productivity commission

In September, Australia powered into its 28th year of uninterrupted economic growth, with an annual rate of 3.4 per cent and strong jobs growth. However, despite this impressive performance, there were still concerns at retail spending, the slip in private capital investment and the tightening finance access for home borrowers.

Against this backdrop, the Productivity Commission released an important piece of analysis into the public debate over just how well Australians are doing really. In Rising inequality? A stocktake of the evidence the Commission analysed a range of data back to the 1980s examining distributions of household incomes, consumption, wealth, composition and movement within distributions over time. It found that sustained growth has delivered significantly improved living standards for the average Australian in every income decile (see chart) and economic mobility in Australia is high. Our progressive tax and highly targeted transfer systems substantially reduce inequality.

Outgoing Productivity Commission chair Peter Harris said, “Unlike North Atlantic nations, which are 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 per cent with least income, have done as well if not slightly better than most deciles. 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.”

About nine per cent of Australians (2.2 million) experience relative income poverty, but for most it is temporary. Persistent but recurring poverty affects three per cent of the population, about 700,000 people. Levels of income inequality are lower than UK and US and slightly higher than Germany and Denmark.