The rich getting richer ... again

THE 2008-09 financial year - when the global financial crisis took hold - was a bad one for Australia's rich.

As share prices dived, markets froze in fear and everyone's wealth shrank, the top 1 per cent of income earners saw their share of Australia's total taxable income slashed from 10.1 per cent to 8.6 per cent.

But the following year, 2009-10, was better at the top. Calculations by economist and Labor MP Andrew Leigh show that - even after tax accountants had done their best - the top 1 per cent of earners declared 8.9 per cent of all taxable income in Australia. This was almost twice their share 30 years ago.

Dr Leigh, who was a professor at the Australian National University before entering politics, presented his findings this week to the annual conference of the Economic Society. He argued that the widening gap in income distribution offended Australians' sense of ''a fair go''.

His findings, based on Tax Office data, show that in 2009-10:

■The top 0.1 per cent of adults (17,500 people) earned at least $650,823 each - 3 per cent of Australia's income.

■The top 1 per cent (175,000 people) earned at least $194,365, and almost 9 per cent of all income.

■The top 10 per cent (1.75 million people) earned at least $78,375, and 31 per cent of all income.

Dr Leigh said many economists thought inequality did not matter, dismissing it as ''the politics of envy''.

But he argued that many people showed ''a preference for equality'', seeing balanced income distribution as ''a public good''. Inequality also had practical implications, he said.

His data shows that inequality was most extreme in the 1920s, when the top 1 per cent earned 11.4 per cent of taxable income.

Largely due to government policies, the inequality shrank steadily over the next 50 years to a low of 4.6 per cent in 1981-82, when Malcolm Fraser was prime minister and John Howard was treasurer.

By the end of the Hawke-Keating era in the mid-1990s, the share of the top 1 per cent had rebounded to 7.2 per cent. It climbed to 10.1 per cent before the GFC broke its rise.

The richest 10 per cent claimed 35 per cent of all individual incomes in 1941-42. Their share shrank to 25 per cent by 1978-79, then rebounded to 32 per cent by 2006-07.

This article The rich getting richer ... again was originally published in The Sydney Morning Herald.