A new poll by Essential Research has revealed that Australians greatly underestimate the level of wealth inequality. And while most voters are somewhat confused over what policies will best reduce it, a majority see the ALP’s policy of stopping negative gearing as being an effective way to tackle the issue.
One of the more common mistakes is to confuse income with wealth. It’s not surprising, given we talk of people with high incomes as being wealthy, even though someone with a low income can have a high amount of wealth. The problem is wealth (otherwise known as “net worth”) is essentially a stock, while income is a flow – income looks at what your earn each year, wealth looks at the total value of your assets and debt regardless of when you gained them.
And the reality is because of house prices increases over the past decade the wealth of those in the top 10% has increased by much more than has their income. The income of those in the 90th percentile grew by 32% while they saw their net worth go up by 62%:
It means that wealth inequality is actually much greater than income inequality. And perhaps not surprisingly (because it is easier to gauge income than wealth when you think of someone’s occupation) we greatly underestimate the disparity of wealth in this county.
Essential Research has polled 1,069 people and found that we are much more likely to underestimate how much of Australia wealth is held by the top 1%:
Nearly two-thirds of people believed that the wealthiest 1% held as much of Australia’s wealth as that held by the bottom half of all households. A plurality believed the top 1% held only as much as that combined by all of the bottom 10% of households:
In reality the top 1% holds as much wealth as the bottom 70% of all households:
The underestimation of the wealth inequality was across all ages, party supporters and income levels, although LNP supporters were much more likely to underestimate the level of wealth held by the top 10%. Eighty one percent of LNP voters underestimated the level of wealth held by the top 1% compared to 67% of Greens voters and 65% of those who support the ALP:
Not surprisingly then, after being told that the top 1% hold as much wealth as the bottom, 70% LNP voters were the least supportive of wealth inequality being a high priority – 29% compared to 59% for ALP and Greens voters:
With this split in belief of the need for action also comes a divergence over how it should be tackled.
Essential Research asked about three ways to reduce wealth inequality – through raising Newstart, raising the minimum wage, or stopping negative gearing on investment properties.
All those surveyed across all genders and political support favoured either raising Newstart or the minimum wage above stopping negative gearing:
And yet while raising either Newstart of the minimum wage might help income inequality, both measures would have little impact on wealth.
Because most of Australians’ wealth is held in home ownership, that – and not income levels – is the biggest cause of wealth disparity.
In 2015-16 the median income of households who owned a house and had paid off their mortgage was roughly the same as that of renters, but their levels of wealth differed by a factor of 13:
It is why concerns about home ownership are not just about wealth inequality, but our retirement system. The current trajectory is for those currently in their 40s to be less likely to retire owning a home than any generation before them:
And a report by Anglicare last year found that taxation concessions based around home ownership and investing are vastly weighted towards the wealthiest. It estimated that $1.7bn worth of negative gearing tax concessions got to the top 20%, while just 0.3bn went to the bottom 20%.
Similarly the top 20% took in 82% of the total benefit from capital gains tax concessions compared to a 2% share going to the bottom 20% of households:
The Essential Report survey highlights the lack of awareness most of us have about the level of wealth inequality that exists, and also our confusion over what policies are best suited to dealing with it.
The ALP, as it heads to the election, will draw strength from the knowledge that most voters do believe stopping negative gearing will be effective to some degree at reducing wealth inequality:
But for most voters the confusion around income and wealth inequality remains. Ironically, this may be an advantage for the ALP given its policies generally are geared towards reducing both. It may be that their voters are not too choosy – and are happy so long as inequality is being reduced in some form.
• Greg Jericho is a Guardian Australia columnist