The gap between the haves and have-nots in Australia is at a 20-year high

COVID-19 changed lives – arguably, in most cases, for the worse. The immediate and longer-term impacts of the pandemic brought loss of lives, lockdowns, isolation and ongoing physical and mental ill health.

However, it did have at least one positive impact. For a brief period, the pandemic reduced the amount of income inequality that exists in Australian households.

According to data from the latest annual Household, Income, and Labour Dynamics in Australia (HILDA) Survey, the government's raft of COVID support payments in 2020, the first year affected by the pandemic, led to a marked decline in inequality.

The HILDA Survey follows the lives of more than 17,000 Australians each year, over the course of their lifetime, and collects information on many aspects of life in Australia including household and family relationships, income and employment, health and education.

The latest HILDA survey was carried out in 2022 and illustrates that the Gini coefficient – which measures distribution of income and wealth amongst households – decreased from 0.304 in 2019 to 0.289 in 2020 – the lowest level recorded by the HILDA Survey since it began.

But in 2022, the Gini coefficient reached a record-high of 0.321.

Politics & Society

It’s getting easier to become a problem gambler in Australia

The way the Gini coefficient works is it measures how unequal the distribution of income is. If there is perfect equality and everyone has the same income, the Gini coefficient would be zero.

If a country has perfect inequality and one person has all the income, the Gini coefficient would be one.

The COVID effect on easing inequality was brief and since that reprieve, income inequality has reached the highest levels since the first HILDA Survey in 2002.

“COVID support payments reduced inequality a lot.

"But since then, we haven’t just returned to prior levels of inequality – we went screaming past that to record the highest level of inequality in HILDA’s 22-year history,” says Professor Roger Wilkins, Deputy Director of the  Melbourne Institute: Applied Economic & Social Research and HILDA Survey Co-Director.

A Gini coefficient of 0.321 places Australia in the middle of the pack of OECD countries – it’s not as high as the US or UK, but Professor Wilkins says it reflects a higher level of inequality than in most of continental Europe.

“It doesn’t launch us into extreme levels of inequality by international standards but it does reflect a fall in incomes for some Australians, while incomes for people at the top have risen quite strongly.

It’s hard to determine what has driven that situation,” says Professor Wilkins.

HILDA data also highlights that the median income fell between 2021 and 2022 ($AUD 62,195 to $AUD 61,863) but low earners were especially hard hit and saw their income fall further than the median.

Politics & Society

Life for single-parent families in Australia is harsh

Single parent families and older people have some of the country’s lowest incomes while non-elderly couples without dependent children have the highest incomes.

“Single parent families are in the lower income group and retirees over 65 also seem to have gone backwards,” says Professor Wilkins.

There have also been geographical shifts in income inequality.

In 2001, the mean income was highest in Sydney, followed by Melbourne and then Brisbane and Perth. The lowest mean incomes in 2001 were in Adelaide.

In 2022, the highest mean income was in Perth.

Also notable in the latest HILDA Survey is the poverty rate for total income of 13.3 per cent – also the highest since the survey began.

HILDA defines income poverty as having a household income below 50 per cent of median income.

Poverty rates vary wildly according to different family types. Single-parent families have an enduring high poverty rate, while older people have experienced the sharpest rises in poverty in recent years.

“We’re not exactly sure what is driving the rise for older people households.

"Interest rates were low in 2022 when data was gathered, which would have negatively impacted income from savings in bank accounts,” says Professor Wilkins.

Financial stress rates have remained constant and shown little increase, but Professor Wilkins adds that the latest HILDA Survey interviews were carried out between August and October 2022 – early in the current cost-of-living surge.

Business & Economics

Australia’s weather-related disasters are getting costlier

“People had also built a financial buffer – they couldn’t easily spend money during COVID lockdowns and they couldn’t travel so people accumulated savings, even if they were on a low income. 

“Rises in cost of living, rent and mortgage interest rates hadn’t bitten too hard as yet because people had a buffer,” says Professor Wilkins.

"However, there are hints of what we expect to see emerging in the next HILDA survey.

“There was a rise in the number of people asking for financial help from friends or family, and the proportion of people selling or pawning possessions because of a cash shortage also started to rise. 

“We expect to see financial stress increase in the next HILDA Survey, reflecting the state of flux we are currently in.”