Gap widens for mega rich

A 30-YEAR trend of rising inequality has continued with the rich boosting their share of Australian income significantly over the last five years, according to new research.

An analysis by Australian National University economist Andrew Leigh and Oxford University's Tony Atkinson shows the richest 1 per cent of taxpayers - those earning more than $197,000 - accounted for 9.8 per cent of all income in 2007-08.

That was up from an 8.8 per cent share of the nation's income which went to the richest 1 per cent five years earlier in 2002-03. It took the top 1 per cent of taxpayers' share of all income to its highest level since the 1950s.

The analysis shows the ''super rich'' - the top 0.1 per cent of taxpayers - increased their share of total income to its highest level since the 1920s during 2007-08.

These taxpayers, nearly 15,000 people with incomes of more than $693,000, earned 3.6 per cent of all taxable income in 2007-08.

That was up from 2.7 per cent in 2002-03 and took the share of income going to the super rich to its highest level since the 1920s, barring a one-off spike in 1950 at the height of the wool boom fuelled by the Korean War.

Professor Leigh said the latest analysis updated earlier research showing significant changes in income inequality in Australia over the past 80 years.

The income share of the richest taxpayers peaked in the 1920s before declining gradually until the early 1980s when it started rising rapidly.

He said the main reasons for inequality since the 1980s were the emergence of an international labour market for chief executives, technological change and cuts to the top marginal tax rate which had given high income earners more scope to invest in property and financial markets.

''It's not that the poor are actually getting poorer, it's just that they are not enjoying the same gains from growth that the top [income earners] are,'' he said.

There had been a similar trend of high income earners taking a larger slice of the economic pie in other English-speaking advanced economies like Britain, the US and Canada over the past 20 to 30 years.

But inequality had not risen as significantly in advanced economies in Europe, possibly because corporate executives without English language skills had not benefited as much from the global market for CEOs. Professor Leigh said the pay packets of CEOs at Australia's top 100 companies had increased twice as fast as those of ordinary workers between 1993 and 2009.

During that period, the earnings of CEOs rose by an average of 7.5 per cent annually. Salaries across the economy rose by an average of 3.7 per cent.

''In 1993 the average earnings of CEOs in the top 100 Australian firms was about $1 million. By 2009 this had risen to around $3 million,'' Professor Leigh said.

The analysis is based on statistics from tax returns and executive earnings surveys. It updates results published in 2003 to include the latest available tax statistics up to 2007-08.

That was just before the onset of the global financial crisis which might have put a dent in investment earnings.