Obsession with inequality does little to help genuinely poor

Never has there been such fire and fury about something barely changing. The most comprehensive analysis of inequality in Australia, released yesterday by the Productivity Commission, shows income inequality fell a little since the financial crisis. Wealth inequality had risen slightly, but as house prices fall, that will unwind.

Inequality, of income or wealth, is far less noticeable here than in Britain, the US or even New Zealand, the commission found. Australian households, however you define it, are among the richest and highest earning in the world. You wouldn’t know it, though, given Labor bleating about how inequality has supposedly soared.

As plain-speaking commission chairman Peter Harris suggested yesterday in his final speech in the job, the obsession with inequality — hard to measure at the best of times — has distracted government from improving the lot of the genuinely poor.

Labor policies to increase tax on trusts, companies and high-income earners, for instance, might make some people feel good, but will do nothing to help the two million Australians whose incomes, despite an ever-growing welfare bill, are less than half the median of $45,000.

“After 30 years, simply shifting money around and doing more of the same is not sufficient,” Mr Harris said, pointing out some types of child poverty had risen in the past 20 years. A vague focus on reducing inequality justifies “almost any form of tax or welfare benefit, billion-dollar regional development boondoggle, or leap on the bandwagon of the new Trump protectionism”, he said.

Neither major party has genuine poverty reduction high on its agenda. New Zealand is more advanced, targeting its much smaller welfare bill on households that really need it.

Doing more of the same thing and expecting different results is considered madness, yet it’s a principle that still governs welfare policy in Australia.