Australia: Inequality and Prosperity and their Impacts in a Radical Welfare State

Australia has been subject to wide-ranging economic reforms. Inequality increased between the 1980s and mid-1990s, mainly reflecting poor labour market outcomes. Household incomes grew slowly, although the tax and social security systems became more effective at reducing inequality. Then up to 2008, real household incomes grew at the second highest rate in the OECD, with a median household being more than 50 per cent better off at the end of the period. But the richest households did even better and inequality increased at a more rapid rate; this reflected large increases in capital incomes concentrated among high income groups, reinforced by developments in the tax and social security system that reduced their effectiveness in combating inequality trends. The social impacts of rising inequality show complex patterns and arguably deteriorated more in the earlier period of slow income growth and some may have improved in the period of rising inequality.