Opposition leader Bill Shorten's assertion that inequality is ever-rising – which he says warrants tax hikes on the rich – is "patently false", Melbourne Institute of Applied Economic and Social Research deputy director Roger Wilkins said.
Professor Wilkins told the Economic and Social Outlook Conference that the Australian Bureau of Statistics data on which Mr Shorten based his claim that inequality is at a 75 year high is distorting and incomplete because its methods have changed over the years.
The data shows the personal income share of the top 1 per cent of Australians growing steadily from 4-6 per cent in the 1970s to 8.2 per cent in recent years.
Mr Shorten is using this data to assert that the case for dramatic policy interventions in tax and spending to reverse rising inequality has become irresistible.
But Professor Wilkins said the data for the incomes of the top 1 per cent was flawed because the Australian Bureau of Statistics (ABS) had changed its method of collecting this data, and the picture it painted was "valid" but at odds with other more reliable data.
"The ABS data would normally be the go to data source but the ABS has had a proclivity to change its methods over time and making it difficult to ascertain what true trends in in inequality are," Professor Wilkins said.
Terrible for ascertaining trends
"It would be fair to say they are getting better at measuring inequality – they are more accurate in recent years than they were in earlier years – but those improvements are terrible for ascertaining trends," he said.
Professor Wilkins said he preferred to look at ABS data showing the Gini coefficient (a measure of inequality) for household disposable income, and the Melbourne Institute's Household Income and Labour Dynamics Australia (HILDA) survey data for the Gini coefficient for household incomes.
"They're not exactly telling same story but what ... they both show since global financial crisis is that if anything inequality is declining as conventionally measured.
"You might say inequality is still relatively high by historical standards for Australia. There's a case that it's something to be concerned about, the level.
Offsetting employment growth
"But a narrative that says inequality is ever rising is patently false from the available evidence that we have."
Professor Wilkins said the differences in the pictures from the data could be reconciled nby looking at the strong growth in employment and the distribution of employment across households, which he said had been "really important in offsetting the trend we see in this personal income".
He said the rising crescendo of public debate about inequality – which Mr Shorten has tapped into – was more likely explained by incomes flatlining since about 2012, after the mining boom collapse, as well as an echo of overseas debates.
US President Donald Trump and Britiish Labour leader Jeremy Corbyn have successfully tapped into concern about inequality in their countries – which is much worse than in Australia – to exceed expectations of their performance in elections.
The Economic and Social Outlook conference is jointly sponsored by The Melbourne Institute and The Australian newspaper.
