Share of wealth held by Australia’s wealthiest has increased tremendously since 2004

By Joe Montero

Most Australians know that the majority have been finding themselves worse off as the share of wealth drifts upward to the few richest in the country. The third edition of Monash University’s Transforming Australia report confirms that 40 percent of Australians have seen a fall in their share by almost a third since 2004. The top 5 percent hold 24 percent of the wealth, and the top 10 percent 57 percent.

The report makes it perfectly clear that unless reversed, the fall will continue, and Australia will lag further behind the rest of the developed world. Changing course depends on long-term planning, something that is spectacularly absent in the political system. More importantly, there is the lack of political will to be any different. This is the Canberra consensus.

Transforming Australia uses long-term data sources covering 80 indicators, including inequalities in income, housing, and health. The indicators show that 12.7 percent of the Australian population was already living below the poverty line in 2020.

The data compares with other similar countries like the United States, where, unsurprisingly, the gap is even bigger, and the one percent hold 34.9 percent of that nation’s wealth, and the top 10 percent hold 70.7 percent.

There is a limit on what the Wealth share tells us. Wealth refers to assets held rather than income. Assets in the hands of the wealthiest are income producing, from interest, dividends, rates, debentures, and speculative bubbles. The assets of the 1 percent are mostly of this type. Those in the 10 percent may have this advantage in part. The rest don’t have income producing assets.

A better measure of day-to-day standard of living is income. Here too the years have seen a shift upwards in Australia. By 2019, aa massive 93 percent of all income gains went to the top 10 percent, and the rest shared only 7 percent.

This reflects assets-based income growth next to stagnant wages.

Inequality of this sort increased during the Covid era, and has only reversed marginally since, well below the rate of inflation. Real wages have therefore fallen more than the nominal numbers suggest. And economists predict more pain in the time ahead.

The official poverty line in Australia is based on a proportion of nominal wages provided by the Australian Bureau of Statistics. The value of Australian wages has fared worse than in other comparative nations as the graph below shows.

The line represents the United States dollar and the green and red blocks the Australian changes at certain points. Note that through the years in question, the value of wage increases remained at much less than $5 a day, and well below the growth in the United States. More often than not, there was a decline during these years, and this trend continues. The only difference is that the gap has become bigger. Note that the Australian Bureau of Statistics provided the estimates.

This suggests that the rise in poverty is higher than that determined by those below the poverty line. A poverty line measured as a proportion of income means less when real wages are falling.

In addition to the failure to address this rising inequality, The Monash University report also shows big lags on progress on the other goals adopted by United Nations members in 2015, and to which Australia is supposed to be committed. Another area of underperformance is education. Maths proficiency, for example, has declined by 25 percent since 2018, and 34 percent since 2004. This is only a partial view of our overall performance as a nation.

Overcoming these problems, especially the growing wealth gap, depends on changing the nation’s priorities. Failure to do this promises to further erode trust in the existing political leadership and the political system. This fall in trust inevitably leads to pollical polarisation as the population seeks different answers.

We already have the start of this, and it will play out in the coming federal election. We don’t know how yet. Reversing the upward drift in the wealth share is the critical issue. Failure to address this, and its link to the cost-of-living crisis, has already put the political elite into disrespect. Eventually, this may transform into a palpable anger that will demand new answers.