Inequality

Trends in average weekly after tax income

This shows how average household incomes grew in ‘real terms’ (after inflation) for the lowest, middle and highest 20% income groups in Australia, as well as the highest 5%. It shows that income growth was very uneven during the boom from 2000 to 2008. The average income of the lowest 20% grew by 5.6% per year in real terms, compared with 5.9% for the middle 20%, 7.2% for the highest 20%, and 10.3% for the highest 5%. After the GFC, from 2008 to 2016, household incomes grew much more slowly and less unequally. The average household incomes of the lowest 20% grew by 2.5% per year (aided by a large pension increase in 2009), compared with 0.3% for the middle 20%, 0.8% for the highest 20%, and a decline of 0.6% for the highest 5% (likely due to falls in returns from investments.

Annual percentage increase in weekly income, before and after the GFC in 2008

The graphs breaks the average annual increases in household income into two periods, before and after the Global Financial Crisis (GFC) and then shows the increase in income over the entire period 1999-00 to 2017-18.  It shows that the average incomes (after inflation) of the highest 20% rose by an average of 5.0% per year during the boom years, and 0.6% afterwards. The incomes of the middle 20% rose more slowly, by an average of 4.1% per year during the boom and 0.5% afterwards. The incomes of the lowest 20% grew more slowly again, by 3.9% a year in the boom up to 2007, but just 0.4% from 2007 to 2017-18. Over the period as a whole, average annual income growth (after inflation) was 2.7% for the highest 20%, compared wtih 2.2% for the middle 20% and 2% for the lowest 20%. The overall increase in incomes over the 18 years was 48% for the highest 20% compared with 40% for the middle 20% and 36% for the lowest 20%.

Changes in income shares before and after the GFC in 2008

This graph shows the changes in the share of household income to each income group before and after the Global Financial Crisis (GFC) and then shows the changes over the entire period 1999-00 to 2017-18. Before the GFC, the share of the highest 20% group rose by 1.6%, while those of the middle and lowest 20% fell by 0.4% and 0.3% respectively. After the GFC, the share of the highest 20% fell by 0.5% while those of the middle and lowest 20% each rose by 0.1%. Over the whole period, the income share of the higest 20% increased by 1.1%, while that of the middle 20% and lowest 20%, whose shares fell by 0.3% and 0.2% respectively.

Trends in reliance on social security

The percentage of people in households relying mainly on social security for their income  declined overall between 1999-00 and 2015-16, although the share of people of working age relying on these payments rose in 2007-08 due to the Global Financial Crisis. This long-term decline in social security reliance was due mainly to lower unemployment (before 2008), the closure of ‘pension’ payments for people between 50 and 64 years in the mid-1990s, ‘welfare to work’ policies that also restricted access to pension payments for people of working age (in 2007 and 2012), and growth in the private incomes of retirees (from superannuation, employment and other investments). You can find out more about changes in Australia’s income support system on our Causes and Solutions page.

Trends in the single rate of Newstart Allowance (now JobSeeker), pensions and wages

This contrasts changes in the maximum weekly rates of Newstart Allowance and Pensions for single adults with changes in full time wages (both median and average measures) between 1993 and 2019. The ‘real’ value of pensions rose from $283 per week to $437, an increase of 56%, while Newstart rose from $250 to $270 (largely due to ‘compensation’ for the GST, and the energy supplement compensating for higher energy prices), an increase of just 8%. The main reasons for this disparity were that, unlike pensions, Newstart Allowance is only indexed to consumer prices and not wage movements (and was not increased in ‘real terms’ since 1994), and that Allowance recipients missed out on the $32pw increase in the pension rate in 2009. Over this period the gap between the two payments increased from $33 to $171 per week. The graph also shows that the minimum wage has progressively fallen behind both median (middle) and average fulltime wages. You can find out more about the changes in income…

Reduction in inequality due to the social security and income tax systems

This tracks the impact of the income support and income tax systems on household income inequality in Australia, using the Gini Coefficient.  The bottom lines show the impact on inequality of the social security system – the difference between private income and gross income. The top lines show the impact on inequality of the income tax system – the difference between gross income and disposable income. Social security payments have a greater overall impact on inequality (ranging from a 9.4% to 11.6% reduction in the Gini for weekly income) than income tax does (ranging from a 4.3% to 5.8% reduction). The impact of social security on inequality decreased in the years before 2008 (represented by the rise in the bottom row), increased shortly afterwards (represented by the fall in the bottom row), then declined after 2011. The impact of social security on inequality is influenced by three main factors: (1) Changes in the share of recipients in the overall population This is shown here.…

Overall trends in income inequality from 1999 to 2015