Advance Australia Fair? What to do about growing inequality in Australia Report following a roundtable held at Parliament House Canberra in January 2014 Bob Douglas, Sharon Friel, Richard Denniss and David Morawetz Australian Wealth Inequality $2,500,000 $2,215,032 $2,000,000 Mean $1,500,000 Household Net Worth (2011-12) $1,000,000 $766,465 $437,856 $500,000 $191,207 $31,205 $0 Lowest 20% Second Third Fourth Highest 20% Source: ABS, Household Income and Income Distribution, Australia, 2011-12 Advance Australia Fair? What to do about growing inequality in Australia Bob Douglas, Sharon Friel, Richard Denniss and David Morawetz Published May 2014 by Australia21 in collaboration with The Australia Institute Australia21 Limited ABN 25 096 242 010 ACN 096 242 010 Email: [email protected] Web: www.australia21.org.au ISBN 978-0-9873991-7-5 The views expressed by the participants are their own and do not necessarily represent those of Australia21 ZOO 50497 or The Australia Institute. While the earnings of a minority are growing exponentially, so too is the gap separating the majority from the prosperity enjoyed by the happy few .... This imbalance is the result of ideologies that defend the absolute autonomy of the marketplace and financial speculation. POPE FRANCIS, Evangelii Gaudium 2013 The richest 85 people on the globe – who between them could squeeze onto a single double-decker bus – control as much wealth as the poorest half of the global population put together (3.5 billion people). OXFAM REPORT to the Davos Conference of the World Economic Forum 2014 Business and political leaders at the World Economic Forum should remember that in far too many countries the benefits of growth are being enjoyed by far too few people. This is not a recipe for stability and sustainability. In the years ahead, it will no longer be enough to look simply at economic growth. We will need to ask if this growth is inclusive. CHRISTINE LAGARDE, Managing Director International Monetary Fund 2014 3 Contents Foreword by Paul Barratt Chair Australia21 ..............................................................................................................................4 Foreword by Richard Denniss Executive Director The Australia Institute ........................................................................... 5 Executive summary .........................................................................................................................................................................6 The roundtable event ......................................................................................................................................................................8 Part A - What to do about growing inequality in Australia: Report following roundtable .................................................9 1. Definitions of inequality .................................................................................................................................................. 10 2. Inequality in Australia ..................................................................................................................................................... 11 3. Similar trends in inequality in other countries ............................................................................................................. 13 4. Causes of growing inequality ...........................................................................................................................................14 4.1 Dominant economic paradigm ..................................................................................................................................14 4.2 Inequitable and inadequate taxation ...................................................................................................................... 15 4.3 Decline in relative value of some government transfer payments ........................................................................17 4.4 Educational inequalities ........................................................................................................................................... 18 4.5 Thomas Piketty’s theory about capitalism and inequality ..................................................................................... 19 5. Adverse consequences of inequality .............................................................................................................................. 20 6. Benefits of intervening now to reduce inequality ........................................................................................................ 21 6.1 Restoration of greater personal autonomy, wellbeing and likely health benefits ............................................... 21 6.2 Improvements in social mobility .............................................................................................................................. 23 6.3 A more efficiently functioning economy ..................................................................................................................24 7 Policies to reduce inequality ............................................................................................................................................ 25 7.1 Promote a national conversation about inequality, its effects, and ways of dealing with it ............................. 26 7.2 Increase the fairness and adequacy of government revenue raising through taxation reform ........................ 27 7.3 Implement fairer funding reforms for schools ....................................................................................................... 28 7.4 Invest nationally in early childhood development, especially for disadvantaged groups ................................... 28 7.5 Set all pensions and benefits no lower than the poverty line and index them to average wages ...................... 29 7.6 Establish more job creation programs in priority areas ......................................................................................... 29 7.7 Develop new models of employee management and cooperative ownership of business ................................. 30 7.8 Implement the World Health Organisation recommendations on the social determinants of health ................31 7.9 Encourage an inquiry by the Productivity Commission into the impact of inequality on economic efficiency and growth ..............................................................................................................................32 7.10 Establish a national research program to monitor progress and test the impact of interventions aimed at reducing inequality ................................................................................................................................. 32 8 Conclusion .......................................................................................................................................................................... 33 4 Contents Part B - Comments by roundtable participants ...................................................................................................................... 35 Andrew Leigh - What can be done to address inequality? .............................................................................................. 36 Alannah MacTiernan - We must regain our egalitarian ethos .......................................................................................... 37 Ross Garnaut - Inequality in the dog days ........................................................................................................................ 38 Ross Gittins - The economic case for a more equitable Australia ................................................................................. 39 Alex Wodak - An Australia of gated communities is not a path we should take .......................................................... 40 Bob Gregory - Time for action on superannuation and negative gearing .......................................................................41 Richard Denniss - Political debate is broken and the beneficiaries are... ..................................................................... 43 Louise Tarrant - The pain of being on the lower rungs .....................................................................................................45 Matt Cowgill - A robust defence of social security is needed ........................................................................................ 46 Richard Eckersley - Job creation possibilities ...................................................................................................................47 Paul Smyth - Inclusive growth ............................................................................................................................................ 48 Geoff Davies - Collective ownership and rent/buy approaches ......................................................................................49 Martin Laverty - World Health Organisation recommendations on social determinants of health .......................... 50 Sharon Friel - Inequitable economic arrangements are bad for health .........................................................................51 Ian Maddocks - Addressing the needs of the elderly ....................................................................................................... 52 Vivienne Moxham-Hall - Addressing the needs of young people ..................................................................................