Examining Recent Changes in Income Distribution in Australia

Abstract

This paper analyses recently released ABS data on the distribution of income which allows, for the first time, estimates to be made of the distribution of income in 2000-01 and how it has changed since the mid-1990s. Problems with some aspects of the data have delayed the release of the new data and these have been addressed through adjustments to the reported data on welfare incomes prior to their release. But there are still differences in the collection methodology and presentation of results that make it difficult to compare the new estimates with those for the 1980s. Even so, it is now possible to examine how inequality has changed since 1994-95 and since the election of the Howard Government in 1995-96. The estimates indicate that while real disposable incomes increased across the distribution, income inequality has also increased since 1994-95, particularly between 1996-97 and 1999-2000. Over the entire period from 1994-95 to 2000-01, mean income in the top quintile increased by $111 a week, more than eight times the increase of $13 a week in the lowest quintile. Since the Howard government came to office, the new figures indicate that almost half (47.3 per cent) of the total increase in disposable income was received by those in the top quintile – implying that half of the income generated by economic growth has been of no benefit to the bottom four-fifths (in income terms) of the population. Comparison with earlier research also shows that income inequality has, in some respects, increased more rapidly since the mid-1990s than during the 1980s. Yet much less is made of inequality as an issue now than before, and this raises questions about why this is the case and whether or not Australian attitudes to inequality have changed. Without this information, it is not possible to determine the desirability of the increase in income inequality that has occurred since the mid-1990s. Nor is it yet possible to ascertain whether the distributional impact of taxes and transfers has changed in the 1990s, and how. These are important issues for future research.