Asked their views about wealth distribution, most Australians have a preference for a more egalitarian society than we have today. Andrew Leigh explains…
Egalitarianism goes deep in the Australian character. Most of us don’t like tipping, and passengers tend to sit in the front seat of the taxi. There aren’t private areas on our beaches, and audiences don’t stand when the prime minister enters the room. We’re a country that happily dispensed with knighthoods decades ago, and no sensible person would suggest that the land of ‘mate’ should become the kingdom of ‘sir’.
And yet that egalitarian ethos is increasingly under threat from a rise in inequality over the past generation.
In Battlers and Billionaires, I found that since 1975, real wages for the bottom tenth have risen 15 per cent, while wages for the top tenth have risen 59 per cent. Today, I estimate that the richest 50 people in Australia have more wealth than the bottom 2 million.
Under the Rudd and Gillard Governments, the nation did not become more unequal. But inequality today remains significantly higher than it was a generation ago. Australian inequality isn’t yet at US levels, but the gap in both countries is widening.
Too much inequality strains the social fabric, threatening to cleave us one from another. Unequal societies tend to have less social mobility, making it harder for a poor child to make it into the middle class. Asked their views about wealth distribution, most Australians have a preference for a more egalitarian society than we have today.
And yet I am concerned that the Abbott Government’s policies may leave us a more unequal country.
The Coalition has announced that it will abolish three payments that are targeted at low-income and middle-income families: the income support bonus, the SchoolKids bonus, and the Low-Income Superannuation Contribution.
The Coalition has decided to maintain extremely generous tax concessions to people with more than $2 million in superannuation, despite the fact that these retirees receive more government assistance than someone on the full pension.
As though it wasn’t enough to cut benefits for the most disadvantaged and cut taxes for the most affluent, the Abbott Government has gone one step further, by proposing to transform Australia’s flat-rate paid parental leave scheme into a wage replacement scheme.
The effect of this is that a high-wage family will get three to five times more than a minimum wage family. As the Coalition’s policy document last year stated, ‘paid parental leave… should be a workforce entitlement’.
For the most affluent Australian families: welcome to your new age of entitlement.
A blind faith in trickle-down economics will make it harder for the Coalition to achieve other goals. While the Abbott Government may claim to have a Closing the Gap Indigenous policy, it’ll be harder to achieve if they have a Widen the Gap economic policy.
But a deeper conversation about inequality is vital for my party too.
When Labor is given the chance to govern again, we should assess policy proposals based on how they will affect the gap. With Australian inequality higher than it has been for three-quarters of a century, we must not ignore the distributional consequences of policy.
The past generation has seen great success for the Australian economy. Our nation is more productive and entrepreneurial; more open to ideas, products and people from overseas. Yet at the same time, we have become more unequal.
We don’t need to recreate the 1960s to reclaim those high levels of equality. But the egalitarianism of that era should remind us of what is possible. Australia is a stronger nation when we act together than when we pull apart.
This article is an edited excerpt of Battlers and Billionaires: Australian Egalitarianism Under Threat delivered at the National Press Club on 27 March 2014.
Andrew Leigh is the Shadow Assistant Treasurer, and author of Battlers & Billionaires: The Story of Inequality in Australia (Black Inc, 2013).