Andrew Leigh

My op-ed in the Australian today discusses the rise, fall, and rise of Australian inequality, why it sits oddly with our social norms, and what we might do about it - including through a revitalised Eureka legend.

Why both sides should celebrate Eureka, The Australian, 18 July 2013

One way of making the case for egalitarianism is to compare two sporting codes– English Premier League football and the Australian Football League. Of the last twenty EPL championships, Manchester United has won twelve. In the same period, no AFL team has won more than three premierships. There are structural reasons for this: the AFL shares television revenue, caps the salary bill, and runs a draft that gives lower ranked teams first pick of promising players. More redistribution makes AFL a more equal game – and a more interesting one – than EPL.

In Battlers and Billionaires: The Story of Inequality in Australia, I argue that egalitarianism has always been central to Australian national identity. Ours is a country that doesn’t like tipping, that prefers the word ‘mate’ to ‘sir’, and where we often sit in the front seat of taxis. If there’s another country that’s had central bank governors called ‘Nugget’ and ‘Nobby’, I’d like to know of it.

From egalitarian beginnings in the late-1700s, Australian inequality rose significantly during the 1800s. In that century, 4 percent of the population worked as servants, and the social fabric bore more resemblance to Dickens’ London than modern Australia. Inequality continued to rise into the early-1900s, peaking around World War I.

Then came the great compression. From the 1920s to the 1970s, incomes rose faster at the bottom than the top, and wealth came to be more equally distributed. Moguls were scarce – as one social commentator noted of the 1960s, the wealthy ‘feel under some pressure to be accepted by ordinary working Australians rather than the other way round’. By the end of the 1970s, Australia was one of the most equal countries in the world.

Over the past generation, this has slowly unravelled. Since the mid-1970s, real earnings for the bottom tenth have grown 15 percent, while earnings for the top tenth have grown 59 percent. In recent decades, the top 1 percent income share has doubled, and the wealth share of the top 0.001 percent has more than tripled. Australia is not as unequal as the United States or many countries in Latin America, but our current level of inequality places us in the top third of the OECD.

How might we seek to redress inequality? To begin with, it’s vital to maintain economic growth, because recessions tend to hit the poor hardest. Next, we need to do more to reduce educational inequality – the gap that sees a child from an affluent family performing three to four years beyond a child from a disadvantaged background. Equality of opportunity doesn’t mean making some competitors run with lead shoes, but it might mean buying a pair of runners for someone who can’t afford them.

It’s also worth recognising the role that unions play in reducing inequality, both within sectors and across them (as with recent pay equity cases). Because unions devote disproportionate attention to lower-paid workers, they act as a powerful bulwark against inequality. Allowing unions the freedom to organise is important in ensuring that inequality does not continue to rise.

We need to preserve our means-tested social safety net, which targets scarce public money to the poorest. Applying an assets test to the pension in 1984, or a means-test to the private health insurance rebate in 2012, was politically difficult. But such decisions are vital to ensuring that our welfare system is effective at reducing poverty.

We also need better evaluation of social policies, ideally through randomised trials. Right now, randomised trials are compulsory for new pharmaceuticals, but almost non-existent for new social policies. In both areas, better evaluation is likely to lead to better results.

Finally, we should preserve the egalitarian spirit that is so central to Australian identity. A belief in equality has been a golden thread through Australia’s history, even at times when the gap between rich and poor has widened. It is vital that egalitarianism stay at the core of our country’s ethos.

National identity is shaped by stories. Some are symbolic nuggets. Peter FitzSimons recounts the tale of a conversation with Bob Hawke, in which an insistent waitress twice interrupted the then prime minister in midsentence to take his coffee order. Only in Australia, FitzSimons thought to himself.

Our big national episodes matter too. I believe that the 1854 Eureka Rebellion – a collective uprising against oppressive taxation – should be reclaimed by both sides of politics as our driving legend. It recognises that hard-working entrepreneurs are vital to our nation’s success. And it tells of the willingness of protestors to join with their mates in a cause greater than themselves: a fairer Australia.

My main reason for writing Battlers and Billionaires is to raise awareness of our egalitarian spirit, and the significant increase in economic inequality over recent decades. Some readers will disagree with me that excessive inequality damages the social fabric. So long as we have a proper debate about the right level of inequality, I’m quite comfortable with this. What I fear is the prospect that we will sleepwalk into a more unequal Australia without realising what is being lost.

Andrew Leigh is the federal member for Fraser. His new book is Battlers and Billionaires: The Story of Inequality in Australia (Black Inc, $19.95).