Income and wealth Inequality in Australia

Inequality is present in every economy, but to what extent are income and wealth in Australia unequal and what government polices contravene income and wealth inequality? Income is defined as money that an individual or business receives in exchange for providing a good or service or through investing capital, while wealth is a measure of the value of all of the assets of worth owned by a person, community, company or country.

Income and wealth inequality refers to the degree to which income is unevenly distributed among people in an economy. The share of total income received by different groups measures inequality, this visually represented in the Lorenz curve. The line of perfect equality bisects the graph with the percentage of income proportional to the quintiles, where 20% of families account for 20% of the national income, the following 20% of families receive 20% of income and so on. However the distribution of income and wealth in an economy is never ideal, therefore the Lorenz curve will always exist below the line of perfect equality. For example in 2009-10, the 20% of Australians with the highest incomes received 40% of national income, whilst the poorest 20% only receive 10%. This has varied in 2012-13 with the richest 20% of Australia earning 33% of national income and the lowest income earners, obtaining an increased 19% from 2009-10, which exhibits a more equal distribution.

Another method of measuring inequality is through use of the Gini coefficient, it represents statistical dispersion of the income distribution of nations residents. The trends in Australia’s Gini coefficient are a fall from 0.329 in 2009-10 to 0.32 in 2011-12, thus illustrating a reduction in inequality due to tax cuts and increased welfare ...

... middle of paper ...

...roportionally higher taxes and come of welfare benefits, moderating the disposable income. As incomes fall in a recession the impact the falling incomes have for income earners is softened as high income earners pay less tax proportionally, and retain more post-tax income, while the low income earners receive benefits, thus injecting into the economy and moderating a downturn in the economy, this is fiscal boost.

These macroeconomic strategies have been applied in 2008-09 as the GFC recession impacted the economy, when the government employed an expansionary stance to support aggregate demand and production.

Inequality is existential in every economy but with the effective implementation of macroeconomic policy partnered with direct and indirect tax policies and safety net of minimum wages a more equal distribution of income and wealth in Australia is attained.