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A new report showed the top tier of income earners have captured disproportionate gains from Australia’s economic growth, leaving the rest behind and fueling a rise in wealth inequality described as being “on steroids”.
The Australia Institute’s latest research showed 93 per cent of the benefits of economic growth between 2009 and 2019 went to the top 10 per cent of earners, while low and middle-income earners — who comprise 90 per cent of Australia’s population — received just 7 per cent.
“Since the global financial crisis, there has been a fundamental change in the operation of the Australian economy,” the report stated.
The paper also highlighted that the share of economic growth going to the top 10 percent over that period was far higher in Australia than in other developed countries, including the US and Canada.
Concerningly, the paper noted that this phenomenon has been getting worse. Data revealed that in the post-war era, the lion’s share of the benefit of economic growth have been funneled to the top of Australia’s income recipients.
To reach these key findings, the report analysed the trend of Australian incomes through five distinct economic cycles, from the 1950s up to 2019, with each period starting with a recession or economic crisis and ending just before the next economic disruption or a “business cycle”.
Data showed there has been a complete shift in outcomes over those 70 years. While in the earlier periods, the bottom 90 per cent of income earners shared the benefits of economic expansion, with higher per adult incomes, their share has slowly decreased over time.
However, since the GFC, their share has been significantly reduced.
During the first cycle from 1950 to 1960, the majority of the benefits of economic growth went to the bottom 90 per cent of income recipients, but by the final cycle from 2009 to 2019, that phenomenon had reversed.
“Such an outcome has not been the norm over Australia’s post-war history. In all previous expansions, the bottom 90 per cent received at least 50 per cent of the economic growth, on a per adult basis,” the paper found.
The think tank’s report zeroed in on stagnating wages, insecure work, surging corporate profits and an “unfair tax system” as the culprits for the phenomenon.
The concerning data is expected to increase pressure on the Albanese government to reconsider the Stage 3 tax cuts before the next election.
The stage 3 tax cuts, due to come into effect in July 2024, are the third phase of the 2019 tax plan which was introduced by the then Prime Minister Scott Morrison.
Stage 3 removes the 37 per cent marginal tax bracket completely and lowers the 32.5 per cent marginal tax rate to 30 per cent. It also increases the threshold for the 45 per cent marginal tax rate, meaning everyone earning between $45,000 and $200,000 will pay the same 30 per cent tax rate.
Coming into the 2022 elections, Anthony Albanese promised no changes to what had been legislated. This stance on the tax cuts has not changed since the Albanese government has been elected.
But the Australia Institute had previously warned that the stage 3 tax cuts will make inequality even worse in the country.
“Stage 3 tax cuts mainly go to high income earners with those earning more than $200,000 receiving a tax cut of $9,075 per year, with CEOs, all federal parliamentarians and surgeons winning big,” the think tank has previously cautioned.
Meanwhile, it pointed out that people earning less than $45,000 will “get nothing from the stage 3 tax cuts, with aged workers, disability carers, bakers, hairdressers and minimum wage workers among those worst off.”
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