The widening gap between rich and poor in Australia should be viewed as a new form of "systemic risk" endangering billions of dollars tied up in long-term resources projects, the nation's big miners will be told on Friday.
The results of rising resentment could also fuel violence and social discord and should be seen as a variable on par with other risk factors such as as climate change, global economic downturns, and changes in government policy affecting energy or taxation.
![Labor's Andrew Leigh says it is in the interest of mining companies to address rising inequality.](/web/20170310164256im_/http://www.smh.com.au/content/dam/images/g/q/b/p/5/9/image.related.articleLeadwide.620x349.guud5b.png/1489039110623.jpg)
Labor's assistant treasury spokesman Andrew Leigh, will use a keynote speech to the Minerals Council of Australia's tax conference in Melbourne to urge the big end of town to recognise that unfair societies end up being unstable ones. This wealth disparity could fuel populist disrupters such as Donald Trump and Pauline Hanson, or worse, making investments less safe.
"A high-inequality society is a highly unstable society," he says.
![The Mangueira 'favela' community in Rio de Janeiro, Brazil.](/web/20170310164256im_/http://www.smh.com.au/content/dam/images/g/q/o/5/i/l/image.related.articleLeadwide.620x349.guud5b.png/1489039110623.jpg)
"When assets in a society are distributed in a way that most people believe is unfair, it creates a form of systemic risk. You only have to look at places such as Latin America to see the tensions that arise when those in the Favelas don't feel they're getting their fair share."
The former academic economist will argue that too little emphasis has been placed by business on the corrosive sociopolitical effects arising from the loss of hope among those at the bottom of the income scale as they watch those at the top get richer.
And he will say this "economic" unfairness can lead to society-wide responses that put long lead-time capital investments at new risk.
"Just as no business today can afford to ignore climate change, human capital or social responsibility, so too no business can afford to ignore inequality," he will say.
"Compared with other countries in the advanced world, Australia isn't the most unequal, but we are among the upper third for inequality in the OECD."
Dr Leigh lists three factors contributing to what could become an unmanageable situation if allowed to continue.
The first is that wages for the top 10th of income earners have risen three times quicker than those of the bottom tenth, in just one generation.
Second, the aggregate worth of the richest 1 per cent, has doubled in that time, and for the top 0.1 per cent it has tripled.
And third, he lists the staggering statistic that just three Australians own as much as the bottom one million.
"Over the past generation, Australia has seen an increase in inequality on every meaningful measure," his speech notes say.
The Labor frontbencher believes miners have the greatest self-interest in restoring faith in the egalitarian dream because their projects often have multi-year and multibillion-dollar construction phases even before they get to the cost recovery and profit phases extending over subsequent decades.
"While other businesses often make an investment with the aim of turning a profit within a few years, your investments frequently span generations."
Despite economics often being derided as the "dismal science", Dr Leigh says economists including those within the big companies should instead see their role as maximisers of "happiness" or what economists call "utility".
"If you think that a dollar brings more pleasure to a battler than a billionaire, then you intuitively recognise the prime reason why policymakers should care about inequality. If you're a utilitarian, you should probably also be an egalitarian," he says.