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Economic Inequality in Australia

David Donnison discusses the phenomenon of increasing income inequality, which has led to declining standards of living for a significant portion of Britain’s population. The author claims that the widening gap between the rich and the poor has introduced challenges regarding access to basic health care for most Britons (Donnison 2013, p.1). The sustained economic growth in Australia for the last twenty years has led to an increase in earnings in various sectors, which has translated into improved average income in the country. Although Australian low-income earners have experienced a 3 percent annual growth in their earnings on labour, the country has had an expanding income inequality from around 1995 (Greig & Lewins 2003, p.103).

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Reports on the evaluation of the top income earners in Australia illustrate that the group owes a significant portion of the national income. Income inequality in Australia has largely been a factor of capital earnings rather than labour inequality, which has been on a decline since 1999 (Tiffen & Gittins 2004, p.139). Increase in employment opportunities for Australian low-income earners has helped to offset the increase in wages for the top-income earners (Jamrozik 2009, p.73).

Economic analysts agree that the inclusion of capital and other income in the calculation of households’ income skews the distribution of income and offsets the reduction in income inequality due to increased wages for low-income earners. Direct government taxes and payments have played a crucial role in reducing income inequality in Australia because the taxes on top income earners contribute to the benefits and services provided to the low- income earners (Salverda 2014, p.115).

Although the tax and transfer system in Australia has played a key role in reducing the tax burden on the poorest of the population, the alteration on the income inequality due to the differences in investment income between the top-income earners and low-income earners remains a factor of concern. There is the need for the Australian government and concerned stakeholders to shift their focus on tax and transfer systems towards facilitating access to public services in health, education and other sectors, which will help to increase opportunities for personal and professional development. ABS report on the distribution of wealth and income in Australia illustrates that 20 percent of Australian wealthiest households has a household net worth about 68 times the household worth of the poorest 20 percent. On the other hand, 20 percent of Australian wealthiest have a disposable income net worth about 5 times the disposable income of 20 percent of the poorest (Stilwell & Jordan 2007, p. 87).

David discusses the importance of responsive social security measures to address basic needs such as access to health for low-income earners. He highlights the importance of government intervention to cushion low-income earners from the costs of accessing basic needs. Australian welfare programs constitute of income support, supplementary payments, accommodative tax and transfer systems (Chenoweth & McAuliffe 2012, p.121). The age pension for Australians above 65 years exempts worker from contribution to the kitty. The pension scheme focuses on maintaining the standards of living of the retired people and is subject to testing to establish capital earnings of the applicants. While the average wealth for the old people is likely to be high, the group’s earnings on labour are lower than the income for young people.

Youth allowance for Australian students, apprentices and job seekers between 16 and 24 years has been pivotal in addressing the income inequality due to capital earnings because the young people have not accumulated funds to allow them to acquire assets to generate additional earnings. The inequality in wealth distribution in Australia arises because accumulation of wealth occurs over time. As people grow older, they accumulate significant disposable income to allow them to acquire assets and enhance their capital earnings (McLean 2013, p.49).

Disability support pension to help individuals who cannot work due to long-term disabilities to pay for necessities such as healthcare counters the effects of lost earnings. Austudy Payment contributes to the educational expenses of Australians above 25 years to improve their access to opportunities such as employment. Supplementary payments include rent assistance and pharmaceutical allowances, which support non-homeowners and costs of prescription drugs respectively. The design of the Australian welfare system focuses on minimizing the costs of living for the low-income earners giving them an opportunity to improve their capital earnings (Mendes 2003, p.149).

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The concept of inequality in Australia is a distinct aspect in that it largely relates to discrepancies in wealth accumulation unlike the general case of income inequality in Britain. Accumulation of wealth occurs over time making the redistribution of wealth a challenging task in addressing the inequality on capital earnings. The most Australia reasonable approach is enhancing access to opportunities and funds to facilitate the accumulation of assets. The Australian government has adopted programs to assist investors through provisions of grants, training, project facilitation and exports. Australians can exploit the programs to improve their capital earnings, which would help to minimize the inequality in wealth distribution.

Reference List

Chenoweth, L & McAuliffe, D 2012, The Road to Social Work and Human Service Practice, 3rd edn, Cengage Learning Australia, South Melbourne. Web.

Donnison, D 2013, Some ideas for reversing Britain’s gross inequality. Scottish Review. Web.

Greig, A & Lewins, F 2003, Inequality in Australia, Cambridge University Press, Cambridge, UK. Web.

Jamrozik, A 2009, Social policy in the post-welfare state: Australian society in a changing world, 3rd edn, Pearson Education Australia, Frenchs Forest, N.S.W. Web.

McLean, I 2013, Why Australia prospered: the shifting sources of economic growth, Princeton University Press, Princeton, NJ. Web.

Mendes, P 2003, Australia’s welfare wars the players, the politics and the ideologies, University of New South Wales Press, Sydney. Web.

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Salverda, W 2014, Changing Inequalities in Rich Countries: Analytical and Comparative Perspectives, Oxford Scholarship Online, Oxford. Web.

Stilwell, F. J & Jordan, K 2007, Who gets what? Analysing economic inequality in Australia, Cambridge University Press, Cambridge. Web.

Tiffen, R & Gittins, R 2004, How Australia compares, Cambridge University Press, Cambridge. Web.

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