Reflections on productivity, public policy, and challenges associated with Closing the Gap
National Press Club Address
Presenting to the National Press Club, outgoing Chair Michael Brennan reflects on his time at the Commission, productivity, public policy and closing the gap.
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It’s a great privilege to be here at the National Press Club.
I would like to acknowledge the Ngunnawal people as the traditional custodians of this land. I acknowledge and respect their continuing culture and the contribution to the life of this city and this region.
As I am come to the end of my term as Productivity Commission Chair, there is more talk than ever (it seems) about productivity.
Less of the thing itself.
But today I wanted to give you a few reflections on the nature of economic progress arising from our productivity work, and also our recent draft report on Closing the Gap.
So, I start with a question: how many minutes does it take to make a loaf of bread?
Of course, it’s a trick question – in case your mind had turned to how long you would spend kneading dough and baking it in the oven.
In fact, the answer is: for the average person in Australia today – around four minutes.
It is four minutes because that is the amount of time required by someone working at today’s average wage to have enough money to buy a standard loaf.
It is a measure of how effective our economy has become at the task of bread making.
And by bread making I don’t just mean the process of kneading and baking the dough. It’s the whole bit: ploughing the field, planting the seeds, building fences, harvesting the wheat, milling it and transporting it; producing the yeast; even mining the metal to then manufacture the oven.
All that for four minutes of work – doing whatever an individual worker does best. They can effectively command all those resources and have those processes co-ordinated on their behalf.
By contrast, in 1901 in Australia, it took 18 minutes of the average worker’s time to afford a loaf of bread.
Back then, agriculture employed one quarter of the Australian workforce, whereas today it employs just 5%.
But wheat production has risen from 1 million tonnes in 1900 to 25 million today. Each tonne of wheat is produced with less land and vastly less labour.
It is a story of replacing human labour with machinery; horses with tractors; and the application of science – new crop types, fertilizer, pesticides.
Combined with the similar productivity improvement in manufacturing and transport, it’s all ‘baked in’ to the humble loaf of bread.
That is productivity. And that story of reducing real cost (measured in the labour of the average worker) has been the pattern of productivity growth over much of the last century.
I start with that example because for many today, productivity as a concept and its link to progress and prosperity has become abstract and not practically relevant.
As recently as the 1950s, half of the Australian workforce was employed in agriculture, manufacturing, or mining – all industries where the concept of productivity growth, for workers and managers, was fairly intuitive.
Today 90% of the economy is in services.
So, what does productivity really mean for someone working in health or disability or finance?
The bread example helps highlight the link between productivity and real wages: over the medium term, productivity growth means each hour of work (whatever your industry) can allow you to purchase more things.
But it also gets you thinking about how not everything is like that.
There are many goods and services that haven’t become much cheaper, but they have gotten a lot better.
Take health: how many minutes of the average workers’ time would be required to pay for a visit to a GP in 1901 vs today?
The answer is that there is unlikely to have been much change. If a GP earns (say) twice the average wage then and now, a half-hour consultation would cost an hour of the average worker’s time, whether today or in 1901.
Hence no visible real cost reduction (unlike the loaf of bread).
What has changed is the quality: the doctor’s ability to understand, diagnose and prescribe has been transformed by medical advance.
That has made us vastly better off; lengthened lives and made them more satisfying.
But it has not reduced the cost of medicine. Quite the contrary. And this is true for many services, partly because the labour content that is embedded in the value of a service is significant and has proven hard to replace or automate (at least to date).
There is even a leisure dimension.
After all, today the average Australian, having obtained their bread, has 14 minutes more to spend working towards something else – a smart phone, holiday – or they could decide to work a bit less.
In fact, average working hours in Australia have fallen by around 30% (or 13 hours per week) since 1900. Though notably, workforce participation as a share of the adult population has increased substantially.
These are all forms of economic progress, broadly conceived.
Not all of them are officially counted in our statistics, but they all matter.
When working on the 5-year productivity review, one of my consistent admonitions was that we should talk less about abstract macro aggregates like GDP per hour worked, capital deepening and multi-factor productivity and more about these concrete instances of what productivity growth really means and how it differs in specific cases.
It’s partly because GDP is an imperfect measure of overall living standards.
Also, because understanding the quality dimension might be increasingly important in a modern services dominated economy, just as real cost reductions ruled the goods sector of the 20th century.
It is important to realise that we need both.
But talking about a smooth overall annual productivity growth rate obscures a bigger reality.
Productivity growth is not smooth, rarely evenly distributed and almost never predictable.
There is, for example, the remarkable fact that nearly all of the improvement in average living standards achieved over the last 10,000 years of human history took place since the late 18th century – the proverbial blink of an eye – and only in certain countries.
And it is lumpy and uneven. Productivity growth consists of a series of new technologies and business innovations that come in waves.
Almost all are characterised by the familiar S-curve of adoption: the take up of a new invention starts slowly, then accelerates dramatically and eventually plateaus.
One example: the rise of the motor car.
In 1900, the average Australian travelled 2,500 kms a year: roughly 40% walking and cycling, 40% via train or tram and 20% by horse.
The rise of the motor car followed the S-curve: it started slowly but accelerated after the second world war. By the 1990s it had reduced all other modes to just 15% of the transport task.
Over that period, the average Australian went from traveling 2,500 kms a year on land to traveling over 13,000 kms a year. The car unleashed a revolution in mobility, spawning new suburbs, factories on the urban fringe and big cost reductions in freight and logistics. With a big productivity dividend attached.
And then, in the last 20 years, that trend just plateaued. We are no more mobile today than in the late 1990s. The cost of moving people and goods around stopped falling, and urban congestion got worse.
So, the quest now turns to new sources of cost reduction and supply side growth. As it happens, the cost of moving information (as distinct from people) has fallen dramatically in the last 30 years – spawning new models like online commerce, telehealth and remote work.
Congestion, on roads and mass transit, can – if we are prepared to grasp the opportunity – now be addressed in part through technology-enabled real-time information and also pricing models, which were not available to us via the fuel excise or paper tickets.
The point is that a successful economy is one that catches those successive waves – that can move from one transformational source of productivity growth to the next – one that will look and feel different, and call forth different policy responses.
That is a story of adaptability and dynamism, and that is what we are trying to get at via productivity policy.
We know that it’s getting harder.
The last decade had the slowest aggregate productivity growth in 60 years.
This is a fairly common phenomenon across the developed world.
Whatever the reason, as a society, we have been slower at generating and spreading new ideas about how to produce goods and services that are cheaper, better or entirely novel.
Admittedly, the technological inventions from the late 19th century through to the mid-20th, were a hard act to follow.
As economist Robert Gordon put it, these inventions replaced the ‘unremitting daily grind’ of painful manual labour, household drudgery, darkness, isolation and early death with safer jobs in air-conditioned environments, electric appliances to perform household tasks and electric light at the flick of a switch. Isolation replaced by fast travel, colour TV and the telephone.
And average life expectancy at birth rose from around 45 years to over 70.
Those changes were nothing short of miraculous, but they can only happen once.
The question isn’t whether we can replicate that pace of transformation, it’s what do we need to do to give ourselves the best possible chance?
It requires that we have maximum adaptive capacity: to do that we need many things, but I will focus on three: improved human capital, shifting the emphasis of innovation policy and a culture of innovation and entrepreneurship within government.
People spend longer in formal education today than ever in human history.
In the past, agriculture and manufacturing created high paying jobs for people with relatively low level of formal education.
The services sector is less forgiving. When labour makes up the bulk of the value, the quality of that labour really matters.
We have derived productivity gains from higher levels of educational attainment (like more years spent at school, and increasingly in post-school education)
And they are still flowing through.
But like everything, that too will level off. Those gains plateau at the top of the S-curve.
There are limits to the future gains we can make just by having young people spend more years in formal education.
We have to achieve a quality dividend – that is to say, a productivity improvement in the education system itself: better results for the resources (including years of a student’s life) that we put in.
Despite a lot of economic change over the last 70 years, our basic models of education have changed very little in that time.
Our challenge is to achieve the sort of transformation in education that we achieved in medicine over the last 150 years.
Just think about what even 1.2% annual productivity growth (the reduced assumption in the IGR) would mean if we applied it to schools.
That would imply – in 20 years – we could teach the same number of students to the same standard, with a 22% reduction in the workforce.
That would be the real cost reduction route.
Or there is the quality route – a similar workforce, but student outcomes lifting by about 25%.
Hard to measure – but it would imply big gains in PISA and NAPLAN and students’ readiness for post school study.
One source of potential gain could come from a better understanding of cognitive science, and a stronger link between the science of learning and classroom practice.
We could be on the cusp of huge technological transformation in education – both digital communications to expand access to the best teaching and instruction, and artificial intelligence to provide real time assessment and guide students and teachers as to where additional effort could be focused.
To augment the role of qualified teachers, not replace it.
But we have to be prepared to embrace that change.
Other countries almost certainly will – particularly those that have traditionally lacked access to high quality teaching, and who will see technology as their big chance to catch up to or leapfrog developed economies in terms of human capital development.
We will also need a renewed focus on lifelong learning.
Our current model focuses significant public subsidy on the initial acquisition of skills but none on those that come from subsequent mid-career study.
The rise of short form credentials suggest the emergence of a greater culture of lifelong learning.
By way of example, our own work has suggested that levels of management capability could be a factor in holding back firm performance and overall productivity in Australia.
A more nimble system of lifelong education and recognition of qualifications is likely to be important in encouraging mobility of labour across jobs and firms.
That is an important channel by which new ideas spread across the economy.
That brings us to innovation.
We often think of innovation policy in terms of stimulating new research and cutting-edge invention.
The traditional policy tools include R&D tax concessions, intellectual property, efforts to commercialise university research, and supporting our public research bodies.
These are important levers, but there is a forgotten side to innovation policy – namely that of diffusion – the way new technology and business innovations spread across firms in the economy.
98% of Australian firms are not new-to-the-world innovators. They are adopters, adapters, tinkerers with existing technology.
Lifting the performance of these firms is the main game in productivity policy.
In agriculture, we used extension services – to spread the results of publicly funded R&D out to farmers. We have not really addressed the issue of what the innovation eco-system might look like in the growing services sector.
Our report made a start, but we have to keep developing our thinking on this issue.
The role for government isn’t always straightforward, but there is some role: for example, the public sector’s attitude to technology can play a key role in accelerating adoption by small firms.
The most effective diffuser of knowledge is a dynamic, competitive economy.
The evolutionary forces by which good ideas are rewarded, and by which resources flow to more productive firms, are what drives the economy forward towards higher levels of prosperity.
Only two weeks ago, The Economist magazine pointed out that the pace of diffusion of new technology across firms seems to be slowing across the developed world.
And it’s not just the technology itself that matters.
One lesson we can learn from the past is that the biggest productivity gains don’t just come from the simple adoption of a new technology but from complementary business innovation.
That was the story of electricity – invented in the 1870s but not fully exploited by manufacturing businesses until well into the 20th century.
The gains came not from replacing a steam-based source of power with an electric motor, but from the changes to the production line which were made possible by having multiple machines powered by electricity, rather than a single steam-based engine in the factory.
Technology is important, but often it is the entirely new business model – the uber or Netflix – that drives the big gains.
So we need regulatory systems that look kindly on new business models; a tax system that promotes new firm entry.
We also need to think more about policies that could promote a healthy risk appetite among investors and would-be entrepreneurs.
This brings us to the non-market sector – those services mainly funded and delivered by government, like health, education, community safety, child care, aged care and disability.
Areas where we have settled on some very labour-intensive business models, and where innovation is not always encouraged, and diffusion of good ideas is not always easy.
They are a big and growing share of the economy – too big to be exempt from potential productivity gains.
But what do these look like?
In some cases, it’s finding lower cost settings for service delivery: health care in the community rather than the hospital, aged care in the home, and alternatives to costly incarceration.
Technology like AI, digital communications or robotics can also play a role, but their effectiveness will be blunted if rigid rules hamper their uptake.
Again, it’s as much the business model as it is the technology itself.
Health is a sector with remarkable technological uptake when it comes to medical innovation (new drugs, diagnostic equipment or surgical procedures).
But a laggard when it comes to the use of general technology to improve the quality of service to patients or reduce costs.
In our work on mental health, we saw the positive impact of moderated online services, to improve quality and convenience and reduce costs. But the challenge is that the MBS enshrines the one-on-one, real time physical consultation as the staple of the system – effectively a hard barrier to any real cost reduction.
Other areas of service delivery explicitly enshrine staff ratios.
If we had staff ratios on the farm or in the factory, then the average worker would still be toiling for 18 minutes for a loaf of bread, instead of four.
And then there is the question as to whether the very structures of government can adapt when needed to deliver better outcomes.
That question is at the heart of the National Agreement on Closing the Gap – the last area I wish to cover today.
Arguably no one sees the limitations and inefficiency of government quite like Aboriginal and Torres Strait Islander people. The fragmentation, red tape and one-size-fits-all approach.
The National Agreement on Closing the Gap, signed in 2020, had two key features. First, it was explicitly an agreement between all governments and a Coalition of Peak Aboriginal and Torres Strait Islander organisations. Second, in addition to setting out 17 socio economic targets – it set out four priority reforms that governments would undertake to help meet those outcomes.
Only 4 of the 17 targets set out in the Agreement are on track to be met at this early stage.
Others are going in the wrong direction, like the rate of incarceration of Aboriginal and Torres Strait Islander people.
That rate steadily increased over the 10 years prior to the Agreement and since.
It was never clear what governments felt they were putting in place that would reverse this trend.
This is where the 4 priority reforms become relevant.
The Agreement commits governments:
- To establish more formal shared decision making between governments and Aboriginal and Torres Strait Islander people.
- To strengthen the Aboriginal and Torres Strait Islander community-controlled sector.
- To transform government entities to be more responsive in achieving the desired outcomes.
- To share relevant data.
They sound fairly basic, but in reality – for traditional processes of government – they are radical.
They require a move away from the traditional ‘upwards’ accountabilities in favour of accountability to the people actually impacted by policy and service delivery, with some ‘letting go’ or power and service specifications.
The progress against these reforms is, so far, limited.
Granted, governments are busy – in the implementation plans put forward by our 9 jurisdictions there are over 2,000 actions identified which purport to be contributing to Closing the Gap.
But this busy-ness is, in many ways, just business as usual.
Governments have taken tentative steps in the right direction, with some examples of good practice. And, yes, we are just three COVID-affected years into the life of this Agreement.
But the priority reforms are not new in substance – they had been talked about and sought by Aboriginal and Torres Strait Islander people for many years.
And the Agreement promised transformation. That is the ambition against which we judge it.
Most jurisdictions have put in place some form of formal partnership arrangements, but feedback suggests the engagement is still often late, formulaic and opaque.
There is some shift of funding towards the community-controlled sector, but largely within what we refer to as the ‘lift and shift’ model – where contract specifications remain with government agencies, while ACCOs are left to cobble together multiple small, time limited grants in order to keep the show on the road.
Meanwhile decisions get made in other policy areas – like criminal justice – that most likely will worsen performance against a key Closing the Gap target.
It is not clear how the Agreement is influencing those deliberations to the extent it should.
All this leaves the impression that governments have not lived up to – and perhaps not fully understood – the extent of the transformation they promised in 2020.
These issues go to that broader question: can government change its fundamental business model when that is what is required to deliver better outcomes?
Because, let’s face it, there are any number of complex issues – like the more general problem of entrenched, locational and multi-faceted disadvantage, where the traditional siloed approach of government service delivery has largely failed to make a dent.
Government has to be able to countenance radical options, including devolving responsibility; parting with top-down power; allowing localised entrepreneurship and giving front line workers a wide remit for practical problem solving.
All those things run counter to public sector culture and system inertia.
But if we want continued economic progress, particularly for the most marginalised, we have to face up to this challenge.
I see this work as a natural fit for the Productivity Commission. But that’s not to say it’s business as usual for us.
For the last four years, we have been on a significant journey.
We have been doing more and more work in Aboriginal and Torres Strait Islander policy, starting with our report on child and family programs in the Northern Territory, the Indigenous Evaluation Strategy and more recently a report into inauthentic Indigenous arts.
This is in addition to our regular work on the Overcoming Indigenous Disadvantage report.
That was pretty new for us. It has meant change.
We have had to embark on the very transformation that priority reform 3 asks of all government entities.
It was not enough to simply be the PC of old – for all the institution’s historic strengths. We had to be that, and something more.
So, we have had to build our cultural capability, we have hired new Aboriginal and Torres Strait Islander staff – of whom I am immensely proud.
We had to cultivate new relationships. We have changed our models of engagement to be more reciprocal and less transactional.
We have had to broaden our thinking.
And we are not done.
When the Coalition of Peaks agreed to embed the role of the Productivity Commission into the Closing the Gap Agreement in 2020, they did not do it on the basis of our track record.
They did it on faith.
And I said to Pat Turner at the time that we would work hard to repay that faith.
No one has contributed more to that commitment than Romlie Mokak – our inaugural Indigenous Policy Commissioner. Supported by a team effort, involving many staff, our previous Social Policy Commissioner Richard Spencer, and our new(ish) one Natalie Siegel Brown, who recently presented our report at Garma.
I emphasise this as an example of the extent to which the PC has evolved over time. On this dimension, we have changed substantially in the last four years.
There are other examples, including our work in water policy, education, health, aged care and disability.
But economic progress means adaptation and change.
And that evolution will go on. I am very positive about the PC’s future and very supportive of Chris Barrett’s appointment.
Knowing that the PC will bring its traditional strengths to new, and important areas, as we have been asked to do on Closing the Gap.
Our capability has to be broad because economic progress is a broad concept.
Whether it is cheaper bread, better health or closing the gap in partnership with Aboriginal and Torres Strait Islander people, there is a common principle: finding new ways to deliver something better, supporting and rewarding our innovators and spreading that knowledge quickly and widely across the community.
How well we do that – as an economy, as a Federation, as a society – will determine our growth in living standards in the decades to come.
Hugh Stretton Oration
Chair Danielle Wood delivered the 2024 Hugh Stretton Oration at the University of Adelaide.
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I would also like to begin by recognising the Kaurna people as the traditional owners of the land on which we meet today. I acknowledge their deep connection to this place and pay my respects to their elders, past and present and to any Aboriginal or Torres Strait Islander people with us this evening.
Thank you everyone for being here. It is very special for me to be back at the University of Adelaide, the place where I experienced the heady years of my undergraduate Economics degree. Lots of long afternoons in the Reading Room of the Barr Smith library, the occasional equally long one at the Uni Bar (RIP), but an incredible spirit of learning, thinking and debate that was so foundational for me.
A huge thank you to the Provost, Professor John Williams AM, Deputy Vice-Chancellor and Vice-President (Academic) Professor Jennie Shaw and Professor Adam Graycar for having me back. I am honoured to have the Governor Her Excellency the Honourable Frances Adamson in attendance, as well as the University Chancellor, the Honourable Catherine Branson AC KC.
There are also a couple of other very special guests in the audience, my parents Rae and Simon Wood, who are hearing me speak for the first time in a professional setting this evening. And I am grateful that after listening to my almost constant talking from the age of two, they are still willing to come back for more.
Hugh Stretton’s legacy
It is also a huge privilege to have the opportunity to honour the professional contribution of Professor Hugh Stretton AC. Professor Stretton’s incredible intellect and impressive CV has been well detailed by the Vice Chancellor.
Three things stood out to me in reading about his professional life.
The first was his intellectual energy and imagination. I particularly enjoyed the reference provided by one of his former supervisors on his application to lead the School of History:
The first impression is of extremely high intelligence. He uses his gifts quietly, however, and is given as much to listening as to talking... He is quite clearly an exact and energetic scholar, though … I am not at all confident that he will publish either quickly or much. I have no doubt that he would build a School of History soundly and with imagination. 1
Now today, any mention of a relaxed approach to publication might be an automatic disqualifier, but the referee was right about Stretton’s suitability to successfully lead the department.
By the end of his tenure as chair in 1966 the School of History had gained a reputation as one of the best of its kind in Australia. 2 And much of this was down to Stretton’s reputation as a formidable thinker and public intellectual. 3 Ultimately in academia, and in life, the spirit of curiosity counts for much.
The second was Professor Stretton’s gift for turning new ideas into policy practice.
His most famous work, a book on urban planning called Ideas for Australian Cities, was so influential that when applicants were interviewed for positions in the Whitlam government’s Department of Urban Development, the first question was: ‘What do you think of Stretton?’. 4
While becoming the opener for a public service interview is a bar not many of us will reach, that spirit of marrying rigorous evidence with real world policy implications is one that I know that many of us strive for in our work.
And the third and perhaps most notable thing was Stretton’s unwavering belief in fairness and opportunity for all. He believed public thinkers have a responsibility to look for chances to make a difference, to reduce disadvantage and make Australia a place where anyone can prosper.
As he once said: “We should be doing all we can, by old and new means that fit our changing historical conditions, to leave Australia fairer than we found it”. 5
Tonight I hope to give you some ideas about how we take up Stretton’s challenge.
I’m going to take you through what we know about inequality in Australia today.
Using new analysis released this week by the Productivity Commission, I’ll show you the distribution of wealth and income in Australia and how it’s changed over time.
I also want to give you a sneak peek of some research we haven’t yet published on intergenerational mobility. This goes to the important question: how much does who your parents are, go on to influence your life outcomes?
To finish, I’m going to give you a ‘fair go toolbox’ – a set of policy allen keys that can fit the inequality problem at hand.
A few disclaimers...
But first let me start with a few disclaimers, and as I’m an economist rather than a lawyer I’m going to put these right upfront rather than buried in size 6 font in a footnote.
1. Economic inequality is a surprisingly slippery construct
‘The rich are different to you and me’, writer F Scott Fitzgerald once claimed. ‘Yes’, said Hemmingway, ‘they have more money’.
At one level inequality is that simple: some people have more money than others.
But as I will come to, economic inequality measures can vary a lot depending on what we are measuring – do we care about income, consumption or wealth?
And there can be a range of worthwhile questions to ask:
- How are those doing it toughest faring?
- How much do the most well off – say the top 10% or 1% – have compared to others?
- Or how are resources distributed across the population as a whole?
Each can give us different insights.
And that’s before we even get to the question of how opportunities and outcomes change over a person’s lifetime, or vary by gender, age or for First Nations Australians.
So, to manage this complexity, tonight I’m going with the maximalists – or perhaps the Strettonist – approach. I will take you through a range of indicators and cuts of the data to give you a broad account of the state of play. But I also want to talk about what this actually looks like in people’s lives.
As Stretton said:
“I’m not sure that much valuable reform has sprung from high theory about the dynamics of distribution. More has come from ...competent accounting, summarising and insistent publication of the patterns of inequality… and the effects of those distributions on the quality of people’s experience in life.” 6
2. Be a sceptic
It is somewhat uncomfortable to say this as the leader of the organisation that prides itself on evidence-based, often data-driven, analysis. But in almost all data analysis we deal with imperfect data and are forced to make choices about how to address that.
In inequality research those choices can make a big difference to the story.
Very recently this challenge has jumped off the pages of academic journals and on to the front page of the Washington Post with the so called ‘inequality wars’.
On one side of the war you have famous inequality researchers, Thomas Piketty and Emmanuel Saez.
They have spent the better part of two decades analysing inequality, including by using American tax data to document a significant and growing share of US incomes flowing to the top 1%.
It’s rare to get rock star economists, but these guys are it.
(As an aside if you purchased but did not finish Piketty’s hefty Capital in the 21st Century back at the height of Pikettymania in 2011 you are not alone, on some measures it is the second most unfinished book on Kindle, after Hilary Clinton’s autobiography...). 7
On the other side of the war sit Gerald Auten and David Splinter – their names might not ring any bells.
These two relatively unknown tax code nerds come from the US Treasury Department and Congress Joint Committee on Taxation.
Using the same tax data as Piketty and Saez, they come up with the opposite conclusion: after tax, the share of US income going to the 1 % has barely moved since the 1960s.
Cue much triumph from some commentators and members of the press.
But beyond the simplistic discussions of Piketty and Saez being proved ‘wrong’ was the more nuanced truth – both sets of researchers had made a series of judgments around issues like how to estimate ‘missing money’ not included in tax returns, and how to attribute spending on health, education or defence across the population.
The appropriateness of each of these judgements is now the subject of further debate, but what is clear is that what might seem like technical judgments can sometimes have a big effect on conclusions.
In all the analysis I present tonight we’ve tried to be as robust and open as we can about any judgments made. But I encourage you to keep your sceptics hat on.
3. There will be graphs
I’m an economist, there will be lot of graphs this evening. But I’ll do my best to ‘use my words’ and hopefully we can avoid data overload.
Income inequality in Australia
Ok, let’s start with talking about the broad distribution of income in Australia.
I know it’s not always au fait to talk about what you earn in public, so I’ll ask you to do this exercise in your heads. I want you to think about whether you consider yourself to be a low-income earner, a middle-income earner, or a high-income earner.
Let’s see how you went.
Here’s the distribution of Australian taxable income. That is, the income before tax but after you’ve made any allowable deductions.
If your taxable income is over about $51,000, you earn more than 50% of Australians who lodge a tax return. If you earn more than $95,000, that puts you in the top 20%. If you earn $336,000 or above – you are the 1%.
A surprising number of people get this wrong. In fact, the vast majority of us consider ourselves to be ‘middle income earners’. 8 This is probably because the people we tend to live near and associate with are more likely to be in a similar tax bracket to us.
This is presumably why every year or so high earners from the media and political class kick off passionate debates about whether $200,000 is really a high income 9 – while, I suspect, the 97 % of Australians earning less than that amount just roll their eyes.
If we move to looking at using disposable income – that is income after tax and transfers – for an average Australian household, we can see that incomes have risen over time.
This is generally what we have come to expect, that outside of short dips during major economic shocks, income growth will continue its long march upwards over time.
And how has this growth been distributed?
The answer is relatively equally across the population in recent decades.
Indeed, in the 30 years between 1989 and 2019, income grew pretty consistently across the income distribution. Those in the top 10% experienced slightly higher growth than other groups, but nothing like the strong growth in income inequality seen in the US that dominates much of our inequality discourse.
In contrast, the COVID period and its aftermath has seen greater dispersion with incomes at the top growing rapidly and those at the bottom going backwards.
The reasons are complicated, but reflect the roller coaster ride of lockdowns and recession, increases and withdrawals of government supports, and the healthy bounce back and high inflation that followed.
As you can see, the three years of the COVID period actually reflect three quite different inequality dynamics.
At the start of the COVID 19 pandemic, government-imposed lockdowns caused drastic declines in economic activity and widespread job losses. 10 In response, the Australian Government provided substantial support, which cushioned the economic harm across the community.
The effective doubling of the JobSeeker payment, and the flat $1500 per fortnight JobKeeper payment for workers in eligible businesses 11 produced high income growth for those at the bottom and middle of the income distribution.
As the economy re-opened, supports were withdrawn, those gains were reversed.
And despite the strong economy and labour market, high inflation meant real wages went backwards for most workers over the past two years.
In contrast, high income households benefited from rip-roaring growth in business income as well as decent investment income, as the economy recovered.
Overall, and barring any further major shocks, we can probably expect the next few years will bring a return to a more ‘normal’ income growth and certainly to the more consistent patterns seen across the distribution observed in the pre-COVID era.
It is also interesting to reflect on how we compare to other nations.
Egalitarianism is tied up with Australian identity. We are the land of the ‘fair go’, a place where your taxi driver, your boss, and even the Prime Minister can all be safely referred to as your ‘mate’.
But does the reality match the mythology?
Not entirely.
Australia’s income inequality is ‘middle of the pack’ by rich-country standards. Comparing based on the Gini coefficient – a measure of overall inequality – Australia is close the OECD average.
Overall, we not as unequal as our friends in the US and the UK, but nor are we as egalitarian as the Nordic countries.
One important reason for these large cross-country differences is differences in tax and transfer policies.
For example, the US starts relatively unequal, but by no means the most. But because they redistribute income less, they end up the most unequal of Western nations. 12 In contrast, Finland has close to US-levels of inequality before taxes and transfers. After, it is one of the most equal nations in the OECD. 13
These are important differences that highlight a point I want to come back to: policy choices matter to inequality.
But now we have a snapshot of how Australians across the distribution have fared over time and relative to elsewhere, I want to turn to another important part of the inequality story: outcomes and opportunities for the most disadvantaged.
Poverty in a rich country
It’s almost 40 years since Bob Hawke declared that no child would live in poverty by 1990. 14
But, according to ACOSS, one in eight people lived below the poverty line in 2019-20, including one in six children. 15
This measure of poverty looks at relative income poverty – it’s set at 50 % of the typical Australian household disposable income, less housing costs.
Some argue it is better to look at absolute measures (for example, the amount of money required to be sure a household can achieve a basic standard of living) or indicators of material deprivation.
For example, amongst low-income households in 2019-20, 16% were unable to raise $500 for something important, 8% were unable to heat their homes, and 7% went without meals. 16
And it’s that sense of precariousness that pushes the impacts of poverty from the material to the mental. And those impacts can have a long tail.
As journalist Rick Morton writes about his own childhood growing up in a poor household: 17
I saw Mum’s daily, sometimes hourly, battles to stay solvent. I saw how hard she worked and what it did to her body and her mind. The stress of even thinking of it now is difficult to explain. It is built not only into my own mind but also in my flesh. The things I will do to avoid the feeling today. The things I try to do for Mum to make it so she never has to feel it again.
The biggest risk factors for poverty are: being on JobSeeker or Parenting Payment. 18
Policy and poverty remain inextricably linked.
Wealth inequality in Australia
Of course economic differences are not just found in incomes. Wealth or how much money you have ‘behind you’ is an important determinant of outcomes too. Wealth is a buffer – it can be converted into future consumption opportunities and provides a sense of financial security.
That is why we understand the pensioner who owns their home and has $250,000 in the bank is in a materially different economic position to the single part-time worker who records a similar $30,000 income but has few assets.
Wealth has grown significantly in Australia in recent decades.
I remember in primary school the shorthand for someone really, really, rich was a ‘millionaire.’ The average Australian household is now more than halfway to that benchmark. Indeed, a person that owns a typical house outright in Clarence Gardens is a ‘millionaire’. 19
Wealth overall is much less evenly distributed than income.
If we take a household at the 90th %ile for wealth, they have almost 70 times as much wealth as the Australians at the 10th %ile. For income the figure is only four times as much.
Wealth also has much greater extremes.
In his 2013 book on inequality, Battlers and Billionaires, Parliamentarian and economist Andrew Leigh provided a memorable analogy, which I have updated today:
Imagine a ladder on which each rung represents a million dollars of wealth. If we were to put all Australian households on this ladder 50% of us are about halfway to the first rung, the top 10 % are about 1.5 rungs up, the top 1% are reaching for the fifth rung – just high enough to clean the gutters. 20 Gina Rinehart is more than 11kms off the ground. 21
But even with this very long ladder, Australia’s wealth inequality is lower than many other OECD countries. 22
But an important question is how has the distribution changed in recent decades?
The answer is: it’s complicated.
Pre-pandemic, wealth grew faster for the top half of the distribution.
But the pandemic once again, produced some surprising results.
This pattern flipped and wealth grew more quickly overall and significantly faster for lower and lower middle wealth groups during the COVID period.
The two main reasons for this are:
- The strong growth in housing prices, particularly in the regions and the smaller capital cities. This had the biggest impact for homeowners in the lower middle and middle parts of the wealth distribution.
- Higher income from increased government support during the pandemic and fewer opportunities to spend, helped boost bank balances and debt repayment among low-wealth households. 23
And while this is good news for many households at least in the short-term, the longer-term run-up house prices has produced a different set of inequality concerns.
A decaying dream? House prices and inequality across generations
Here I want to stop and reflect on the different ways in which the very strong growth in house prices has impacted economic outcomes for different groups in Australia.
Until the 1990s, house prices broadly tracked growth in incomes. But between 1992 and 2018 they grew at almost three times the pace on average. 24
The effect has been an increase in the upfront barrier to home ownership and increasingly also the ongoing costs for those that are able to clear that hurdle.
The result, unsurprisingly, has been falling home ownership.
In the early 1980s, when my parents were buying their first home, around 70% of those in their early 30s owned a home. Today that figure is just 50%. And the drops have been particularly acute amongst low-income young people. 25
The declining opportunities for homeownership are a particular source of dissatisfaction and unrest amongst many non-homeowning younger Australians. Amongst the so-called Generation Z non-homeowners, 93% want to own their own home. But only 63% think it is likely that they ever will. 26
The rise in house prices has also contributed to rising generational disparities in wealth accumulation.
Older households have always had more assets on average than younger ones. But the run up in house prices has created windfall gains for existing homeowners. This has been a major contributor to the rapid growth in wealth among older households.
A household headed by someone aged 65-74 had on average $1.3 million in assets in 2016, up from $900,000 for the same age group in 2004. Rising asset prices over the past seven years mean this figure is almost certainly substantially higher now.
In contrast, the wealth of households under 35 has barely moved in 15 years. And poorer young Australians have less today than poorer young Australians did 15 years ago. 27
Overall the developments in the housing market over recent decades have left many, particularly many older Australians, very well off. But the cost has been considerable housing stress amongst the vulnerable, and a generation of younger Australians who will reach middle age with substantially lower rates of home ownership than their parents.
Land of the fair go? Social mobility in Australia
Now I want to move from the photo to the movie: from talking about disparity in economic outcomes at a point in time to talking about how these outcomes can evolve over someone’s life.
A question that has rightly been of interest to those concerned about inequality, is how does inequality in outcomes influence equality of opportunity. ;Or to be more specific – how much are economic opportunities determined by who are our parents are?
Generational mobility has historically been a hard thing to study. To understand its dynamics we need linked data on parental economic outcomes and those of their children over a long duration.
In the absence of this type of data, at least until recently, people got creative.
In one of my favourite studies, Parliamentarian Andrew Leigh alongside co-authors Gregory Clark and Mike Pottenger, identified rare surnames in the 2014 electoral roll among doctors and university graduates from 1870. They found, nearly 150 years later, that people with those rare surnames are more likely to be in the so called ‘elite’ professions than people with surnames such as Smith.28
Indeed, they found that so called ‘status persistence’ for surnames was as high in Australia as for England or the United States. 29
In somewhat brighter news, more recent studies using linked administrative data point to a more optimistic picture on social mobility in Australia.
Looking at economic outcomes for a million individuals born between 1978 and 1982 Economists Nathan Deutscher and Bhashkar Mazumder find that Australia is one of the more economically mobile advanced economies. 30>
Indeed, they find Australia’s ‘intergenerational elasticity of income’ (a measure of how much your family’s income affects your own) is similar to Canada and close to those of the Nordic countries, and considerably more mobile than places like the United States. 31
In forthcoming work the Productivity Commission uses family-linked tax data that confirms that estimates of intergenerational mobility remain comparatively high.
But in contrast, things may be stickier for those doing it toughest.
In a 2017 study, Professor Deborah Cobb-Clarke and her co-authors showed that young people are 1.8 times more likely to need social assistance if their parents have a history of receiving social assistance themselves. 32
Consistent with this, the Productivity Commission’s forthcoming work shows that people in their late 20s whose parents received social transfer payments were about one and a half times more likely to receive social transfer payments themselves.
The Cobb-Clarke work showed that these transmission effects were particularly pronounced for disability payments, payments for those with caring responsibilities, and parenting payments for single parents. Interestingly, disadvantage stemming from parents’ poor labour market outcomes was much less persistent. 33
Cobb-Clarke and her co-authors posit that parental disadvantage may be more harmful to children’s later life outcomes if it is more strongly driven by circumstances rather than personal choice.
This aligns with the growing appreciation by economists of the impact of lack of hope or despair in shaping life choices and outcomes. 34
This was the sentiment expressed by a Tasmanian woman on welfare supports: 35
It’s not so much what we are missing out on, it’s the next generation and it is a hard cycle to break because they look at it and think, well, what’s the point? We’re always going to be poor, things are hard, nothing’s going to get better. Why should we bother?
Schools under stress: a red flag for future mobility?
One of the foundational supports for economic mobility is a strong education system.
Indeed, educational attainment has been estimated to explain up to 30 % of the transmission of economic advantage between parents and children. 36
Australia has historically had a strong system of school education that has supported opportunities across the population.
But there are some red flags for future prosperity and mobility that we should heed.
Indeed, despite growing funding in recent years, Australia’s school system has not been delivering the results we want for our young people.
Data from the OECD suggest that the performance of Australian school students in Reading and Maths is going backwards, with significant falls in our levels of achievement since 2000.
Estimates based on this data suggest the average Australian Year 10 student in 2018 was eight months behind in reading compared to where Year 10 students were at the turn of the century, and results have largely flatlined since. 37 We’ve seen even sharper declines in mathematics scores, where the decline for Year 10 students by 2018 was almost a year of learning.
But how much does parental background make a difference to how students fare?
The answer is a lot. More than half of the most economically disadvantaged 15-year-old students in Australia are not proficient readers.
Analysis from the Grattan Institute shows that the disparity in outcomes was worse in Australia than in Canda or the UK and on par with the US. 38
These gaps in performance widen through the schooling process.
The Productivity Commission looked at this using NAPLAN data. 39 We compared the average reading outcomes of students whose parents did not finish high school to those whose parents have a bachelor’s degree or higher. We found the learning gap – equivalent to almost two years of reading achievement in Year 3, progressively widens to an almost 5-year learning gap by the time students reach Year 9.
For mathematics, the gap widens from 1.3 to almost 4 years.
If we take education as an indicator of both a country’s future economic prosperity and its social mobility – this data must concern us.
It has been pleasing to see senior leaders, including here in South Australia, engage with this issue and its implications. But turning the ship around will require significant shifts in the way we deliver education in Australia.
A nation divided: why mixing matters for mobility
Another less obvious mobility-enhancer is where we grow up, and more specifically, who we grow up with.
US economist Raj Chetty and co-authors made a splash in 2014, when their study using administrative records on the incomes of more than 40 million children and their parents found very large variations in social mobility across the US. For example, they estimated a child from the poorest 20% of families had nearly a 3 times better chance of making it into the top 20% of income earners as an adult if they lived in Silicon Valley rather than Charlotte North Carolina. 40
In a later paper, Chetty and another co-author reinforced the importance of these neighbourhood effects by studying outcomes for families who moved to different parts of the Unites States.
They found that outcomes for children whose families move to a better neighbourhood improve the more time they spend there.
Indeed, every additional year in a ‘good neighbourhood’ sees that child’s outcomes converge closer to the average for that neighbourhood by about 4 %.41
And if you are thinking that this type of locational lottery could only exist in a place as unequal as the United States – think again.
Economist Nathan Deutscher has replicated this work for Australia. 42
And while the dipartites between regions are less pronounced here, we see the same convergence in outcomes, the longer a child is exposed to a ‘good neighbourhood’.
Deutscher finds that place matters most during the teenage years and suggests it might be ‘peer effects’ that explain locational differences in outcomes.
In other words, who you hang around with in those formative years makes a difference. Which may well be a validating result for any parent that has ever uttered the immortal phrase: “If Tanya jumped off a cliff, would you do it too?”.
This is consistent with more recent work that suggests it is economic connectedness – the capacity of low socioeconomic people to make friends with those from higher socioeconomic groups – that is the principal driver of social mobility. 43
And this is the very thing that gets lost as neighbourhoods and schools become more stratified and we participate less in social mixing opportunities. This means that observed declines in the types of activities that help build the social glue – from volunteering, to local sport, to attending church – over time might further erode social mobility.
What’s a policy maker to do?
Where does all this leave policy makers?
How much policy makers should seek to address inequality is not a straightforward question. It has been dissected by philosophers since Plato. And economists have been at intellectual fisticuffs over it for much of the past century.
Today, even the strongest advocates for greater equality will acknowledge that some inequality is inevitable and that it is important to maintain incentives for innovation and effort.
Many of the richest people in the world – Gates, Dyson, Musk – are innovators whose work has reshaped our lives. It is at least partly the ‘size of the prize’ available to successful innovation that drives the efforts and risks of would-be innovators and entrepreneurs.44
On a more relatable level, let’s think of the University we are at tonight. Would we expect students to flow through these gates to spend years of their lives learning about engineering or medicine or economics, and to work long hours while establishing themselves in their career, without some return for these efforts? In other words, incentives are important for growing the pie, even if they result in a somewhat unequal distribution of it.
On the other hand, even many of capitalism’s biggest cheerleaders raise concerns about the social and economic implications of stark economic dispersion.
Recently the IMF has warned that high inequality and especially poor social mobility can impact on long-term economic growth. 45 Others have shown that physical and mental health problems are worse in more unequal societies, predominantly due to the physiological stress of operating within a steep economic hierarchy. 46 And still others have linked rising inequality, or declining social mobility, 47 with the rise of populism as the ‘left behind’ lodge their protests vote against the so called elite.
All of this is to say that targeting inequality is complex. And while the ‘line’ across which inequality flips to doing more harm than good is far from clear, what is clear is that policy makers have a broad set of tools that can help push in their desired direction.
A policy makers’ toolbox
A few years ago, a group of high-profile economists organised an international conference on combatting inequality with a mission of engaging with the full suite of policy responses. 48
Their conclusion, although not revolutionary, provides helpful clarity: that the right policy response depends on why you care about inequality.
In particular, they draw a distinction between policies concerned with:
- outcomes for most disadvantaged – particularly for addressing entrenched poverty
- boosting opportunities for a ‘hollowed out’ middle class – a much greater concern in the United States than here, where, as we have seen, income growth has been broader based
- opportunity hoarding – or the way wealthy people might leverage their economic and political power to entrench their position.
The right policy tool will also depend crucially on whether policy makers are more concerned with equality of opportunity or outcomes.
Below is an adapted version of the taxonomy they created. It shows the breadth – and importantly the targeting of different levers that a would-be inequality buster might pull.
Now I do not advocate for all of the policies proposed. Indeed, whether any of these policies would be a good idea would require careful analysis of the costs and benefits in the particular context you might use them. There are probably good ideas that have been left out too.
But I did want to talk very briefly about four of the ‘biggies’ that I think really matter in an Australian context.
Growing the pie can mean bigger slices for all
Now in a presentation largely focused on distribution of the pie, I want make the case for making the pie bigger.
A cross-country and cross time evaluation suggests that growth is effective in reducing poverty. 49 Indeed, incomes for the bottom 10% are highly correlated with overall economic growth – a rising tide lifts some very important boats. We could put this beyond doubt for Australia by addressing some of the weaknesses in the current social safety net - a point I’ll return to.
The impact of higher economic growth on overall inequality is less clear. 50 But what is clear is that faster economic growth gives governments more room to support more generous welfare policies as well as other social spending on areas like education and health that particularly benefit those at the bottom and middle of the income distribution.
More generally healthy income growth can also support the political ‘buy in’ for these types of policies. 51
As for what governments can do to grow the pie – that would be a whole other lecture. But if the pie is of interest: ‘here’s one I prepared earlier’. My colleagues have published a comprehensive 1000-page guide for governments looking for ways to boost productivity and growth. 52
Fixing the housing mess
A functioning housing system is critical for improving our social and economic outcomes. Building more houses closer to jobs and amenities is needed to help younger and poorer Australians access the same opportunities as previous generations.
Australia’s population has grown strongly over the past two decades and will likely continue to do so. We can choose to push people out to the ever-expanding fringes of our cities or accommodate them through boosting supply in the inner and middle ring suburbs where most would prefer to live.
Allowing greater density in these areas not only expands supply but also boosts variety in housing choices, supporting more of the cross-socio economic mixing critical to social mobility.
After at least two decades of letting the ‘housing market frog’ slowly boil, there have been some positive steps from both Commonwealth and State governments to support the planning changes needed to boost supply. In particular, the Commonwealth government has offered incentives for states to target the construction of 1.2 million new homes over the next five years. 53
Similarly, moves to boost social housing are also a positive step, particularly where they’re targeted to those with the highest need.
Unfortunately, this new-found policy energy has come at the same time as the building industry faces challenges in ramping up.
But over time, if ambitious growth targets can be met, this could be a powerful shift in reducing inequality both within and between generations.
An education revolution?
School education is fundamental to supercharging opportunities for the next generation.
And while some of the problems our system faces are thorny, some of the solutions are surprisingly straightforward.
Our focus should start with getting the basics right – our schools should be supported and held accountable for delivering basic levels of literacy and numeracy. 54 My former colleagues at Grattan have called for a ‘Reading Guarantee’ – whereby governments would commit to ensuring at least 90 % of Australian students learn to read proficiently at school. 55
Supporting schools and teachers to deliver on these basics would require:
- making sure all teachers adopt evidence-based teaching practices such as phonics decoding for reading 56
- providing all schools and teachers access to a bank of well-sequenced high-quality curriculum materials 57
- reducing low value tasks for teachers to free them up to spend time on what really matters, 58 and
- providing better career paths to help schools attract and retain top teachers, and allowing top teachers to support and develop others in the profession. 59
Boosting social safety net
The Federal Government’s Economic Inclusion Committee just released its second report designed to inform the budget process.
Its lead recommendation remained unchanged from last year: to increase the rate of the JobSeeker and related income support payments.
The Committee finds that Australia’s unemployment benefits have been slipping further and further behind community living standards for two decades. 60
And while the recent 10% increase to Commonwealth Rent Assistance will provide much needed relief – as did the extra 15% in the last Budget – the Committee’s report demonstrates that the value of the payments has fallen significantly relative to average rents for the past 25 years. 61
Today, Australia’s payments to the short-term unemployed, including housing benefits, are the least generous in the OECD. 62
No single measure would do more to alleviate poverty than a material change in these payments.
What’s stopping us?
Partly it’s likely to be well-meaning concerns about the impact on incentives to work.
But consistent with previous work, the Economic Inclusion Advisory Committee finds that the negative effect on incentives is likely to be small, because current levels of the payment are so far below incomes from working. 63
Indeed, for those facing economic exclusion, higher income support payments may improve the capacity to search for and accept employment. 64
Second, is the cost. Moving as far as the Economic Inclusion Advisory Committee recommends on JobSeeker and related payments could cost up to $4.6 billion per year, 65 which is not straightforward for governments balancing a range of competing priorities. But as targeted interventions to address poverty go, there is very little waste.
Finally, there is the question of community support. Boosting Jobseeker payments rarely garners majority support across the population. 66 As I have previously argued, this is less a case of Australians being mean spirited and more about the grip of some persistent and unhelpful myths about welfare recipients. Your regular community service reminder tonight: the median Jobseeker recipient is a 45-year-old woman. 67
Finding our inner Stretton
And with that I want to wrap up where I began, with Stretton’s legacy.
Inequality is one of those topics where it is easy to simply revert to tired tropes, particularly off shelf ones from elsewhere.
Stretton encouraged us to look with curiosity and rigour, but also with an open heart. In doing so, everyone may take away something different from the numbers and analysis I have shared tonight.
To me, there are bright spots in the story. Australia has grown its income and wealth over several decades, and it has shared those gains broadly. Social mobility is relatively high.
On the other hand, many relying on payments are in poverty and the long shadow of that experience can be hard for children to escape. Our schools and suburbs are becoming less of a springboard for mobility. And we have made the Australian dream out of reach for a generation of young people.
Policy matters – there are many levers that governments can pull to make a difference to these outcomes. But it is up to Australians to decide which ones we want them to use.
Footnotes
- Munro, D 2016, ‘The House that Hugh Built, the Adelaide history department during the Stretton era, 1954-1996’, History of Education vol. 46, no. 5, p.634.. Return to text
- Ibid, p.631. Return to text
- Spoehr, J 2015, ‘Hugh Stretton: a great Australian public intellectual’, The Adelaide Review, 7 September. Return to text
- Davison, G 2018, ‘Watching a brilliant thinker stretching his mind’, Inside Story, 11 October. Return to text
- Spoehr, J 2015. Return to text
- Gibilisco, P and Stretton, H 2003, ‘A pragmatic social democrat: an interview with Hugh Stretton’, The Journal of Australian Political Economy, vol. 51, pp. 13. Return to text
- The Guardian 2014, ‘Can the Hawking Index tell us when people give up on books?’, 8 July.Return to text
- Hoy, C, and Mager, F 2021 ‘Why are relatively poor people not more supportive of redistribution? Evidence from a randomized survey experiment across ten countries.’ American Economic Journal: Economic Policy, vol. 13, no. 4, pp. 299–328.Return to text
- Hobman, J 2022, ‘EXCLUSIVE: 'It barely cuts it': Aussie finance guru exposes why $200,000 a year is NOT a big salary anymore - despite most of the country earning MUCH less - but not everyone agrees’, The Daily Mail, 14 July; Martin, P 2021, ‘Other Australians don’t earn what you think. $59,538, is typical.’ The Conversation, 8 June. Return to text
- Coates, B and Ballantyne, A 2020, ‘No one left behind: Why Australia should lock in full employment’, Grattan Institute. The unemployment rate surged from 5.2% in March 2020 to a peak of 7.5% in July 2020. ABS (Australian Bureau of Statistics) 2024, ‘Labour Force, Australia, Detailed, February 2024’. Return to text
- The Australian Government provided JobKeeper payments of $1,500 per fortnight to eligible businesses, which had to be paid to their employees, to minimise job losses and maintain employment and job attachment. AIHW (Australian Institute of Health and Welfare) 2021, ‘Australia’s welfare 2021: data insights’, pp. 84–86. The flat payment of $1,500 per fortnight meant some people – particularly part time workers – received more than their salary, while for others it led to a reduction in their salary. Treasury 2023, ‘The Australian Government Independent Evaluation of the JobKeeper Payment Final Report’, 28 September. Return to text
- Hasell, J 2023, ‘Income inequality before and after taxes: How much do countries redistribute income?’, Our World in Data Return to text.
- Ibid. Return to text
- As Prime Minister, Bob Hawke made the declaration in 1987, with the intention to reach the goal by 1990. Hawke, B 1987, speech delivered at Sydney, NSW, June 23rd, Museum of Modern Democracy: Election Speeches. Return to text
- Davidson, P, Bradbury, B and Wong, M 2023, ‘Poverty in Australia 2023: Who is affected’, Poverty and Inequality Partnership Report no. 20, Australian Council of Social Service and UNSW Sydney. Return to text
- ABS (Australian Bureau of Statistics) 2022, ‘Survey of Income and Housing 2019-20’, Australian Government. Return to text
- Morton, R 2020, On Money, Hachette Australia, p.18. Return to text
- Davidson, P, Bradbury, B and Wong, M 2023. Return to text
- ‘Clarence Gardens Adelaide - Greater Region, SA 5039’, https://www.realestate.com.au/sa/clarence-gardens-5039/, accessed 12 May 2024. Return to text
- Leigh, A 2013, Battlers and Billionaires: The Story of Inequality in Australia, Schwartz Publishing, Melbourne, updated according to Productivity Commission estimates using Melbourne Institute data (Household, Income and Labour Dynamics in Australia (HILDA) Survey, Release 22). Return to text
- Estimate based on data from AFR (Australian Financial Review), ‘Rich List 2023’, https://www.afr.com/rich-list, accessed 12 May 2024. Return to text
- Shorrocks, Lluberas, Davies and Waldenström 2023, ‘Global Wealth Report 2023’, Credit Suisse and UBS Global Wealth Databook. Return to text
- See Productivity Commission 2024, ‘A snapshot of inequality in Australia’, Research paper, Canberra, pp. 25-30 for a discussion. Return to text
- Wood, D 2023a, ‘Creating a Better Future for Generation Next’, Grattan Institute, Giblin Lecture, Hobart, 30 August 2023. Return to text
- Coates, B 2022, ‘Levelling the playing field: it’s time for a national shared equity scheme’, Grattan Institute. Return to text
- Susan McKinnon Foundation 2023, ‘McKinnon Poll: Understanding attitudes towards housing in Australia’, September, p.90. Return to text
- Wood, D 2023a. Return to text
- The authors define a set of elite ‘rare’ surnames in 1900 as those surnames where 29 or fewer people held the name in Australia in 2014 in the voting roll, and where someone holding that name graduated from Melbourne or Sydney universities 1870-1899. Clark, G, Leigh, A, and Pottenger, M 2020, ‘Frontiers of mobility: Was Australia 1870–2017 a more socially mobile society than England?’, Explorations in Economic History, vol. 76. Return to text
- Ibid. Return to text
- Deutscher, N and Mazumder, B 2020, ‘Intergenerational mobility across Australia and the stability of regional estimates’, Labour Economics, vol. 66. Return to text
- Ibid. Return to text
- Cobb-Clark et al., 2022, ‘Intergenerational disadvantage: Learning about equal opportunity from social assistance receipt’, Journal of Labour Economics, vol. 79. Return to text
- Ibid, pp.16-17. Return to text
- Case, A and Deaton, A 2020, Deaths of despair and the future of capitalism, Princeton University Press, Princeton. Return to text
- TASCOSS 2022, ‘Wellbeing First: A budget proposal to ease the cost of living and invest in the long-term wellbeing of Tasmanians’, 2023-24 TASCOSS Budget Priorities Statement, p.12. Return to text
- Breunig, R and Taylor, M 2023, ‘Success in life is tied to parental education. That’s why we need to track intergenerational school performance’, The Conversation, 14 February. Return to text
- Hunter, J et al. 2023, ‘The Reading Guarantee: How to give every child the best chance of success.’ Grattan Institute. Return to text
- Ibid, p.10. Return to text
- Productivity Commission 2022a, ‘Review of the National School Reform Agreement’, Study Report, Canberra. Return to text
- The authors found a child whose family is amongst the 20% most disadvantaged has a probability of ending up in the top 20% of income earners of just 4.4% if they live in Charlotte North Carolina, but 12.9% if they live in San Jose, in the heart of Silicon Valley. Chetty, R et al. 2014, ‘Where is the land of opportunity? The geography of intergenerational mobility in the United States’, The Quarterly Journal of Economics, vol. 129, no. 4, November, pp. 1553-1623. Return to text
- Chetty, R and Hendren, N 2018, ‘The impacts of neighborhoods on intergenerational mobility I: Childhood exposure effects’, The Quarterly Journal of Economics, vol. 133, no. 3, August, pp. 1107-1162https://academic.oup.com/qje/article/133/3/1107/4850660?login=false Return to text
- Deutscher, N 2020, ‘Place, peers, and the teenage years: Long-run neighborhood effects in Australia’, American Economic Journal: Applied Economics, vol. 12, no. 2, pp. 220-49. Return to text
- Chetty, R et al. 2022, ‘Social capital I: Measurement and associations with economic mobility’, Nature vol. 608, pp. 108-121. Return to text
- Deaton, A, ‘What’s wrong with inequality?’, The IFS Deaton Review, panellist introduction, https://ifs.org.uk/inequality/themes/whats-wrong-with-inequality/, accessed 19 May 2024. Return to text
- Cerra et al. 2021, ‘Links between growth, inequality, and poverty: A survey’, IMF Working Papers, Working Paper No. 2021/068. Return to text
- Wilkinson, RG and Pickett, KE 2009, ‘Income inequality and social dysfunction’, Annual Review of Sociology, vol. 35, pp. 493–511. Return to text
- Protzer, ESM 2019, ‘Social Mobility Explains Populism, Not Inequality or Culture’, Center for International Development at Harvard University, Working Papers, no.118. Return to text
- Pearson Institute for International Economics 2019, ‘Combating inequality: Rethinking policies to reduce inequality in advanced economies’, conference papers, October 17 to 18, Washington DC. Return to text
- Cerra et al. 2021. Return to text
- Ibid. Return to text
- Weisstanner, D 2023, ‘Stagnating incomes and preferences for redistribution: The role of absolute and relative experiences’, European Journal of Political Research, vol. 62, pp. 551-570. Return to text
- Productivity Commission 2023, ‘5-year Productivity Inquiry: Advancing prosperity’, vol. 1, Inquiry Report no. 100, Canberra. Return to text
- Productivity Commission 2022a, ‘Review of the National School Reform Agreement’, Study Report, Canberra. Return to text
- Hunter, J et al. 2023, ‘The Reading Guarantee: How to give every child the best chance of success’, Grattan Institute. Return to text
- Ibid. Return to text
- Hunter, J et al. 2022, ‘Ending the lesson lottery: How to improve curriculum planning in schools’, Grattan Institute. Return to text
- Productivity Commission 2022a. Return to text
- Goss, P and Sonnemann, J 2020, ‘Top teachers: Sharing expertise to improve teaching’, Grattan Institute; Gonski, D et al. 2011, ‘Review of funding for schooling: Final report’, Australian Government Department of Education, Employment and Workplace Relations. Return to text
- EIAC (Economic Inclusion Advisory Committee) 2024, ‘2024 Report to Government’, Australian Government Department of Social Services. Return to text
- EIAC 2024, p.62. See also Productivity Commission 2022b, ‘In need of repair: The National Housing and Homelessness Agreement’, Study Report, Canberra. Return to text
- EIAC 2024, p.54. Return to text
- EIAC 2024, pp.49-55. Return to text
- Ibid, p.55. Return to text
- EIAC, p.47. Return to text
- Wood, D 2023b, ‘The three myths that keep Australians in poverty’, The Sydney Morning Herald, 25 April. Return to text
- Ibid. Return to text
Acknowledgment
I would like to thank Productivity Commission staff especially Carmela Chivers, Sara Collard and the inequality team for their assistance with this speech. The speech draws heavily on their most recent work: A snapshot of inequality in Australia. All good ideas and analysis theirs – all mistakes my own.
