IMF says Aus­tralia has one of the fastest ris­ing in­come in­equal­ity rates

The Guardian Australia - - Headlines / News - Gareth Hutchens

Aus­tralia is among coun­tries with the high­est growth in in­come in­equal­ity in the world over the past 30 years, ac­cord­ing to the In­ter­na­tional Mone­tary Fund.

Vi­tor Gas­par, the IMF’s di­rec­tor of fis­cal af­fairs, has told an au­di­ence at the launch of the IMF’s lat­est Fis­cal Mon­i­tor that Aus­tralia’s in­come in­equal­ity growth has been sim­i­lar to the US, South Africa, In­dia, China, Spain and the UK since the 1980s.

Last month the trea­surer, Scott Mor­ri­son, said that in­come in­equal­ity was not get­ting worse in Aus­tralia.

Mor­ri­son told the Busi­ness Coun­cil of Aus­tralia in late Septem­ber that Trea­sury and the Re­serve Bank had found, in spe­cific anal­y­sis of cur­rent wage fun­da­men­tals, that Aus­tralian wages were grow­ing slowly across most in­dus­tries in the econ­omy, and most re­gions of the coun­try, so the slow growth was evenly shared.

How­ever, he would not re­lease the Trea­sury anal­y­sis.

Gas­par said IMF staff had used the Or­gan­i­sa­tion for Eco­nomic Co-op­er­a­tion and De­vel­op­ment’s in­come dis­tri­bu­tion data­base, Euro­stat, and the World Bank’s Pov­cal­net data, among other sources, to cal­cu­late that in­come in­equal­ity had in­creased in nearly half of the world’s coun­tries in the past three decades, and Aus­tralia had ex­pe­ri­enced a “large in­crease” in that time.

“Most peo­ple around the world live in coun­tries where in­equal­ity has in­creased,” he said.

The IMF’s lat­est Fis­cal Mon­i­tor, re­leased overnight, is ded­i­cated to the global growth in in­come in­equal­ity. It warns that while some in­equal­ity is in­evitable in a mar­ket-based eco­nomic sys­tem as a re­sult of “dif­fer­ences in tal­ent, ef­fort, and luck”, ex­ces­sive in­equal­ity could “erode so­cial co­he­sion, lead to po­lit­i­cal po­lar­i­sa­tion, and ul­ti­mately lower eco­nomic growth”.

It also warns that in­come in­equal­ity tends to be “highly cor­re­lated” with wealth in­equal­ity, in­equal­ity of op­por­tu­nity, and gen­der in­equal­ity.

In July this year, when dis­miss­ing the La­bor party’s plan to crack­down on trusts and other forms of tax min­imi­sa­tion, Mor­ri­son claimed that in­come in­equal­ity was ac­tu­ally get­ting bet­ter in Aus­tralia.

“The lat­est cen­sus showed on the global mea­sure of in­equal­ity, which is the Gini co­ef­fi­cient, that is the ac­cepted global mea­sure of in­come in­equal­ity around the world and that fig­ure shows it hasn’t got worse, it has ac­tu­ally got bet­ter,” he said.

He was tech­ni­cally right – if you only con­sider the last few years.

The Gini in­dex is the most widely used mea­sure of in­equal­ity. It looks at the dis­tri­bu­tion of a na­tion’s in­come or wealth, where 0 rep­re­sents com­plete equal­ity and 100 to­tal in­equal­ity.

The 2016 cen­sus showed the Gini co­ef­fi­cient for equiv­alised dis­pos­able house­hold in­come in Aus­tralia fell from 0.333 in 2013-14, to 0.323 in 2015-16.

Mor­ri­son did not men­tion that the Gini co­ef­fi­cient had been even lower in 2005-06, at 0.314.

Ear­lier this year, the OECD eco­nomic sur­vey of Aus­tralia in April found “in­clu­sive­ness has been eroded” in the past two decades.

“The Gini co­ef­fi­cient has been drift­ing up and house­holds in up­per­in­come brack­ets have ben­e­fited dis­pro­por­tion­ally from Aus­tralia’s long pe­riod of eco­nomic growth,” the re­port said.

“Real in­comes for the top quin­tile of house­holds grew by more than 40% be­tween 2004 and 2014, while those for the low­est quin­tile only grew by about 25%.”

In July the Re­serve Bank gover­nor, Philip Lowe, when asked about his views on in­equal­ity at a char­ity lunch in Syd­ney, said it had grown “quite a lot” in the 1980s and 1990s and had risen “a lit­tle bit” re­cently, but it was im­por­tant to make a dis­tinc­tion be­tween in­come and wealth in­equal­ity.

“Wealth in­equal­ity has be­come more pro­nounced par­tic­u­larly in the last five or six years be­cause there’s been big gains in as­set prices,” Lowe said. “So the peo­ple who own as­sets, which are usu­ally wealthy peo­ple, have seen their wealth go up.”

He said in­come in­equal­ity had in­creased slightly in re­cent years, but wealth in­equal­ity was more pro­nounced be­cause of ris­ing as­set prices.

Pho­to­graph: Bren­dan Es­pos­ito/AAP

Trea­surer Scott Mor­ri­son has said in­come in­equal­ity is not get­ting worse in Aus­tralia.

Il­lus­tra­tion: IMF

Graph show­ing in­equal­ity by coun­try by the IMF.

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