Advance Australia fair? Maybe not
Illustration: Michael Mucci.Lots of national myths get bandied about on Australia Day, and a common one is that we are a fairly classless society.
Unlike capitalistic Americans or stuffy Brits, many of us like to think the gap between the haves and the have-nots here is relatively narrow.
The assumption is that while a growing gap between rich and poor might be a problem for governments overseas, it is not something we need to worry about.
Right? Not if you look at the evidence. It shows that although we dodged the worst of the global financial crisis, we have not dodged the rising tide of inequality.
An Oxfam report last week said Australia’s wealthiest 1 per cent of households had had a rise in income second only to their peers in the US between 1980 and 2012.
The wealthiest households’ share of income almost doubled in the past three decades, the second biggest increase in a group of 12 wealthy countries.
It is not just the super rich who have been doing disproportionately well: the incomes of the wealthiest 10 per cent of the population rose by 60 per cent in the two decades to 2010. In comparison, Productivity Commission research shows lower-paid worker’s income rose by 40 per cent in the same period.
We are hardly alone. It is a global trend, so much so that corporate members of the World Economic Forum, which met in Davos, Switzerland last week, think rising inequality is the most likely risk to the global economy in 2014.
Whether the business leaders at Davos will do anything meaningful to narrow the income gap is another matter, of course. (I am trying to recall the last time a chief executive made a table-thumping demand for reform to increase the share of the pie going to the less well-off.)
However, even if you doubt the sincerity of corporate claims of concern about inequality, this does not mean we should ignore the issue.
Even if Australia is a wealthy country that prides itself on being egalitarian, that does not mean we are immune from a global widening of the gap between rich and poor.
There are too many causes of this phenomenon to list individually, but most developed countries have become more unequal in recent decades as they freed up labour markets and opened themselves to increasing competition. We are hardly unique.
However, there is one way in which Australia appears to be going against the grain: how our government is responding.
After the stalled recoveries from the global financial crisis in much of the West, overseas leaders are realising that an ever-widening income gap is a serious problem. Some inequality is inevitable, but if left unchecked it seriously hampers social stability, and growth.
US President Barack Obama has dubbed the income gap the ”defining issue of our time”, though it must be noted that the situation in the US is much more extreme than here.
The British and Japanese governments are pushing for wage rises for some of the lowest-paid workers in an attempt to stir their economies from slumber.
A growing number of economists are also of a view that something must be done to close the income gap. Before the financial crisis, many of them thought that how income was distributed was a secondary concern to growth. ”A rising tide lifts all boats” summed up the thinking.
However, lacklustre recovery in the US has blown a hole in this logic.
It is also true that countries with more unequal income distribution are not only less socially cohesive, they are likely to have shorter spells of economic growth.
It is a message that International Monetary Fund managing director Christine Lagarde was hammering home in Davos.
“Business and political leaders at the World Economic Forum should remember that in far too many countries the benefits of growth are being enjoyed by far too few people. This is not a recipe for stability and sustainability,” she said.
It is telling to contrast this with comments by Prime Minister Tony Abbott at the same event. He avoided endorsing calls for a focus on inequality above and beyond economic growth, saying: ”As always, stronger economic growth is the key to addressing almost every global problem.”
This is not some isolated quote; it reflects the government’s economic philosophy. His primary message for the leaders at Davos was to choose policies that made way for business and to avoid “government-knows-best action”.
What is more, several of the Coalition’s first moves since taking government have clearly been in the interests of the wealthy.
Take superannuation, something that is likely to be the biggest asset many people own in decades to come. One of the first things the government did was to scrap Labor’s plan to tax a small minority of funds that pay members a pension of more than $100,000 a year.
At the same time, it is removing a tax break to allow concessional super contributions for workers earning less than $37,000 because it was funded by the mining tax.
Or there is welfare. Last week the government announced a sweeping review of so-called unsustainable income support payments that inevitably go to the lowest-paid, such as disability support pensions.
But a $5.5 billion-a-year parental leave scheme that will pay women earning up to $150,000 a year as much as $75,000? Sure thing.
While much of the world is at least talking about narrowing the gap between rich and poor, the same cannot be said for our government.
Read more: http://www.smh.com.au/business/advance-australia-fair-maybe-not-20140126-31gpz.html#ixzz2rZKzt6mR
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