Olivia lives with the rare Kleefstra Syndrome.

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More inequality means more poverty

It is now widely accepted that inequality in Australia, and around the world, is getting worse. VCOSS and its member organisations are increasingly making the link between the growing incidence of poverty and disadvantage we see every day, and the increasing structural inequality that is a significant cause of it.

In the community sector, we are often very focused on the coalface of poverty: attending to the often desperate people who come to us for assistance daily. But poverty doesn’t appear from nowhere, and it is not the sole result of individual decisions. When the gains of economic growth and rising wealth are increasingly concentrated in the hands of a very few, there is less to meet the needs of everyone else, meaning people will be more likely to fall into poverty and lead diminished lives.

Some years after the Global Financial Crisis (which the rest of the world calls the Great Recession), policy-makers and economists are now starting to acknowledge and question the effects of increasing inequality across the world over the last 30 years. The focus comes as Thomas Picketty’s findings in his best-selling book “Capitalism in the 21st Century”, that in western countries levels of inequality are returning to 19th century heights after briefly dipping in the mid-20th century, sweep across the world.

In Australia, a spate of recent reports have also documented that rising inequality is affecting us here. The Australia Institute provided the startling statistic that the 10 richest families in Australia have more wealth than the 1,730,000 least wealthy Australians. Oxfam found that the wealthiest 1 per cent of Australians own more than the bottom 60 per cent and called for the issue to be put on the November 2014 G20 agenda. Recent data from the HILDA survey shows that inequality has resumed its upward climb in Australia after a brief dip following the Global Financial Crisis.

A recent Productivity Commission Report looked at what contributed to rising income inequality in Australia. It found that while wages were becoming more unequal, this had not contributed to income inequality at the household level – because low-income earners were working more, to overcome their lower wage growth.

Instead, the significant factors increasing inequality were capital income and the tax system. In other words, wealthy people were receiving more and more income from their assets, which wage-earners could not match. The second factor was changes in the taxation and transfer systems, particularly the series of tax cuts in the early 2000s. In essence, much of Australia’s increasing inequality has been driven purely by government policy.

The recent proposals in the Federal Government Budget will increase inequality in Australia. Most of its proposals are borne by low- and middle-income earners, reducing their incomes and increasing their living costs. Apart from a temporary levy on high-income earners, none of the existing extraordinarily generous tax concessions for superannuation, negative gearing, capital gains tax or private health insurance will be touched. This will further increase inequality in Australia, and will mean more poverty and more desperate people seeking help from community services. The Australian Senate is holding a Committee Inquiry into Inequality in Australia. This is a chance for the community to discuss the implications of rising inequality in Australia, and look at proposals that could reduce inequality and produce a more cohesive and fairer society.

All around us, community organisations see the human face of rising inequality; and see the growing numbers of homelessness, people experiencing financial crisis, rising levels of housing stress and increasing reports of family violence and child protection notifications. The tears in our social fabric caused by rising inequality are showing. Unless we work together to fix the underlying drivers of inequality – issues like a fair taxation system, a strong income support system, high quality free education and healthcare, and a strong and sustainable system of community services, Victorian inequality will continue to grow, more Victorians will find themselves homeless, in social conflict or financial crisis, and community services will be unable to cope with demand.