The wealth of Australia’s top 200 richest people is equivalent to almost a quarter of the country’s gross domestic product (GDP), and researchers warn that if trends continue, wealth disparity will soon destroy any remaining vestiges of equality in Australian society.
Research from the Australia Institute released on Tuesday found that the wealth of the ultra-rich will more than triple over the past 20 years, from 8.4% of Australia’s GDP in 2004 to 23.7% by 2024, with the top fifth of households holding 146 times more wealth than the bottom fifth.
The report found that growth in capital gains – an increase in the value of assets, mostly generated by the already wealthy – is starting to outpace wage spending, which has only been suppressed by the 2008 global financial crisis and the 2020 COVID-19 pandemic in the past two decades.
Meanwhile, rising living costs are hitting the poor and low-income earners hard, as they struggle to buy basic goods and services while the wealthy benefit from rising asset values.
The report said landlords raising rents and energy retailers inflating prices to make profits for shareholders are two examples of how inflation impoverishes low-income earners and increases the wealth of the already wealthy.
The researchers argued that there is no way to solve the cost of living and housing crises without addressing the wealth gap that is at the root of inequality. “The political barriers to making this change will be significant, but if the problem is not confronted, the country will be stuck in a spiral of ever-widening inequality,” the report said.
David Richardson, a senior research fellow at the Australia Institute and one of the report’s authors, said Australia needed new ideas and policies to address rapidly growing wealth inequality.
“Australia is becoming increasingly unequal,” Mr Richardson said. “It is harder to realise our collective potential and grow the economic pie when millions of Australians are forced to fight for the crumbs that fall from the tables of the wealthy.”
The report said tax reform targeting capital gains and personal wealth is essential to address growing inequality because these things “provide cumulative benefits to a minority in society while making life harder for the majority”.
Australia’s current system of capital gains tax exemptions and reductions, and the absence of a wealth tax more generally, means the burden of funding the country’s public services falls most heavily on ordinary wage earners, who cannot afford higher taxes.
The report finds that a simple 2% annual wealth tax on the wealthiest 5% of households could raise billions of dollars in federal revenue and significantly improve the federal government’s ability to deliver services to the vast majority of people.
“Widening economic inequality is making the lives of millions of Australians worse off and holding back the country’s development. Institutions such as the International Monetary Fund have shown how economic inequality tends to reduce a country’s economic growth,” Mr Richardson said.
“Failing to appropriately tax wealth and capital gains is neither ethically nor economically justifiable. Bold policy action is needed to combat growing inequality and raise billions of dollars in public revenues currently being lost.”
