Title page

Contents

Acknowledgements 4

Executive summary 5

1. Why investigate economic inequality in Australia? 9

1.1. What is economic inequality and why examine it again? 9

1.2. How to measure inequality - a policymaker's toolkit 11

2. Recent changes to inequality in Australia 15

2.1. Income inequality 15

2.2. Wealth inequality 27

2.3. Measures of potential and actual consumption 35

3. Income, transfers and consumption capacity by age 39

3.1. Variations in income and transfers across age groups 39

3.2. Measures of potential and actual consumption suggest less inequality between age groups 42

4. Income, transfers and wealth components by gender 46

4.1. Income snapshot by gender 46

4.2. Gender differences in transfer payments 49

4.3. Men tend to have more assets and debts than women 52

5. Inequality for Aboriginal and Torres Strait Islander people 55

5.1. Wellbeing encompasses more than income 55

5.2. Changes in income during the pandemic 57

5.3. Geography matters for Aboriginal and Torres Strait Islander incomes 59

5.4. Age and gender inequality within Aboriginal and Torres Strait Islander incomes 62

Appendix: Inequality measures and data sources 65

A.1. Equivalised measures 65

A.2. Calculating income 66

A.3. Data sources 66

References 68

Table 1.1. Inequality measures toolkit 11

Figure 1.1. Illustrative example of inequality measures 13

Figure 2.1. Income growth accelerated leading up to the pandemic 16

Figure 2.2. Income inequality declined at the start of the pandemic, but then increased in the recovery 17

Figure 2.3. Percentile ratios also suggest inequality decreased early in the pandemic, before increasing in the recovery 18

Figure 2.4. Income growth was weak for the bottom few deciles over the pandemic period 19

Figure 2.5. The effects of COVID-19 on households varied across the distribution 21

Figure 2.6. Taxes and transfers significantly reduce income inequality 24

Figure 2.7. Most transfer payments go to lower-income households 25

Figure 2.8. Disaggregating government cash transfers into categories 25

Figure 2.9. Aged-related transfers are the largest type of transfers 26

Figure 2.10. Wealth has increased significantly in recent years 27

Figure 2.11. Average wealth increased for all deciles throughout the pandemic 28

Figure 2.12. Wealth inequality was stable but declined recently 28

Figure 2.13. Wealth grew faster for the bottom half during the pandemic 29

Figure 2.14. Wealth grew strongly across different components 30

Figure 2.15. Housing wealth has become more equally distributed in recent years 31

Figure 2.16. Superannuation inequality has been declining 32

Figure 2.17. The household savings rate rose during the pandemic 34

Figure 2.18. Income and wealth are not perfectly correlated 35

Figure 2.19. Calculating wealth-adjusted income 36

Figure 2.20. Wealth-adjusted income is distributed more unequally than disposable income 37

Figure 2.21. Expenditure is more equal than income 38

Figure 3.1. Disposable income is highest for those aged between 45 and 54 40

Figure 3.2. People over 65 receive far more government transfers than any other age group 41

Figure 3.3. Older people have higher wealth levels 42

Figure 3.4. Economic wellbeing of older cohorts depends on how much wealth people are assumed to deplete by the end of their lifetime 43

Figure 3.5. Wealth-adjusted income indicates that older age groups are better off than income suggests 44

Figure 3.6. Across age groups, expenditure does not always track income 45

Figure 4.1. Women have less disposable income than men across all income deciles 47

Figure 4.2. Women are under-represented in the top income deciles, although there has been some improvement over time 49

Figure 4.3. Women receive more government transfers than men, particularly family-related payments 50

Figure 4.4. The proportion of women who receive government transfers has declined over time 51

Figure 4.5. A lower share of women receive family payments now compared to 10 years ago 52

Figure 4.6. The superannuation gender gap opens early, and never closes 53

Figure 4.7. Men have more personal debt than women 54

Figure 5.1. Aboriginal and Torres Strait Islander people's incomes grew - and fell - more sharply than the Australian average across the COVID-19 years 59

Figure 5.2. Remoteness affects Aboriginal and Torres Strait Islander incomes 60

Figure 5.3. Not all remote areas fare the same 61

Figure 5.4. Aboriginal and Torres Strait Islander incomes rose and fell sharply in the COVID-19 period, especially in very remote areas 62

Figure 5.5. The Aboriginal and Torres Strait Islander gender income gap is lower than the gender income gap for all Australians 63

Figure 5.6. Younger Aboriginal and Torres Strait Islander people are earning more than older people 64

Boxes

Box 2.1. Economic conditions changed rapidly throughout the pandemic 19

Box 2.2. What happened to the bottom decile in the tightening labour market? 22

Table A.1. Datasets used to measure economic inequality 66

Appendix Boxes

Box A.1. How to calculate equivalised measures 65