We're all worse off if the rich get richer while the poor get poorer

This article was published in The Sydney Morning Herald 20 October 2010

It has become unfashionable to talk about rising inequality in Australia. The mining boom is delivering untold riches, we are told, so shut up and let's enjoy the sunshine.

And yet, there are warning signs. In pockets of south-western Sydney, mortgage-holders struggle to meet payments. In the bush, farmers fight tooth and nail against water buybacks. Around kitchen tables, families decry the rising cost of living, as if living itself were increasingly a burden too expensive to bear. How can we be a rich nation and cry poor so often?

The answer, of course, is that the benefits of two decades of uninterrupted economic growth have not been shared evenly.

There are many ways to measure inequality. One is to compare the income of the top 10 per cent of households against the bottom 10 per cent. On this measure (and including government transfers as income) the richest 10 per cent of households in Australia received

4.3 times the income of the poorest households in 2007-08 (the latest year for which Bureau of Statistics data is available). A decade before the multiple was just 3.77 times. And yes, this doesn't even begin to take into account inequality in wealth held in shares, super and housing.