Quick questions on Income distribution and equity in Australia (QCE Economics Unit 4)

The Lorenz curve plots cumulative income (or wealth) share against cumulative population share, ranked from lowest to highest.

The Gini coefficient is the area between the Lorenz curve and the line of equality, divided by the total area below the line of equality.

ABS Survey of Income and Housing data (indicative, equivalised disposable household income):

The top 1 percent of households hold around 17 percent of wealth (Productivity Commission). Housing is the largest single source of wealth inequality.

Inequality reduces aggregate demand growth. Lower-income households have a higher marginal propensity to consume. Redistribution upward reduces total consumption.

Rates from 0 to 47 percent (including Medicare levy).

- Age Pension (~$30,000 per year for a single). - JobSeeker. - Disability Support Pension.

- 11.5 percent of wages in 2024-25, rising to 12 percent from 1 July 2025. - Reduces wealth inequality over time as low and middle-income earners accumulate balances.

Lower-income households have a higher marginal propensity to consume. Redistribution upward reduces total consumption.

OECD research finds that more unequal countries have slower long-run growth, controlling for other factors.

The 2022-24 inflation episode showed inequality dynamics: real wages fell for low- and middle-income workers; high-income capital owners benefited from rising profits and asset prices. This affected consumption patterns: durable goods spending fell sharply (mortgage holders), but services spending held up (higher-income households less affected by rate rises).

High inequality may reduce long-run growth through lower social mobility and lower demand growth.

Long-term unemployed face poverty traps that perpetuate inequality.

Stronger wage growth for lower-income workers (minimum wage rises) supports demand but can add to wage pressure.

Higher-income households have larger carbon footprints; equitable transition policy is needed.