Gross Domestic Product (GDP) is the most widely used measure of a country’s economic performance and wealth. This number shows the total value of all goods and services produced within a country. It is a global measure for gauging the prosperity of nations. The GDP is often divided by the population to obtain a Per Capita GDP. But this is not an accurate measure of a particular individual’s wealth within that country as GDP is not distributed equally across the entire population.

The Gini coefficient, an internationally accepted measure of income distribution, can provide a truer picture of how wealth is spread across a country. This index shows the inequality of income or the inequality of wealth in a particular group e.g., a community or a country. Understanding the difference between income and wealth inequality helps explain the nature of inequality in Australia and what can be done about it. 

The Gini coefficient is expressed as a value between zero and one. Zero represents maximum equity and one means maximum inequality e.g. wealth is concentrated within a small group of people.

ABS Survey of Household Income and Wealth Australia Financial Year 2019/20 data released May 2022.

Gini coefficient for Australia

Disposable Income

0.324

Gross Household Income

0.436

Household Net Worth

0.611

The distribution of disposable income is approximately 50% more equitable than the distribution of household net worth.

Wealth inequality can be considered a more revealing measure than income inequality as it accounts for assets such as a business, home, savings or investments, that often provides a fuller picture of a person’s wealth opposed to their annual income.

It would appear the gap between rich and poor is not predominantly due to income inequality but because of differences in accumulated wealth. Inherited or accumulated wealth provides a ‘springboard’ to earn more income and increase wealth. The gap can become generational due to family support through life for student loans, help with home deposits and inheritance.

In Australia the widening of the wealth gap has been highly influenced by the increase in house values. Those who bought homes when they were affordable compared to those who are now shut out of home ownership. In Australia, the richest 10% of households have an average of $6.1million and almost half of all wealth (46%).

After analysing data from the World Inequality Database (WID), The Australian Institute revealed earlier this year that the bottom 90% of Australians only received 7% of economic growth per person since 2009. This is a reversal compared to the long-term trend from 1950 – 2009. The Australian Institute identify “stagnating wages, insecure work, soaring profits and an unfair tax system” as widening inequality.