Who Benefits? The Australian Welfare State and Redistribution

Abstract

Income distribution is a key element in any approach to social policy, and as such is an important subject for consideration within the Social Welfare Research Centre. Ann Harding addresses issues in income distribution by pointing out that many branches of economic and social theory stress the supposedly distributive character as a key component of the rationale for government intervention in the economy. In Australia, both major political parties express commitment to redistribution in favour of low income and other disadvantaged groups. There are however, two bodies of opinion on this issue: one, which attempts to demonstrate that such distribution does, in fact, take place; the other, that the redistributive effects of government policies are negligible and, as far as taxation is concerned, the system actually redistributes in favour of the rich. As a test of these divergent views, Harding compares the data from the Household Expenditure Survey carried out by the Australian Bureau of Statistics in 1975-76 with the Commonwealth Government1s taxation review and social expenditure for the same year. She also refers to the changes that took place in government policy from 1975-76 to 1981-82. An important feature of the study is Harding’s methodology. She points out the distinction between distribution in absolute terms and incidence of expenditure related to each group of recipients' original share of income, and demonstrates through systematic comparison of data that each approach leads to different interpretations and conclusions. Harding’s analysis shows that, if measured as incidence, the overall effect of government policy in 1975-76 was a redistribution in favour of low income groups, but redistribution was not equal in all areas. The most pronounced effect was in pensions and benefits and in public housing; the lowest was in education and health. The distributive effect of taxation was negligible, because the progressive effect of income tax was reduced by the regressive nature of indirect taxes, rebates and concessions.