Think tank says Labor claims on income equality are wrong

The Australian, November 27, 2017

Income inequality in Australia is lower than 15 years ago and Labor’s claims that the gap is widening are wrong, the Institute of Public Affairs says.

A new report by the right-wing think tank argues Bill Shorten has been using misleading figures to claim inequality was at its highest level in 75 years.

The think tank argues his figures are based on the “highly inappropriate” data of pre-tax earnings and does not take into account the higher levels of tax paid by rich people and the levels of social welfare received by low- income earners.

Opposition Treasury spokesman Chris Bowen dismissed the report as “simply wrong” and a “failed attempt” to justify the policies of the Liberal Party.

IPA research fellow Daniel Wild said Labor’s inequality claims did not account for the impact of “tax and transfers”.

Mr Wild said data that took into account tax and social welfare, known as the “Gini co-efficient” measure, showed inequality was “broadly unchanged” over the past two decades. “Claims that income inequality is high and increasing in Australia are wrong. Income inequality is lower today than 15 years ago and is around the OECD average,” Mr Wild said.

“The best evidence suggests the claim that there is rampant inequality in Australia is false.

‘‘It is being used by some as a smokescreen to raise taxes and burden business with more red tape. Measures to reduce income inequality, such as higher taxes, typically reduce economic growth, job opportunities, and make everyone in society worse off.”

The report noted there were three main sources on inequality in Australia based on the Gini coefficient measure: the Australian Bureau of Statistics’ Survey of Income and Housing, the Australian Bureau of Statistics’ census, and the University of Melbourne’s Household Income and Labour Dynamics in Australia (HILDA) Survey.

“The ABS survey suggests income inequality has risen slightly over the past two decades, while the HILDA survey suggests it has decreased over the past 15 years, and the ABS census suggests it decreased between 2011 and 2016,” the report said.

The report noted the Gini coefficient measure did not take into account subsidised healthcare and education, which was used more by people on lower incomes. The IPA researchers also argued, while wealth inequality was higher than income inequality, it was still “extremely low” and the third-lowest in the world behind Japan and Belgium.

It used research by Credit ­Suisse to argue that only 11 per cent of Australians have a net worth below $US10,000, compared with 22 per cent in Britain and 35 per cent in the US.

It argued that public policy had been a contributor to wealth inequality as low interest rates had inflated the cost of housing.