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Yes, the Rich Are Getting Much Richer

We knew it was happening didn't we? The rich are taking a bigger slice of the pie --- but it's only the very top earners doing well, everyone else is relatively less well off.
According to the ABS's Household Income and Income Distribution data, in 2007 20 percent of the population accounted for 40.5 percent of all income, up from 37.3 percent back in 1995. Back then the top 20 percent of the population earned $2,461 per week, 10.6 times the income of the lowest quintile. By 2007 the gap had risen to 11.8 times.

Translated to annual incomes, one in five Aussie households in 2007 was getting by quite nicely thank you with almost $205,000 per year, while another one in five was struggling on a little over $17,000.

This graph shows how since the mid nineties, it really is only the top quintile that is increasing its relative wealth. I indexed each income as a proportion of average income, to see how each bracket moved relative to the average over the period. You can see that every category except the red one (the fifth quintile) has moved below the index point of 100 (from 1995-6).

Notice how the fourth quintile has performed as badly as the lowest income group. This fourth quintile earned $71,000 per year in 1995 --- 1.24 times the average wage --- up to $101,000 in 2007, 1.18 times the average wage, and half the income of the next category.

If you wondered why house prices were continually on the rise, here's part of your answer. One in five people are racing further ahead in income terms, able to afford the top end of the market, which trickles down as they inflate the prices of investment properties.

The UN measures income equality using the Gini index, where 0 is a point of complete equality. Australia scores 35, showing more inequality than Canada on 32, but close to the 36 for Britain. The US scores 40.8, while many Northern European countries seem to have the inequity thing under control; Sweden (25), Norway (25.8), Finland (26.9), Germany (28.3), Netherlands (30.9).

Still, Sweden achieves this equity by having some of the highest taxes in the world. I can't see Australian politicians running down that road in a hurry, so perhaps the broadening divide is something we have to get used to. Stay out of certain parts of town and you probably won't even notice it.