that growth is no guarantee against a widening disparity between rich and poor.
Moreover and paradoxically, these inequality trends do not square with the perceptions of many in the community.
It appears that many Australians are confounding the very modest wages growth in the post GFC period with widening income inequality.
This again underlines the importance of first assembling the facts.
While the perception often is that the glass is half empty, the most accurate picture that can be drawn from the data suggest that each generation is still better than its predecessor.
To reach this finding we considered yet another way to look at inequality, and that is to dive deeper into the variation in income across age groups.
Most often, this variation reflects overall trends in the strength of income growth. When the economy is strong, all age groups benefit from higher income growth and when the economy is weak, all age groups suffer from lower income growth.
Sometimes though, some age groups have benefited more or less than others. Most recently, the incomes of young people have grown relatively slowly.
But on average, the story is that each new generation has earned more income than the last at a given age, and reaches the same level of income earlier in life.
A further clear message from the data is that Australia’s tax and transfer systems substantially reduce income inequality.
Relative to other OECD countries, Australia redistributes less income. But we do a much better job of targeting this redistribution to low income earners.
Overall, our progressive tax and highly targeted transfer system lower the summary measure of income inequality by about 30 per cent.
Government funded services, such as health, education and public housing have an additional equalising effect.
When these in‑kind transfers are included in a more expansive measure of consumption, inequality is about 30 per cent lower again than that for disposable household income.
This is because people with low incomes receive the largest amount of in‑kind transfers.
While there has been no material change in these equalising effects in the past 30 years, there is nothing inevitable about them either.
The inequality measures considered thus far give a snapshot of the distribution at a point in time.
While they show a slightly widening gap between “rich” and “poor” that does not mean the rich and the poor households at the beginning and the end of the period are the same households.
The distinction is important, and is why our report also looks at economic mobility — the gauge of whether the rich always remain rich and the poor always poor.
It matters, because a society with a given level of inequality and where incomes are static faces different and more serious policy challenges than a society with the same level of inequality, but where incomes are mobile.
A low level of mobility can erode the foundations of economic growth and give rise to feelings of social exclusion.
Mobility prospects are also an important determinant of life satisfaction and wellbeing.
So how does economic mobility stack up in Australia? Well, there is both good news and bad news.
The good news is economic mobility is high in Australia. Most of the people in the top income decile today were not there fifteen years ago.
In fact, almost everyone moves across the income distribution through the course of their lives. To give a few examples:
- Over a 16‑year period, the average Australian was classified in five different income deciles.
- Only one per cent of people remained in the same income decile over the whole period.
- And 9 per cent of the Australian population spent time in both the top and the bottom income decile.
Life events, such as transitioning from education into work, career advancement, household formation, having children, divorce and retirement, underpin some of the observed trends in economic mobility. Policy design also plays a part.
The bad news is we found the ends of the distribution to be ‘stickier’ than the middle.
Households in the top and bottom two income deciles at the beginning of the period were the most likely to be in the same decile 15 years later.
This is of particular concern because low mobility at the bottom typically extends beyond earnings to other dimensions of wellbeing, such as educational attainment and health outcomes.
To be sure, some ‘stickiness’ at the ends of the distribution is to be expected. I won’t get into the reason for this, as it is somewhat technical.
But how much stickiness is too much?
There is no consensus on how much matters, but international benchmarking provides a basis for comparisons.
Relative to the United States, for example, economic mobility in Australia is higher overall and less sticky at the tails. A similar pattern of income mobility holds across a broader range of OECD countries.
Another way of summing it up is that many Australians experience economic disadvantage at some stage in their lives, but for most of us, it is temporary.
For this group, sustained economic growth and reliable access to employment will continue to be the source of new opportunities.
But another group of Australians experience entrenched economic disadvantage; they are stuck at the bottom end of the mobility ladder.
To explain the nature of this group and what can be done about it, I will hand the floor back to Peter.
Peter Harris: Jonathan, that economic mobility slide is pretty impressive piece of work, my favourite summary of how we should probably view ourselves.
The value of longitudinal data sets can be seen here.
We have so few of them in Australia, badly lagging other developed nations. But they can show us remarkable truths. It’s to be strongly hoped that the creation of National Interest Data sets out of the Commonwealth Government’s response to our 2017 Data Use Report will invigorate investment in further similar data sets, and soon.
But if there is one lesson for the future out of our analysis of inequality, it is this: despite 27 years of uninterrupted economic growth, and unemployment stabilising at a notably lower level (generally starting with a 5 and not a 7 or an 8), and significant investment in redistribution of income via Family Tax Benefit and child care assistance in the 2000s, and a boost to indexation of the age pension late in that decade, we still have 9 to 10% of Australians living on very low incomes.
It has varied a bit throughout that period but today, for 2 million or so people, we are where we were thirty years ago.
It is not the same 2 million, as the mobility data shows. But the proportion of our society apparently doing very poorly should have reduced over that thirty years.
Of course, the gross number is a bit misleading. Included in that group will be many people for whom low incomes have an explanation that does not need a policy response — students in part‑time jobs, small business operators building a capital asset, some older high net wealth persons.
For the remainder, there are expert advisers that suggest we already know the answer. But after thirty years, perhaps simply shifting money around and doing more of the same is not sufficient. We have measures in this study to show how forms of poverty for children in particular have actually risen over the last twenty years. There are certainly no simple answers to inherited poverty.
So, as political parties ask themselves what are good ways to respond to the popular view that the benefits of growth are not being shared, rather than narrow the search to a favourable statistical model of inequality, perhaps it might be better to focus instead on persistently disadvantaged elements of this group.
It would be a complex task, and one for which there are few precedents.
We know a bit about this complexity. Aside from the major inquiries I mentioned at the start of this address, in 2015 we undertook a piece of research on Housing Assistance and Employment that focused on public housing tenants and the factors that reduced their employability. The conclusion of that work was that policies need to be much more adaptable to individual disadvantage, what I like to call hand‑made policy.
And we completed a Report last year on Reforms to Human Services that again showed some innovative ways to address improved health and social service provision.
We increasingly have the data, thanks to digital collection, to be able to improve on this work across a wide range of aspects of disadvantage. We should use it, not bury it.
Making a commitment to a comprehensive policy response to persistent disadvantage matters not just because we ought to be able to do better by
our fellow Australians as we look out at a fourth decade of uninterrupted
economic growth.
It matters too because without a practical and specific focus on something that represents the genuine policy failure in as loose a subject as inequality, almost any form of tax or welfare benefit to the better off, or billion‑dollar regional development boondoggle, or leap on to the bandwagon of the new Trump protectionism can be justified under that banner.
Finally, Shifting the Dial, our 5 year productivity plan I referred to at the outset, would complement such a commitment to focus on entrenched disadvantage.
Shifting the Dial’s serious structural improvements to human‑scale gains in responding to:
- chronic disease
- education and training unsuited to a multi‑career job market
- expensive, congested urban environments...
...would equip governments, State and Federal, facing the sentiment detected by CEDA with another part of the necessary ability to give a clear human focus to structural change.
And prevent us from being driven by fear to abandon that which we know works, even if it raises hackles to say it: lower barriers to trade; an active focus on innovation and basic research; and a healthy scepticism about the capability — let alone the efficacy — of governments setting prices or favouring some firms at the expense of others and calling it competition.
Hugh Stretton Oration
Chair Danielle Wood delivered the 2024 Hugh Stretton Oration at the University of Adelaide.
Download the oration
Read the oration
I would also like to begin by recognising the Kaurna people as the traditional owners of the land on which we meet today. I acknowledge their deep connection to this place and pay my respects to their elders, past and present and to any Aboriginal or Torres Strait Islander people with us this evening.
Thank you everyone for being here. It is very special for me to be back at the University of Adelaide, the place where I experienced the heady years of my undergraduate Economics degree. Lots of long afternoons in the Reading Room of the Barr Smith library, the occasional equally long one at the Uni Bar (RIP), but an incredible spirit of learning, thinking and debate that was so foundational for me.
A huge thank you to the Provost, Professor John Williams AM, Deputy Vice-Chancellor and Vice-President (Academic) Professor Jennie Shaw and Professor Adam Graycar for having me back. I am honoured to have the Governor Her Excellency the Honourable Frances Adamson in attendance, as well as the University Chancellor, the Honourable Catherine Branson AC KC.
There are also a couple of other very special guests in the audience, my parents Rae and Simon Wood, who are hearing me speak for the first time in a professional setting this evening. And I am grateful that after listening to my almost constant talking from the age of two, they are still willing to come back for more.
Hugh Stretton’s legacy
It is also a huge privilege to have the opportunity to honour the professional contribution of Professor Hugh Stretton AC. Professor Stretton’s incredible intellect and impressive CV has been well detailed by the Vice Chancellor.
Three things stood out to me in reading about his professional life.
The first was his intellectual energy and imagination. I particularly enjoyed the reference provided by one of his former supervisors on his application to lead the School of History:
The first impression is of extremely high intelligence. He uses his gifts quietly, however, and is given as much to listening as to talking... He is quite clearly an exact and energetic scholar, though … I am not at all confident that he will publish either quickly or much. I have no doubt that he would build a School of History soundly and with imagination. 1
Now today, any mention of a relaxed approach to publication might be an automatic disqualifier, but the referee was right about Stretton’s suitability to successfully lead the department.
By the end of his tenure as chair in 1966 the School of History had gained a reputation as one of the best of its kind in Australia. 2 And much of this was down to Stretton’s reputation as a formidable thinker and public intellectual. 3 Ultimately in academia, and in life, the spirit of curiosity counts for much.
The second was Professor Stretton’s gift for turning new ideas into policy practice.
His most famous work, a book on urban planning called Ideas for Australian Cities, was so influential that when applicants were interviewed for positions in the Whitlam government’s Department of Urban Development, the first question was: ‘What do you think of Stretton?’. 4
While becoming the opener for a public service interview is a bar not many of us will reach, that spirit of marrying rigorous evidence with real world policy implications is one that I know that many of us strive for in our work.
And the third and perhaps most notable thing was Stretton’s unwavering belief in fairness and opportunity for all. He believed public thinkers have a responsibility to look for chances to make a difference, to reduce disadvantage and make Australia a place where anyone can prosper.
As he once said: “We should be doing all we can, by old and new means that fit our changing historical conditions, to leave Australia fairer than we found it”. 5
Tonight I hope to give you some ideas about how we take up Stretton’s challenge.
I’m going to take you through what we know about inequality in Australia today.
Using new analysis released this week by the Productivity Commission, I’ll show you the distribution of wealth and income in Australia and how it’s changed over time.
I also want to give you a sneak peek of some research we haven’t yet published on intergenerational mobility. This goes to the important question: how much does who your parents are, go on to influence your life outcomes?
To finish, I’m going to give you a ‘fair go toolbox’ – a set of policy allen keys that can fit the inequality problem at hand.
A few disclaimers...
But first let me start with a few disclaimers, and as I’m an economist rather than a lawyer I’m going to put these right upfront rather than buried in size 6 font in a footnote.
1. Economic inequality is a surprisingly slippery construct
‘The rich are different to you and me’, writer F Scott Fitzgerald once claimed. ‘Yes’, said Hemmingway, ‘they have more money’.
At one level inequality is that simple: some people have more money than others.
But as I will come to, economic inequality measures can vary a lot depending on what we are measuring – do we care about income, consumption or wealth?
And there can be a range of worthwhile questions to ask:
- How are those doing it toughest faring?
- How much do the most well off – say the top 10% or 1% – have compared to others?
- Or how are resources distributed across the population as a whole?
Each can give us different insights.
And that’s before we even get to the question of how opportunities and outcomes change over a person’s lifetime, or vary by gender, age or for First Nations Australians.
So, to manage this complexity, tonight I’m going with the maximalists – or perhaps the Strettonist – approach. I will take you through a range of indicators and cuts of the data to give you a broad account of the state of play. But I also want to talk about what this actually looks like in people’s lives.
As Stretton said:
“I’m not sure that much valuable reform has sprung from high theory about the dynamics of distribution. More has come from ...competent accounting, summarising and insistent publication of the patterns of inequality… and the effects of those distributions on the quality of people’s experience in life.” 6
2. Be a sceptic
It is somewhat uncomfortable to say this as the leader of the organisation that prides itself on evidence-based, often data-driven, analysis. But in almost all data analysis we deal with imperfect data and are forced to make choices about how to address that.
In inequality research those choices can make a big difference to the story.
Very recently this challenge has jumped off the pages of academic journals and on to the front page of the Washington Post with the so called ‘inequality wars’.
On one side of the war you have famous inequality researchers, Thomas Piketty and Emmanuel Saez.
They have spent the better part of two decades analysing inequality, including by using American tax data to document a significant and growing share of US incomes flowing to the top 1%.
It’s rare to get rock star economists, but these guys are it.
(As an aside if you purchased but did not finish Piketty’s hefty Capital in the 21st Century back at the height of Pikettymania in 2011 you are not alone, on some measures it is the second most unfinished book on Kindle, after Hilary Clinton’s autobiography...). 7
On the other side of the war sit Gerald Auten and David Splinter – their names might not ring any bells.
These two relatively unknown tax code nerds come from the US Treasury Department and Congress Joint Committee on Taxation.
Using the same tax data as Piketty and Saez, they come up with the opposite conclusion: after tax, the share of US income going to the 1 % has barely moved since the 1960s.
Cue much triumph from some commentators and members of the press.
But beyond the simplistic discussions of Piketty and Saez being proved ‘wrong’ was the more nuanced truth – both sets of researchers had made a series of judgments around issues like how to estimate ‘missing money’ not included in tax returns, and how to attribute spending on health, education or defence across the population.
The appropriateness of each of these judgements is now the subject of further debate, but what is clear is that what might seem like technical judgments can sometimes have a big effect on conclusions.
In all the analysis I present tonight we’ve tried to be as robust and open as we can about any judgments made. But I encourage you to keep your sceptics hat on.
3. There will be graphs
I’m an economist, there will be lot of graphs this evening. But I’ll do my best to ‘use my words’ and hopefully we can avoid data overload.
Income inequality in Australia
Ok, let’s start with talking about the broad distribution of income in Australia.
I know it’s not always au fait to talk about what you earn in public, so I’ll ask you to do this exercise in your heads. I want you to think about whether you consider yourself to be a low-income earner, a middle-income earner, or a high-income earner.
Let’s see how you went.
Here’s the distribution of Australian taxable income. That is, the income before tax but after you’ve made any allowable deductions.
If your taxable income is over about $51,000, you earn more than 50% of Australians who lodge a tax return. If you earn more than $95,000, that puts you in the top 20%. If you earn $336,000 or above – you are the 1%.
A surprising number of people get this wrong. In fact, the vast majority of us consider ourselves to be ‘middle income earners’. 8 This is probably because the people we tend to live near and associate with are more likely to be in a similar tax bracket to us.
This is presumably why every year or so high earners from the media and political class kick off passionate debates about whether $200,000 is really a high income 9 – while, I suspect, the 97 % of Australians earning less than that amount just roll their eyes.
If we move to looking at using disposable income – that is income after tax and transfers – for an average Australian household, we can see that incomes have risen over time.
This is generally what we have come to expect, that outside of short dips during major economic shocks, income growth will continue its long march upwards over time.
And how has this growth been distributed?
The answer is relatively equally across the population in recent decades.
Indeed, in the 30 years between 1989 and 2019, income grew pretty consistently across the income distribution. Those in the top 10% experienced slightly higher growth than other groups, but nothing like the strong growth in income inequality seen in the US that dominates much of our inequality discourse.
In contrast, the COVID period and its aftermath has seen greater dispersion with incomes at the top growing rapidly and those at the bottom going backwards.
The reasons are complicated, but reflect the roller coaster ride of lockdowns and recession, increases and withdrawals of government supports, and the healthy bounce back and high inflation that followed.
As you can see, the three years of the COVID period actually reflect three quite different inequality dynamics.
At the start of the COVID 19 pandemic, government-imposed lockdowns caused drastic declines in economic activity and widespread job losses. 10 In response, the Australian Government provided substantial support, which cushioned the economic harm across the community.
The effective doubling of the JobSeeker payment, and the flat $1500 per fortnight JobKeeper payment for workers in eligible businesses 11 produced high income growth for those at the bottom and middle of the income distribution.
As the economy re-opened, supports were withdrawn, those gains were reversed.
And despite the strong economy and labour market, high inflation meant real wages went backwards for most workers over the past two years.
In contrast, high income households benefited from rip-roaring growth in business income as well as decent investment income, as the economy recovered.
Overall, and barring any further major shocks, we can probably expect the next few years will bring a return to a more ‘normal’ income growth and certainly to the more consistent patterns seen across the distribution observed in the pre-COVID era.
It is also interesting to reflect on how we compare to other nations.
Egalitarianism is tied up with Australian identity. We are the land of the ‘fair go’, a place where your taxi driver, your boss, and even the Prime Minister can all be safely referred to as your ‘mate’.
But does the reality match the mythology?
Not entirely.
Australia’s income inequality is ‘middle of the pack’ by rich-country standards. Comparing based on the Gini coefficient – a measure of overall inequality – Australia is close the OECD average.
Overall, we not as unequal as our friends in the US and the UK, but nor are we as egalitarian as the Nordic countries.
One important reason for these large cross-country differences is differences in tax and transfer policies.
For example, the US starts relatively unequal, but by no means the most. But because they redistribute income less, they end up the most unequal of Western nations. 12 In contrast, Finland has close to US-levels of inequality before taxes and transfers. After, it is one of the most equal nations in the OECD. 13
These are important differences that highlight a point I want to come back to: policy choices matter to inequality.
But now we have a snapshot of how Australians across the distribution have fared over time and relative to elsewhere, I want to turn to another important part of the inequality story: outcomes and opportunities for the most disadvantaged.
Poverty in a rich country
It’s almost 40 years since Bob Hawke declared that no child would live in poverty by 1990. 14
But, according to ACOSS, one in eight people lived below the poverty line in 2019-20, including one in six children. 15
This measure of poverty looks at relative income poverty – it’s set at 50 % of the typical Australian household disposable income, less housing costs.
Some argue it is better to look at absolute measures (for example, the amount of money required to be sure a household can achieve a basic standard of living) or indicators of material deprivation.
For example, amongst low-income households in 2019-20, 16% were unable to raise $500 for something important, 8% were unable to heat their homes, and 7% went without meals. 16
And it’s that sense of precariousness that pushes the impacts of poverty from the material to the mental. And those impacts can have a long tail.
As journalist Rick Morton writes about his own childhood growing up in a poor household: 17
I saw Mum’s daily, sometimes hourly, battles to stay solvent. I saw how hard she worked and what it did to her body and her mind. The stress of even thinking of it now is difficult to explain. It is built not only into my own mind but also in my flesh. The things I will do to avoid the feeling today. The things I try to do for Mum to make it so she never has to feel it again.
The biggest risk factors for poverty are: being on JobSeeker or Parenting Payment. 18
Policy and poverty remain inextricably linked.
Wealth inequality in Australia
Of course economic differences are not just found in incomes. Wealth or how much money you have ‘behind you’ is an important determinant of outcomes too. Wealth is a buffer – it can be converted into future consumption opportunities and provides a sense of financial security.
That is why we understand the pensioner who owns their home and has $250,000 in the bank is in a materially different economic position to the single part-time worker who records a similar $30,000 income but has few assets.
Wealth has grown significantly in Australia in recent decades.
I remember in primary school the shorthand for someone really, really, rich was a ‘millionaire.’ The average Australian household is now more than halfway to that benchmark. Indeed, a person that owns a typical house outright in Clarence Gardens is a ‘millionaire’. 19
Wealth overall is much less evenly distributed than income.
If we take a household at the 90th %ile for wealth, they have almost 70 times as much wealth as the Australians at the 10th %ile. For income the figure is only four times as much.
Wealth also has much greater extremes.
In his 2013 book on inequality, Battlers and Billionaires, Parliamentarian and economist Andrew Leigh provided a memorable analogy, which I have updated today:
Imagine a ladder on which each rung represents a million dollars of wealth. If we were to put all Australian households on this ladder 50% of us are about halfway to the first rung, the top 10 % are about 1.5 rungs up, the top 1% are reaching for the fifth rung – just high enough to clean the gutters. 20 Gina Rinehart is more than 11kms off the ground. 21
But even with this very long ladder, Australia’s wealth inequality is lower than many other OECD countries. 22
But an important question is how has the distribution changed in recent decades?
The answer is: it’s complicated.
Pre-pandemic, wealth grew faster for the top half of the distribution.
But the pandemic once again, produced some surprising results.
This pattern flipped and wealth grew more quickly overall and significantly faster for lower and lower middle wealth groups during the COVID period.
The two main reasons for this are:
- The strong growth in housing prices, particularly in the regions and the smaller capital cities. This had the biggest impact for homeowners in the lower middle and middle parts of the wealth distribution.
- Higher income from increased government support during the pandemic and fewer opportunities to spend, helped boost bank balances and debt repayment among low-wealth households. 23
And while this is good news for many households at least in the short-term, the longer-term run-up house prices has produced a different set of inequality concerns.
A decaying dream? House prices and inequality across generations
Here I want to stop and reflect on the different ways in which the very strong growth in house prices has impacted economic outcomes for different groups in Australia.
Until the 1990s, house prices broadly tracked growth in incomes. But between 1992 and 2018 they grew at almost three times the pace on average. 24
The effect has been an increase in the upfront barrier to home ownership and increasingly also the ongoing costs for those that are able to clear that hurdle.
The result, unsurprisingly, has been falling home ownership.
In the early 1980s, when my parents were buying their first home, around 70% of those in their early 30s owned a home. Today that figure is just 50%. And the drops have been particularly acute amongst low-income young people. 25
The declining opportunities for homeownership are a particular source of dissatisfaction and unrest amongst many non-homeowning younger Australians. Amongst the so-called Generation Z non-homeowners, 93% want to own their own home. But only 63% think it is likely that they ever will. 26
The rise in house prices has also contributed to rising generational disparities in wealth accumulation.
Older households have always had more assets on average than younger ones. But the run up in house prices has created windfall gains for existing homeowners. This has been a major contributor to the rapid growth in wealth among older households.
A household headed by someone aged 65-74 had on average $1.3 million in assets in 2016, up from $900,000 for the same age group in 2004. Rising asset prices over the past seven years mean this figure is almost certainly substantially higher now.
In contrast, the wealth of households under 35 has barely moved in 15 years. And poorer young Australians have less today than poorer young Australians did 15 years ago. 27
Overall the developments in the housing market over recent decades have left many, particularly many older Australians, very well off. But the cost has been considerable housing stress amongst the vulnerable, and a generation of younger Australians who will reach middle age with substantially lower rates of home ownership than their parents.
Land of the fair go? Social mobility in Australia
Now I want to move from the photo to the movie: from talking about disparity in economic outcomes at a point in time to talking about how these outcomes can evolve over someone’s life.
A question that has rightly been of interest to those concerned about inequality, is how does inequality in outcomes influence equality of opportunity. ;Or to be more specific – how much are economic opportunities determined by who are our parents are?
Generational mobility has historically been a hard thing to study. To understand its dynamics we need linked data on parental economic outcomes and those of their children over a long duration.
In the absence of this type of data, at least until recently, people got creative.
In one of my favourite studies, Parliamentarian Andrew Leigh alongside co-authors Gregory Clark and Mike Pottenger, identified rare surnames in the 2014 electoral roll among doctors and university graduates from 1870. They found, nearly 150 years later, that people with those rare surnames are more likely to be in the so called ‘elite’ professions than people with surnames such as Smith.28
Indeed, they found that so called ‘status persistence’ for surnames was as high in Australia as for England or the United States. 29
In somewhat brighter news, more recent studies using linked administrative data point to a more optimistic picture on social mobility in Australia.
Looking at economic outcomes for a million individuals born between 1978 and 1982 Economists Nathan Deutscher and Bhashkar Mazumder find that Australia is one of the more economically mobile advanced economies. 30>
Indeed, they find Australia’s ‘intergenerational elasticity of income’ (a measure of how much your family’s income affects your own) is similar to Canada and close to those of the Nordic countries, and considerably more mobile than places like the United States. 31
In forthcoming work the Productivity Commission uses family-linked tax data that confirms that estimates of intergenerational mobility remain comparatively high.
But in contrast, things may be stickier for those doing it toughest.
In a 2017 study, Professor Deborah Cobb-Clarke and her co-authors showed that young people are 1.8 times more likely to need social assistance if their parents have a history of receiving social assistance themselves. 32
Consistent with this, the Productivity Commission’s forthcoming work shows that people in their late 20s whose parents received social transfer payments were about one and a half times more likely to receive social transfer payments themselves.
The Cobb-Clarke work showed that these transmission effects were particularly pronounced for disability payments, payments for those with caring responsibilities, and parenting payments for single parents. Interestingly, disadvantage stemming from parents’ poor labour market outcomes was much less persistent. 33
Cobb-Clarke and her co-authors posit that parental disadvantage may be more harmful to children’s later life outcomes if it is more strongly driven by circumstances rather than personal choice.
This aligns with the growing appreciation by economists of the impact of lack of hope or despair in shaping life choices and outcomes. 34
This was the sentiment expressed by a Tasmanian woman on welfare supports: 35
It’s not so much what we are missing out on, it’s the next generation and it is a hard cycle to break because they look at it and think, well, what’s the point? We’re always going to be poor, things are hard, nothing’s going to get better. Why should we bother?
Schools under stress: a red flag for future mobility?
One of the foundational supports for economic mobility is a strong education system.
Indeed, educational attainment has been estimated to explain up to 30 % of the transmission of economic advantage between parents and children. 36
Australia has historically had a strong system of school education that has supported opportunities across the population.
But there are some red flags for future prosperity and mobility that we should heed.
Indeed, despite growing funding in recent years, Australia’s school system has not been delivering the results we want for our young people.
Data from the OECD suggest that the performance of Australian school students in Reading and Maths is going backwards, with significant falls in our levels of achievement since 2000.
Estimates based on this data suggest the average Australian Year 10 student in 2018 was eight months behind in reading compared to where Year 10 students were at the turn of the century, and results have largely flatlined since. 37 We’ve seen even sharper declines in mathematics scores, where the decline for Year 10 students by 2018 was almost a year of learning.
But how much does parental background make a difference to how students fare?
The answer is a lot. More than half of the most economically disadvantaged 15-year-old students in Australia are not proficient readers.
Analysis from the Grattan Institute shows that the disparity in outcomes was worse in Australia than in Canda or the UK and on par with the US. 38
These gaps in performance widen through the schooling process.
The Productivity Commission looked at this using NAPLAN data. 39 We compared the average reading outcomes of students whose parents did not finish high school to those whose parents have a bachelor’s degree or higher. We found the learning gap – equivalent to almost two years of reading achievement in Year 3, progressively widens to an almost 5-year learning gap by the time students reach Year 9.
For mathematics, the gap widens from 1.3 to almost 4 years.
If we take education as an indicator of both a country’s future economic prosperity and its social mobility – this data must concern us.
It has been pleasing to see senior leaders, including here in South Australia, engage with this issue and its implications. But turning the ship around will require significant shifts in the way we deliver education in Australia.
A nation divided: why mixing matters for mobility
Another less obvious mobility-enhancer is where we grow up, and more specifically, who we grow up with.
US economist Raj Chetty and co-authors made a splash in 2014, when their study using administrative records on the incomes of more than 40 million children and their parents found very large variations in social mobility across the US. For example, they estimated a child from the poorest 20% of families had nearly a 3 times better chance of making it into the top 20% of income earners as an adult if they lived in Silicon Valley rather than Charlotte North Carolina. 40
In a later paper, Chetty and another co-author reinforced the importance of these neighbourhood effects by studying outcomes for families who moved to different parts of the Unites States.
They found that outcomes for children whose families move to a better neighbourhood improve the more time they spend there.
Indeed, every additional year in a ‘good neighbourhood’ sees that child’s outcomes converge closer to the average for that neighbourhood by about 4 %.41
And if you are thinking that this type of locational lottery could only exist in a place as unequal as the United States – think again.
Economist Nathan Deutscher has replicated this work for Australia. 42
And while the dipartites between regions are less pronounced here, we see the same convergence in outcomes, the longer a child is exposed to a ‘good neighbourhood’.
Deutscher finds that place matters most during the teenage years and suggests it might be ‘peer effects’ that explain locational differences in outcomes.
In other words, who you hang around with in those formative years makes a difference. Which may well be a validating result for any parent that has ever uttered the immortal phrase: “If Tanya jumped off a cliff, would you do it too?”.
This is consistent with more recent work that suggests it is economic connectedness – the capacity of low socioeconomic people to make friends with those from higher socioeconomic groups – that is the principal driver of social mobility. 43
And this is the very thing that gets lost as neighbourhoods and schools become more stratified and we participate less in social mixing opportunities. This means that observed declines in the types of activities that help build the social glue – from volunteering, to local sport, to attending church – over time might further erode social mobility.
What’s a policy maker to do?
Where does all this leave policy makers?
How much policy makers should seek to address inequality is not a straightforward question. It has been dissected by philosophers since Plato. And economists have been at intellectual fisticuffs over it for much of the past century.
Today, even the strongest advocates for greater equality will acknowledge that some inequality is inevitable and that it is important to maintain incentives for innovation and effort.
Many of the richest people in the world – Gates, Dyson, Musk – are innovators whose work has reshaped our lives. It is at least partly the ‘size of the prize’ available to successful innovation that drives the efforts and risks of would-be innovators and entrepreneurs.44
On a more relatable level, let’s think of the University we are at tonight. Would we expect students to flow through these gates to spend years of their lives learning about engineering or medicine or economics, and to work long hours while establishing themselves in their career, without some return for these efforts? In other words, incentives are important for growing the pie, even if they result in a somewhat unequal distribution of it.
On the other hand, even many of capitalism’s biggest cheerleaders raise concerns about the social and economic implications of stark economic dispersion.
Recently the IMF has warned that high inequality and especially poor social mobility can impact on long-term economic growth. 45 Others have shown that physical and mental health problems are worse in more unequal societies, predominantly due to the physiological stress of operating within a steep economic hierarchy. 46 And still others have linked rising inequality, or declining social mobility, 47 with the rise of populism as the ‘left behind’ lodge their protests vote against the so called elite.
All of this is to say that targeting inequality is complex. And while the ‘line’ across which inequality flips to doing more harm than good is far from clear, what is clear is that policy makers have a broad set of tools that can help push in their desired direction.
A policy makers’ toolbox
A few years ago, a group of high-profile economists organised an international conference on combatting inequality with a mission of engaging with the full suite of policy responses. 48
Their conclusion, although not revolutionary, provides helpful clarity: that the right policy response depends on why you care about inequality.
In particular, they draw a distinction between policies concerned with:
- outcomes for most disadvantaged – particularly for addressing entrenched poverty
- boosting opportunities for a ‘hollowed out’ middle class – a much greater concern in the United States than here, where, as we have seen, income growth has been broader based
- opportunity hoarding – or the way wealthy people might leverage their economic and political power to entrench their position.
The right policy tool will also depend crucially on whether policy makers are more concerned with equality of opportunity or outcomes.
Below is an adapted version of the taxonomy they created. It shows the breadth – and importantly the targeting of different levers that a would-be inequality buster might pull.
Now I do not advocate for all of the policies proposed. Indeed, whether any of these policies would be a good idea would require careful analysis of the costs and benefits in the particular context you might use them. There are probably good ideas that have been left out too.
But I did want to talk very briefly about four of the ‘biggies’ that I think really matter in an Australian context.
Growing the pie can mean bigger slices for all
Now in a presentation largely focused on distribution of the pie, I want make the case for making the pie bigger.
A cross-country and cross time evaluation suggests that growth is effective in reducing poverty. 49 Indeed, incomes for the bottom 10% are highly correlated with overall economic growth – a rising tide lifts some very important boats. We could put this beyond doubt for Australia by addressing some of the weaknesses in the current social safety net - a point I’ll return to.
The impact of higher economic growth on overall inequality is less clear. 50 But what is clear is that faster economic growth gives governments more room to support more generous welfare policies as well as other social spending on areas like education and health that particularly benefit those at the bottom and middle of the income distribution.
More generally healthy income growth can also support the political ‘buy in’ for these types of policies. 51
As for what governments can do to grow the pie – that would be a whole other lecture. But if the pie is of interest: ‘here’s one I prepared earlier’. My colleagues have published a comprehensive 1000-page guide for governments looking for ways to boost productivity and growth. 52
Fixing the housing mess
A functioning housing system is critical for improving our social and economic outcomes. Building more houses closer to jobs and amenities is needed to help younger and poorer Australians access the same opportunities as previous generations.
Australia’s population has grown strongly over the past two decades and will likely continue to do so. We can choose to push people out to the ever-expanding fringes of our cities or accommodate them through boosting supply in the inner and middle ring suburbs where most would prefer to live.
Allowing greater density in these areas not only expands supply but also boosts variety in housing choices, supporting more of the cross-socio economic mixing critical to social mobility.
After at least two decades of letting the ‘housing market frog’ slowly boil, there have been some positive steps from both Commonwealth and State governments to support the planning changes needed to boost supply. In particular, the Commonwealth government has offered incentives for states to target the construction of 1.2 million new homes over the next five years. 53
Similarly, moves to boost social housing are also a positive step, particularly where they’re targeted to those with the highest need.
Unfortunately, this new-found policy energy has come at the same time as the building industry faces challenges in ramping up.
But over time, if ambitious growth targets can be met, this could be a powerful shift in reducing inequality both within and between generations.
An education revolution?
School education is fundamental to supercharging opportunities for the next generation.
And while some of the problems our system faces are thorny, some of the solutions are surprisingly straightforward.
Our focus should start with getting the basics right – our schools should be supported and held accountable for delivering basic levels of literacy and numeracy. 54 My former colleagues at Grattan have called for a ‘Reading Guarantee’ – whereby governments would commit to ensuring at least 90 % of Australian students learn to read proficiently at school. 55
Supporting schools and teachers to deliver on these basics would require:
- making sure all teachers adopt evidence-based teaching practices such as phonics decoding for reading 56
- providing all schools and teachers access to a bank of well-sequenced high-quality curriculum materials 57
- reducing low value tasks for teachers to free them up to spend time on what really matters, 58 and
- providing better career paths to help schools attract and retain top teachers, and allowing top teachers to support and develop others in the profession. 59
Boosting social safety net
The Federal Government’s Economic Inclusion Committee just released its second report designed to inform the budget process.
Its lead recommendation remained unchanged from last year: to increase the rate of the JobSeeker and related income support payments.
The Committee finds that Australia’s unemployment benefits have been slipping further and further behind community living standards for two decades. 60
And while the recent 10% increase to Commonwealth Rent Assistance will provide much needed relief – as did the extra 15% in the last Budget – the Committee’s report demonstrates that the value of the payments has fallen significantly relative to average rents for the past 25 years. 61
Today, Australia’s payments to the short-term unemployed, including housing benefits, are the least generous in the OECD. 62
No single measure would do more to alleviate poverty than a material change in these payments.
What’s stopping us?
Partly it’s likely to be well-meaning concerns about the impact on incentives to work.
But consistent with previous work, the Economic Inclusion Advisory Committee finds that the negative effect on incentives is likely to be small, because current levels of the payment are so far below incomes from working. 63
Indeed, for those facing economic exclusion, higher income support payments may improve the capacity to search for and accept employment. 64
Second, is the cost. Moving as far as the Economic Inclusion Advisory Committee recommends on JobSeeker and related payments could cost up to $4.6 billion per year, 65 which is not straightforward for governments balancing a range of competing priorities. But as targeted interventions to address poverty go, there is very little waste.
Finally, there is the question of community support. Boosting Jobseeker payments rarely garners majority support across the population. 66 As I have previously argued, this is less a case of Australians being mean spirited and more about the grip of some persistent and unhelpful myths about welfare recipients. Your regular community service reminder tonight: the median Jobseeker recipient is a 45-year-old woman. 67
Finding our inner Stretton
And with that I want to wrap up where I began, with Stretton’s legacy.
Inequality is one of those topics where it is easy to simply revert to tired tropes, particularly off shelf ones from elsewhere.
Stretton encouraged us to look with curiosity and rigour, but also with an open heart. In doing so, everyone may take away something different from the numbers and analysis I have shared tonight.
To me, there are bright spots in the story. Australia has grown its income and wealth over several decades, and it has shared those gains broadly. Social mobility is relatively high.
On the other hand, many relying on payments are in poverty and the long shadow of that experience can be hard for children to escape. Our schools and suburbs are becoming less of a springboard for mobility. And we have made the Australian dream out of reach for a generation of young people.
Policy matters – there are many levers that governments can pull to make a difference to these outcomes. But it is up to Australians to decide which ones we want them to use.
Footnotes
- Munro, D 2016, ‘The House that Hugh Built, the Adelaide history department during the Stretton era, 1954-1996’, History of Education vol. 46, no. 5, p.634.. Return to text
- Ibid, p.631. Return to text
- Spoehr, J 2015, ‘Hugh Stretton: a great Australian public intellectual’, The Adelaide Review, 7 September. Return to text
- Davison, G 2018, ‘Watching a brilliant thinker stretching his mind’, Inside Story, 11 October. Return to text
- Spoehr, J 2015. Return to text
- Gibilisco, P and Stretton, H 2003, ‘A pragmatic social democrat: an interview with Hugh Stretton’, The Journal of Australian Political Economy, vol. 51, pp. 13. Return to text
- The Guardian 2014, ‘Can the Hawking Index tell us when people give up on books?’, 8 July.Return to text
- Hoy, C, and Mager, F 2021 ‘Why are relatively poor people not more supportive of redistribution? Evidence from a randomized survey experiment across ten countries.’ American Economic Journal: Economic Policy, vol. 13, no. 4, pp. 299–328.Return to text
- Hobman, J 2022, ‘EXCLUSIVE: 'It barely cuts it': Aussie finance guru exposes why $200,000 a year is NOT a big salary anymore - despite most of the country earning MUCH less - but not everyone agrees’, The Daily Mail, 14 July; Martin, P 2021, ‘Other Australians don’t earn what you think. $59,538, is typical.’ The Conversation, 8 June. Return to text
- Coates, B and Ballantyne, A 2020, ‘No one left behind: Why Australia should lock in full employment’, Grattan Institute. The unemployment rate surged from 5.2% in March 2020 to a peak of 7.5% in July 2020. ABS (Australian Bureau of Statistics) 2024, ‘Labour Force, Australia, Detailed, February 2024’. Return to text
- The Australian Government provided JobKeeper payments of $1,500 per fortnight to eligible businesses, which had to be paid to their employees, to minimise job losses and maintain employment and job attachment. AIHW (Australian Institute of Health and Welfare) 2021, ‘Australia’s welfare 2021: data insights’, pp. 84–86. The flat payment of $1,500 per fortnight meant some people – particularly part time workers – received more than their salary, while for others it led to a reduction in their salary. Treasury 2023, ‘The Australian Government Independent Evaluation of the JobKeeper Payment Final Report’, 28 September. Return to text
- Hasell, J 2023, ‘Income inequality before and after taxes: How much do countries redistribute income?’, Our World in Data Return to text.
- Ibid. Return to text
- As Prime Minister, Bob Hawke made the declaration in 1987, with the intention to reach the goal by 1990. Hawke, B 1987, speech delivered at Sydney, NSW, June 23rd, Museum of Modern Democracy: Election Speeches. Return to text
- Davidson, P, Bradbury, B and Wong, M 2023, ‘Poverty in Australia 2023: Who is affected’, Poverty and Inequality Partnership Report no. 20, Australian Council of Social Service and UNSW Sydney. Return to text
- ABS (Australian Bureau of Statistics) 2022, ‘Survey of Income and Housing 2019-20’, Australian Government. Return to text
- Morton, R 2020, On Money, Hachette Australia, p.18. Return to text
- Davidson, P, Bradbury, B and Wong, M 2023. Return to text
- ‘Clarence Gardens Adelaide - Greater Region, SA 5039’, https://www.realestate.com.au/sa/clarence-gardens-5039/, accessed 12 May 2024. Return to text
- Leigh, A 2013, Battlers and Billionaires: The Story of Inequality in Australia, Schwartz Publishing, Melbourne, updated according to Productivity Commission estimates using Melbourne Institute data (Household, Income and Labour Dynamics in Australia (HILDA) Survey, Release 22). Return to text
- Estimate based on data from AFR (Australian Financial Review), ‘Rich List 2023’, https://www.afr.com/rich-list, accessed 12 May 2024. Return to text
- Shorrocks, Lluberas, Davies and Waldenström 2023, ‘Global Wealth Report 2023’, Credit Suisse and UBS Global Wealth Databook. Return to text
- See Productivity Commission 2024, ‘A snapshot of inequality in Australia’, Research paper, Canberra, pp. 25-30 for a discussion. Return to text
- Wood, D 2023a, ‘Creating a Better Future for Generation Next’, Grattan Institute, Giblin Lecture, Hobart, 30 August 2023. Return to text
- Coates, B 2022, ‘Levelling the playing field: it’s time for a national shared equity scheme’, Grattan Institute. Return to text
- Susan McKinnon Foundation 2023, ‘McKinnon Poll: Understanding attitudes towards housing in Australia’, September, p.90. Return to text
- Wood, D 2023a. Return to text
- The authors define a set of elite ‘rare’ surnames in 1900 as those surnames where 29 or fewer people held the name in Australia in 2014 in the voting roll, and where someone holding that name graduated from Melbourne or Sydney universities 1870-1899. Clark, G, Leigh, A, and Pottenger, M 2020, ‘Frontiers of mobility: Was Australia 1870–2017 a more socially mobile society than England?’, Explorations in Economic History, vol. 76. Return to text
- Ibid. Return to text
- Deutscher, N and Mazumder, B 2020, ‘Intergenerational mobility across Australia and the stability of regional estimates’, Labour Economics, vol. 66. Return to text
- Ibid. Return to text
- Cobb-Clark et al., 2022, ‘Intergenerational disadvantage: Learning about equal opportunity from social assistance receipt’, Journal of Labour Economics, vol. 79. Return to text
- Ibid, pp.16-17. Return to text
- Case, A and Deaton, A 2020, Deaths of despair and the future of capitalism, Princeton University Press, Princeton. Return to text
- TASCOSS 2022, ‘Wellbeing First: A budget proposal to ease the cost of living and invest in the long-term wellbeing of Tasmanians’, 2023-24 TASCOSS Budget Priorities Statement, p.12. Return to text
- Breunig, R and Taylor, M 2023, ‘Success in life is tied to parental education. That’s why we need to track intergenerational school performance’, The Conversation, 14 February. Return to text
- Hunter, J et al. 2023, ‘The Reading Guarantee: How to give every child the best chance of success.’ Grattan Institute. Return to text
- Ibid, p.10. Return to text
- Productivity Commission 2022a, ‘Review of the National School Reform Agreement’, Study Report, Canberra. Return to text
- The authors found a child whose family is amongst the 20% most disadvantaged has a probability of ending up in the top 20% of income earners of just 4.4% if they live in Charlotte North Carolina, but 12.9% if they live in San Jose, in the heart of Silicon Valley. Chetty, R et al. 2014, ‘Where is the land of opportunity? The geography of intergenerational mobility in the United States’, The Quarterly Journal of Economics, vol. 129, no. 4, November, pp. 1553-1623. Return to text
- Chetty, R and Hendren, N 2018, ‘The impacts of neighborhoods on intergenerational mobility I: Childhood exposure effects’, The Quarterly Journal of Economics, vol. 133, no. 3, August, pp. 1107-1162https://academic.oup.com/qje/article/133/3/1107/4850660?login=false Return to text
- Deutscher, N 2020, ‘Place, peers, and the teenage years: Long-run neighborhood effects in Australia’, American Economic Journal: Applied Economics, vol. 12, no. 2, pp. 220-49. Return to text
- Chetty, R et al. 2022, ‘Social capital I: Measurement and associations with economic mobility’, Nature vol. 608, pp. 108-121. Return to text
- Deaton, A, ‘What’s wrong with inequality?’, The IFS Deaton Review, panellist introduction, https://ifs.org.uk/inequality/themes/whats-wrong-with-inequality/, accessed 19 May 2024. Return to text
- Cerra et al. 2021, ‘Links between growth, inequality, and poverty: A survey’, IMF Working Papers, Working Paper No. 2021/068. Return to text
- Wilkinson, RG and Pickett, KE 2009, ‘Income inequality and social dysfunction’, Annual Review of Sociology, vol. 35, pp. 493–511. Return to text
- Protzer, ESM 2019, ‘Social Mobility Explains Populism, Not Inequality or Culture’, Center for International Development at Harvard University, Working Papers, no.118. Return to text
- Pearson Institute for International Economics 2019, ‘Combating inequality: Rethinking policies to reduce inequality in advanced economies’, conference papers, October 17 to 18, Washington DC. Return to text
- Cerra et al. 2021. Return to text
- Ibid. Return to text
- Weisstanner, D 2023, ‘Stagnating incomes and preferences for redistribution: The role of absolute and relative experiences’, European Journal of Political Research, vol. 62, pp. 551-570. Return to text
- Productivity Commission 2023, ‘5-year Productivity Inquiry: Advancing prosperity’, vol. 1, Inquiry Report no. 100, Canberra. Return to text
- Productivity Commission 2022a, ‘Review of the National School Reform Agreement’, Study Report, Canberra. Return to text
- Hunter, J et al. 2023, ‘The Reading Guarantee: How to give every child the best chance of success’, Grattan Institute. Return to text
- Ibid. Return to text
- Hunter, J et al. 2022, ‘Ending the lesson lottery: How to improve curriculum planning in schools’, Grattan Institute. Return to text
- Productivity Commission 2022a. Return to text
- Goss, P and Sonnemann, J 2020, ‘Top teachers: Sharing expertise to improve teaching’, Grattan Institute; Gonski, D et al. 2011, ‘Review of funding for schooling: Final report’, Australian Government Department of Education, Employment and Workplace Relations. Return to text
- EIAC (Economic Inclusion Advisory Committee) 2024, ‘2024 Report to Government’, Australian Government Department of Social Services. Return to text
- EIAC 2024, p.62. See also Productivity Commission 2022b, ‘In need of repair: The National Housing and Homelessness Agreement’, Study Report, Canberra. Return to text
- EIAC 2024, p.54. Return to text
- EIAC 2024, pp.49-55. Return to text
- Ibid, p.55. Return to text
- EIAC, p.47. Return to text
- Wood, D 2023b, ‘The three myths that keep Australians in poverty’, The Sydney Morning Herald, 25 April. Return to text
- Ibid. Return to text
Acknowledgment
I would like to thank Productivity Commission staff especially Carmela Chivers, Sara Collard and the inequality team for their assistance with this speech. The speech draws heavily on their most recent work: A snapshot of inequality in Australia. All good ideas and analysis theirs – all mistakes my own.
Related publications
Related publications
