Australian economic inequality: We would like a fairer go

7:22 Feb 5th, 2012 | 1 note

With the Occupy movement filling headlines across the globe, leaving an empty vacuum instead of solutions to their vaguely stated complaints, it is important that we look to Australia, and our own economic situation here at home.

While we pride ourselves on our egalitarianism and in our belief in a ‘fair shake of the sauce bottle’ for all (as one former Prime Minister put it), we must acknowledge that Australia is a free-market economy, and thus is prone to the perks and pitfalls that come with the territory.

The Australian Bureau of Statistics, our national statistical agency, compiles data on wealth and income distribution every two years. What it shows is that Australia has a healthy middle-class, which I’m classifying as the third and fourth quintile. However, it would be hard for people not to be mildly surprised at what is happening either side of the middle class. The share of household worth for the top quintile grew from 59% in 2003-04, to 63% in 2009-10, squeezing the second, third and fourth quintiles along the way. The poorest 20% of Australians have held steady at 1% of household net wealth since 2003-04, which I guess is only slightly more bearable than that number dropping to a statistical 0%.

While all Australians experienced wealth growth over the past decade (mostly through property prices shooting through the roof), in real dollar terms, the growth for the bottom 80% doesn’t look that crash hot when shown on a graph.

It is a similar story in terms of income, which is in my opinion a much better indicator of economic wellbeing. The picture painted here between 2003-04 and 2009-10 is rather more alarming then what I just showed for wealth. Overall, the poorest, second, and third quintiles all have lower wages in the 2009-10 data than they did in 2003-04. The poorest 20% of Australians saw their wages decline by 12.8% between 2003-04 and 2009-10; the second quintile saw a decline of 12.6%; and the third quintile, a 4% decline. Meanwhile, the highest earning Australians saw their income rise by a healthy 11.8%.

One of the more interesting points to note is the different in raw dollar changes in income. Top Australian earners saw their incomes rise by an amount larger than the entire weekly wage of a person in the bottom quintile. That is, a top earner saw his income rise from $3527 a week in 2003-04, to $3943 in 2009-10, resulting in a $416 larger pay cheque compared with the $360 which comprises the entire pay cheque of someone in the bottom quintile.

The Australian Council of Trade Unions last year published a survey they commissioned on the attitudes of Australians towards wealth. The most interesting section here was Australian perceptions of wealth distribution. In each quintile, respondents over estimated the equality of wealth distribution, by a lot. Respondents from every bracket thought the combined wealth of the bottom quintile was 9% of total household net worth, whereas in reality it is 1%. Respondents in the top wealth quintile thought their combined household net worth was 40% of the national total, instead of 61% in reality (Empirca Research, the firm who conducted the survey, for some reason used ABS data from 2007, even though the survey was released last year).

The astounding results to what respondents supplied as their ‘ideal’ wealth distribution speak for themselves.

Highlighting all of this isn’t to bash rich people—I’m studying economics, I’m hoping not to end up poor. Instead, it is to remind Australians of the reality we live in. We must remind ourselves that our social services and our safety nets are there for a reason: because we are not only the lucky country, we are a country renowned for our camaraderie—we help out those in need. Faced with politicians on both sides wielding axes and salivating over the budget, we must remember what is important.