Tag Archives: inequality

Campaigning for Concessions: Reflections on Success and the Bigger Picture

Some time ago, the environment group I worked for engaged in a comparison of the results of campaigning for the protection of land and habitat as against buying tracts of land for conservation. As I recall, the result was pretty stark – buying properties, even with the backing of big philanthropic money, saved far less land from environmental threats (e.g. land clearing, forestry, mining) than could be saved by campaigning to create national parks and/or to stop threatening processes. It was a crude consideration given the complexity of nature conservation, but on a dollar per hectare saved basis, it was not even close. At the time I felt lucky to be working in a campaign organisation.

Now I find myself working in a peak body for a service-provision sector, but I was reminded of those old debates when I reflected on this year’s South Australian state budget. Compared to the environment movement, the social service sector are not great campaigners. Mostly ours is a disempowered sector of professionalised service-providers who do not think in terms of public policy change. Much of what passes for campaigning (although the preferred term is “advocacy”) rarely goes beyond writing to Ministers or responding to government consultations.

A Concessions Campaign

Yet on occasions, I get to contribute to campaign approaches, and in 2021 SACOSS began a campaign to fix the system of South Australian government concessions. Concessions are government subsidies, rebates and payments to help those on low incomes afford essential goods and services, but as our initial State of Concessions report found, the system was fundamentally broken. It included unfair barriers to eligibility, and poverty premiums which meant that those on higher incomes often received greater support than those in most need.

Unlike most sector advocacy, our concessions campaign had a clear path from the beginning. It was not “whinge and pray” advocacy, or a belief that we just need more research and more facts to give to governments. We had a staged plan – what I have been known to call “a plausible path to victory”. It was basic text book stuff, and lots of such plans go wrong. Indeed, it was unusual that this one played-out fairly close to the text book version, but that does not make it magical or unreplicatable.

We began with the research and report showing that the system was broken, but rather than letting the evidence speak (or not), we used the 2022 state election to seek promises for a government review of the system. That was an exercise in publicity and political engagement, not policy. That done, we kept some attention on the issue to see the promise delivered, and then participated in the technical debates and influenced the direction of that review. The goal was always the 2024-25 state budget – a goal happily shared by an engaged Minister and department.

It was not all an inside game, or simply assuming the review would deliver. Given that the Minister was supportive, we directly lobbied other parts of government for funding of the outcomes to improve concessions. We did occasional media commentary to keep the issue in the public (or at least the politicians’) eye, and engaged in opportunistic advocacy in different government processes along the way. All pretty standard stuff, but always with an eye on the formal government process and the campaign strategy.

While the government review proceeded in 2023, we wanted to maintain external momentum – because government processes can bury, as well as facilitate, change. With philanthropic support, we hosted a community panel to consider the issues and feed into the review process. This was an exercise in participatory policy-making which garnered publicity and kept pressure on government, but also ended up substituting for the traditional top-down government consultation.

All up, it was not campaign rocket science, but nor was it mendicancy or reactive submission-writing.

The review resulted in a significant package of measures announced in the 2024-25 South Australian state budget, including:

  • a one-off payment of $243 to existing Cost of Living Concession (CoLC) recipients,
  • one-off discounts for children’s sports fees and school charges for low-income households,
  • doubling the amount of the annual CoLC payment to renters,
  • opening access to more concessions for asylum seekers and share-houses,
  • providing access to more concessions for those in waged poverty,
  • and increasing access and/or payments for some other specialised concessions.
Front cover of State Budget Overview

This amounted to an ongoing $60m increase in expenditure going to people on low incomes, and $130m in one-off payments. At the beginning of the campaign, I would have called $60m for those changes a significant win, even without one-off payments – which will themselves be useful short-term cost of living relief.

Reflections

All that said, these concession changes did not come simply because we campaigned cleverly. Often the best campaigns don’t succeed. While our campaign was broader and more sustained than much sector advocacy in our state, it was still mild and relatively small-scale. And of course we did not get everything we wanted. There were still holes in the government’s package which reflected, in part, our failure to get engagement from a couple of Ministers and departments. Further, the big one-off concession payments announced in the budget were not part of the review or our campaign – but the lasting changes certainly were.

Our campaign could well have come to nothing in different circumstances. Yes, we had the imprimatur of an election promise and a proactive Minister for Human Services driving the review, but the broader political economic context of a “cost of living crisis” was crucial. There was great pressure on the government to “do something” to address the crisis. And when the government needed to act, there was a set of responses where the policy leg-work had been done and could be easily implemented.

[I am sure someone once said that people make history, but not in circumstance of their choosing].

All campaigns need a measure of luck and the right environment, but in this case there was also a fortuitous and useful flow-on. With the government under pressure to address financial pressures on many households, the prior policy leg-work done by the department and prompted by the campaign meant that the government’s cost of living relief package was built around concessions. It was therefore targeted towards those on lower incomes who are likely to be hit hardest by the crisis. That stands in contrast to the federal budget where the energy bill reliefs were delivered to all and sundry, and the bulk of the tax cuts were delivered to – well, it is hard to be polite about the tax cuts, even in their revised form.

I don’t want to get too carried away about a small state-based campaign. Despite the $200m headline, state concession payments are still at the periphery of income distributions, and will make only a marginal difference to households. After all, income and income supports are primarily federal government responsibilities. However, the concession increases are still a win – a distribution from the treasury to those on low incomes. And importantly, I would argue that they will make far more difference to far more households than charity and service provision to what can only ever be a small minority of impacted households.

Bottom Line

It is not that service provision is not important, but the budget win on concessions did remind me of the importance of campaigning. It is why I want to scream every time I hear that I (or at least my money) can change the world “one child at a time” (with said child usually looking forlorn and helpless), or one animal or species (usually cute) at time, or one village at a time. That is the stuff of fundraising and marketing, not of political economy or social change.

Despite it being a hard slog with uncertain and often disappointing outcomes, campaigning for change is crucial because the bottom line is that to end poverty you need to redistribute wealth, not just provide counselling or relief services. To end domestic violence you need to change men’s behaviour, not just provide services to victim-survivors. To end racism, you need to address white privilege and power, not just provide better services to close a gap or support migrant communities.

Of course, we need to fund those services and supports, but we also need social change that will make those services redundant. That said, I know concessions are not revolutionary and systemic change. By definition, they are band-aids on an inequitable system – but the example still makes me (re)believe in campaigning and the possibility of bigger change.

Debt, Interest Payments and Choices: A Surprise in the SA State Budget

As we make our way through the first month of a new financial year, political economic debates are dominated by inflation, interest rates and “full employment”. But the discussion of interest rates is generally focused on their impact on inflation at the macro-level, and on mortgages and cost of living at the micro-level. The impact of interest payments on government budgets is usually noted in budget night commentary on the deficit/surplus scorecard, but promptly forgotten for the rest of the year.

However, an unusual occurrence (at least in recent times) in the South Australian state budget should serve to illustrate why interest rates matter to government and to the community. In 2023-24 the amount of government expenditure going to servicing state debt ($1,254m) will eclipse the budget for the Department of Human Services (DHS) ($1,148m). This difference grows over the forward estimates with the DHS budget subject to real cuts (low indexation and older operational savings) while interest payments increase substantially. By 2026-27, interest payments are predicted to be $1,684m, by comparison with a DHS budget of just $1,233m.

Column graph comparing SA State Budget expenditure showing interest payments increasing from 2022-23 to 2026, while DHS expenditure remains stable.

In practice, this means that we are spending more on debt repayments than we are on the Department that is the primary provider of support services for the most vulnerable and disadvantaged people in our state. That feels wrong – but apart from the shock value, does it really matter, or it is just a statistical coincidence with no budget or social impact?

A Debt Problem?

As I pointed out in SACOSS’ post-budget analysis, government debt and deficits are not necessarily a problem – and may represent important economic stimulus or long-term investment. And there is no suggestion that this level of debt in unsustainable, although the budget papers show that a 1 percent point increase interest rates in 2023-24 would equate to an extra $203m in service payments. That would obviously be a significant imposition on the budget, but even with the debt-to-income ratio rising, the government can clearly still maintain payments. However, if debt is unchecked or interest rates continue to rise, at some point interest payments either become unsustainable, or more likely, a significant constraint on budget spending in other areas.

In that sense, the comparison of interest payments and the DHS budget is important because it reminds us of the potential impact and opportunity cost of state debt. I am not suggesting that if we were not paying that money in interest, we would be spending it on human services. That would be wishful thinking! However, all government spending has distributional impacts, and interest payments are no different. The comparison with DHS expenditure simply serves to focus the interest payment discussion on inequality.

Debt, Interest Payments and Inequality

In providing concessions and emergency supports to those on low incomes, and funding charities to provide a range of other supports, the Department of Human Services functions to transfer money and resources from the budget to those most in need. By contrast, interest payments are a transfer from the budget to government bond holders – who, by definition, are those with excess cash to afford to lend money to the government (by buying bonds).

As Piketty has pointed out, (and [as ever] some of the concerns here come from my reading of his work) it is far more advantageous to those with capital to have public deficits and receive interest on their money than to have that capital taxed to balance the budget (Capital in the Twenty-first Century, p.130). So, in creating government debt we have already chosen to favour those with capital by borrowing rather than taxing their money and creating an ongoing flow to rather than from that capital.

Seen in this light, the contrast between the DHS budget and the amount going to debt servicing is an indicator of choices about government priorities – the choice to provide relatively less to the poorest in society (via government expenditure) than to those who are better off (via taxes foregone and interest paid out).

Caveats

Of course, as with everything in economics, it is not as simple as that. The initial use of borrowed capital may be used for things which support those on low incomes, and inflation may quite separately have a counter-balancing impact by undermining the real value of bonds and the interest payable on them. Further, bond-holders may not be South Australian residents and may therefore be outside the tax ambit of the state government. In that sense the taxing v borrowing from capital argument above is not about individual bondholders. Rather it is illustrative of the options of government in general and operates at the level of class: that is, the state government has options to tax local capital rather than borrow from capital in a national or global market.

To the extent that we can look at individual bondholders, it is also worth noting that, as Piketty points out, they are no longer necessarily the wealthiest people in society (as the super-rich can invest more lucratively elsewhere). ABS wealth statistics do not record bonds as a separate category, so it is hard to confirm this. However, it is clear that the low-inflation era of the first years of this century made bonds a safe investment for middle class superannuation and investment funds, so when we talk about bondholders it is likely we are talking about middle and above-average income earners (often via superannuation or investment trusts). In that sense, the DHS/interest payment comparison is not so much about rich vs poor, but about a form of middle-class welfare instead of a transfer to those in most need of the supports that a DHS might offer them.

Finally, there is another (non-taxation) route to balancing the budget and avoiding interest flows to capital owners. That is by cutting expenditure. However, cuts to expenditure (and therefore to services) usually impact disproportionately on the poorest people. Those with the fewest economic resources are likely to be most reliant on support services and have limited or no alternative options, so expenditure cuts usually also impact most on the poor. Further, it is notable that in this SA budget, government debt continues to increase even with operational surpluses from 2023-24 onwards, so balancing the budget is not simply done by cutting expenditure. However, there is little doubt that when government services are cut (the “austerity approach”) this exacerbates inequality, so if fairness or equality is a consideration in balancing the budget, we must ultimately return to revenue issues – and our preference for borrowing rather than taxing capital.

Why Debt and Interest Payments Matter

Budget deficits and surpluses matter, but not for the reasons often touted in economic commentary (“responsible government”, “living within our means”). They matter because they determine the level of debt, which in turn, within any given interest rate regime and revenue base, impacts on the money available to spend on services. And as interest rates increase, so too does the cost of servicing government debt. The choices made to borrow rather than tax capital increasingly manifest in a distribution of government revenue to the middle and upper middle classes rather than to those on the lowest incomes who would benefit most from government service provision.

The fact that the SA state government interest payments now eclipse spending on the Department of Human Services should make us think about government priorities and the need for a stronger tax base.

The Australian Inequality Index

The public policy think tank, Per Capita, has just released a new multidimensional measure of inequality, the Australian Inequality Index. The index combines various measures of inequality in seven areas: income, wealth, gender, ethnicity, disability, and intergenerational and First Nations inequalities. The measures are weighted and give a measure of inequality for each category, and for overall inequality.

Given my ongoing critique of the use of mono-dimensional and often misleading household income statistics as the primary measure of inequality, I welcome Per Capita’s initiative. In previous posts I have tried to develop consistent indicators of inequality in a number of similar areas, mainly in terms of shares of total income. However, the Per Capita inequality index is broader than simply income (or economics) and includes a range of social measures – something that makes its methodology bolder, and more fraught (more below).

Results

Because the Inequality Index combines different types of measures (for instance, gender inequality includes political representation ratios, crime victimisation rates, and the gender wage gap), it is difficult to get a common language and measure. Per Capita solves this partly by using indexes with values between 0 (perfect equality) and 100 (the furthest distance from equality). So, for instance, if wealth inequality was rates at 70, this would mean that the wealth of the highest income group would need to decrease by 70% for equality to be achieved. These index numbers are then tracked in each area (and combined) for the years since 2010.

The outcome is summed up in the graph below from the Summary Report. It shows stability in the immediate years after the GFC, followed by a bumpy decrease in inequality from 2013 to 2018, primarily due to improvements in gender and ethnic equality, and in some measures of equality for First Nations’ people. However, the first two of these indexes turned around late in the decade and, coupled with rises in income and wealth inequality, the index shows a resurgence in inequality.

Line graph showing the Inequality Index from 2010 to 2021, hovering just under 44 until 2015, declining to 40.5 in 2018 and increasing again to just under 44 by 2020.

Interestingly, alongside these index numbers, there is also an estimate of the time that it would take to reach equality – at the current rate of progress, and with a 1% per annum rate of catch-up. I have created the table below from the Index to sum up the key findings in each area of inequality.

Measure2021 Index NumberChange since 2010: Index PointsYears to Equality based on trend over last 10 yrsYears to Equality at 1% p.a. Catch Up
Income45.4-4.286 yrs45 yrs
Wealth64.47.7Never85 yrs
Gender21.0-9.818 yrs19 yrs
Intergenerational28.51.2Never29 yrs
Ethnicity45.9-4.137 yrs45 yrs
Disability63.416.8Never63 yrs
First Nations36.5-6.751 yrs63 yrs
Overall Inequality43.60.1361 yrs40 yrs

Statistical Issues in the Inequality Index

Given the Inequality Index was put together by a relatively small think tank rather than a government statistical agency, I think there are some minor anomalies in a few places, but this should not distract from the usefulness or ambition of the project. However, there is still devil in the detail.

The full methodology and assumptions have not yet been published, so what follows is based on the information in the Summary Report.

The bringing together of multiple dimensions of inequality requires weighting the relative importance of the various components – otherwise a few areas of harsh inequality potentially impacting relatively few people may overwhelm the index. Yet weighting is tricky: how do you weigh the relative importance of women’s political representation, with the gender wage gap – let alone those issues with rates of Aboriginal incarceration or numbers of people with disability reporting discrimination?

The process is inherently subjective, but all statistics are subjective in that their definitions reflect subjective or theoretical assumptions. The bigger question is whether the weighting and the subsequent index is statistically robust. That is, would the index or the trends be significantly changed by minor changes in the weighting or categories. I don’t have the data (or the statistical skill) to make that judgement, but I am prepared to take the Inequality Index on face value – not least because the important thing about indexes is not so much how they are constructed, but their ability to show trends over time. In some senses, as long as they capture key elements well enough it becomes more important to maintain consistency over time then to continually adjust to political nuances.

Broader Critique

The question then is whether the Inequality Index does actually capture the key elements of inequality well enough – and here I do have some questions and critique. For instance,

  • The income inequality data is based on standard measures household income, which I have argued previously are misleading as they fail to take account of housing incomes, social-transfers-in-kind, capital gains and capital income.
  • The intergenerational inequality index focuses on current differences between age cohorts in rates of poverty and intended retirement age. It is too easy to dismiss these as life-cycle effects, and to me, the bigger intergenerational issues are long-term: what sort of economy, infrastructure, natural resource base and environment are we bequeathing the next generation? Is the next generation going to be better or worse off than the current or previous ones at same point or overall in their lives? These aspects of intergenerational inequality are not considered in the index.
  • Both the ethnicity and disability inequality indexes are based on rates of reported discrimination and labour force participation, but there is no accounting for the income that comes from that participation (or not). I wanted to know the share of income and wealth held by those groups.
  • Similarly, the First National inequality measure has 12 different components, but not one relating to income.

There are all sorts of good reasons for the choices about what to include and leave out, including the challenge (or impossibility) of getting robust and continuous public data on some of the issues above. For that reason, my main critique of the Inequality Index is not the points above (although they remain important), but two areas where I think the issues are of a much greater scale – the omission of class and geographic inequality.

Class

Despite the Summary Report’s Introduction acknowledging the importance of Thomas Piketty’s work, the Index uses the very bald income quintiles which Piketty criticises, and it does not examine the top 10% and top 1% where Piketty sees inequality growing at its most obscene. More importantly, the distribution of (some) income across a stratified income spectrum arbitrarily divided into quintiles does not capture class inequality or the structural inequality of the distribution of income between labour and capital.

The labour share of GDP is a much more robust measure of class inequality, and one for which there is robust ongoing data. While capital and labour incomes eventually land (differentially) in households on the household income spectrum, so to do the wage differentials of the gender wage gap and the differing incomes of varying labour force participations of other groups. This is no reason to exclude class inequality or assume it is covered by household inequality. I would have liked to have seen class, measured by the labour share of GDP included as an eighth sub-index, separate to and alongside the household income data.

Regions

The other significant omission from the Inequality Index is geographic inequality. The Australian population, income and wealth is concentrated in a small number of cities, and the data is clear that residents of some states (SA and Tasmania in particular) and people in regional and remote communities have significantly lower average incomes than those in the capital cities.

Beyond simply income, geography matters in terms of inequality in access to services. Many services cost significantly more (e.g. telecommunications) or are simply unavailable in many regional areas. Differences in access to health, education and other services can be seen as inequalities in the social wage, but they also have direct impacts on quality of life and the sustainability of communities. To ignore the geographic dimensions of inequality is a major oversight in measuring inequality in Australia.

Conclusion

Despite these queries and critiques, I still regard Per Capita’s Inequality Index as a bold and important initiative – a significant step beyond the narrow and flawed income measures used in much inequality analysis. I hope that in time the Index can be revised to incorporate some of the measures noted above, but either way, if Per Capita can sustain the methodology and index, it will be a valuable tool for understanding whether (and where) we are becoming more, or less, equal.

However, any socio-economic index is a tool, not an end in itself, and I suspect the greatest challenge for the Index is not its construction but its use. There are other indexes (e.g. the UN HDI, the Genuine Progress Indicator, and most recently, Wellbeing Budgets) that also reflect multiple dimensions of equality and wellbeing, but they pale in comparison to the use and status of economic statistics like GDP, the unemployment rate and CPI. Those official measures are sometimes misused, misunderstood or politically dubious, but they dominate economic discussion. They do so, not because they are the best scorecards of well-being or economics, but because they are causal variables (within ruling economic theories) used in economic management.

Accordingly, to be truly effective, the Australian Inequality Index will need to be not just a scorecard, but an active instrument of policy. Whether it has the theoretical framework and the mobilising power to play that policy role remains to be seen, but it is a start to build upon– and given my statistical efforts at measuring inequality, I am slightly jealous!

Extended Income and Inequality: Different Data, Surprising Results

In a previous post, I suggested that the treatment of housing in the official income distribution data massively underestimates inequality. This is because it fails to account for imputed rent (the non-monetised value of housing services enjoyed by owner-occupiers) and for capital gains. My calculations in that post were illustrative of why this extended income was important (renters became relatively worse off, homeowners better off), but those illustrative calculations were not analysis of real data. What I wanted to see was an income spectrum which included monetary income, imputed rent and capital gains, but also including an imputation for “social transfers in kind” – that is, the receipt of public services such as education, public health care, child care subsidies as well as a range of rebates and concessions. From there, the standard income inequality questions could be asked to properly analyse inequality in this extended income.

Equals sign with diagonal line through it and the words "Inequality - not what you think" - which relates to extended income.

My Wish Granted

Since writing my original post, my attention has been drawn to the work of Yuvisthi Naidoo, from the UNSW Social Policy Research Centre. Her PhD and subsequent articles calculate many of the above changes (and more). She starts with standard household disposable income and adds values for net imputed rent and social transfers in kind to produce a measure of “full income”. She then converts household wealth into income flows in the form of imputed lifetime annuities (that is, an income equivalent to drawing down on capital to leave zero at the end of life). This is done for household financial assets to produce a measure of “potential consumption”, and then more controversially for owner-occupied housing to get “adjusted potential consumption”.

The incorporation of an income stream from wealth is important because it overcomes a fundamental problem in standard inequality data. Simply focusing on standard money income (and considering wealth separately or not at all) gives a false picture of which households have the most and least economic resources, and the gap between them. For instance, ABS data tells us that 24% of low-income households have moderate wealth, and 9.8% have high wealth, while 60% of households in the highest income bracket do not have high wealth, yet these households are ranked solely on income in most analyses.

The use of annuities to calculate income flows from wealth holdings is not the capital gains accounting I was envisaging: a simple capital gain = income equation. However, it incorporates capital gains into the base on which the annuities are calculated. For instance, in the annuities model, a $50,000 capital gain is not considered income of itself, but the annuity is calculated on the increased asset value and for a 20 year annuity would add $2,500 to the income stream. The annuities approach probably under-estimates the value of capital gains income to households, but it is a better overall accounting of capital wealth and income than simply capital gains – and is certainly better than the nothing in the usual income accounts.

Results

The table below shows Naidoo’s calculations for median household incomes at each step in the process. Surprisingly (to me) the overall result is that extended income is more evenly spread than disposable (cash) income. This is evident in the final column which shows the ratio of median income in the lowest income quintile to the median in the highest quintile decreases. When just standard money income is considered, those in the top income quintile average 4.2 times the income of those in the lowest quintile, but when extended income is considered (as “adjusted personal consumption”), this figure falls to 3.14 times.

Median Incomes $p.aIncome QuintilesRatio Q5/Q1
 Q1Q2Q3Q4Q5
Disposable Income18200300214046152923763994.20
Full income33259446445443865677894872.69
Potential Consumption339824653857763717471030023.03
Adjusted PC360585069362728790061131543.14

The reason for this more equitable distribution in extended income is the impact of social transfers in kind, the benefits of which flow disproportionately to lower-income households. The step from disposable income to full income (that is, the inclusion of net imputed rents and social transfer in kind) produces an 83% increase in income for the lowest income quintile, but only a 17% increase for the highest quintile. By contrast, the inclusion of wealth annuities only adds a further 8% to income in the lowest quintile, but 26% in the highest quintile – so (unsurprisingly) these capital incomes increase inequality.

Naidoo focuses on older-age households, and she goes on to investigate other measures, but for me the impact of government services in reducing inequality (and the quantification of that) is the first standout political point coming out of the analysis of extended income distribution.

However, equally important is the fact that there are different households in each quintile once we incorporate extended income. As I argued previously, the inclusion of imputed rents as income moves homeowners up the income spectrum while renters will be even more clustered among those with low incomes. But it is not just housing tenure. Naidoo’s research showed that nearly a half of all older people (65+) were in the lowest standard (money) income quintile, but the inclusion of imputed rent and social transfers in kind reduced that to 22.5% (because older Australians are disproportionately more likely to own homes and benefit from health services). By the time imputed wealth annuities were included in the analysis, only 17% of older people were in the lowest income quintile, while 26% were in the highest quintile (up from 7.1% when only disposable income was taken into account) (Naidoo, Appendix Tables C8-11) .

Implications

The data in Naidoo’s PhD is now dated (2010 HILDA income data), but the two key implications highlighted above are clear and remain relevant:

  • expenditure on public services has a major impact on reducing inequality, and
  • a more comprehensive income analysis changes who we see and understand as being on the lowest (extended) incomes, and potentially the most vulnerable.

The first point (and the quantification of that impact) is important because it not only makes a further case (beyond the direct health, education and other outcomes) for funding public services, but it may also add to our perception of tax-and-transfer policies. Progressive tax is usually understood as taxing high income earners at higher rates than those on lower incomes. This is a key instrument for limiting income inequality. However, the inclusion of social transfer in kind shows that spending this tax revenue on health, education and community supports is a further transfer from rich to poor.

That said, the second point above confounds the impact of progressive taxation. Since income taxation is largely based on money income, the amount of tax paid will depend partly on the type of income rather than the amount. Those with relatively higher cash incomes may pay much more income tax than those with significantly higher extended incomes but lower cash incomes. The money-based tax system does not follow households as they shift up and down the extended income spectrum and so some progressivity is lost (or mistargeted).

There are of course issue around taxing non-cash income as it would require a conversion of some wealth to cash to pay the tax. This itself may cause hardship – unless of course the wealth was maintained and simply taxed at realisation or end-of-life. Another argument for inheritance taxes – but I digress!

There is a further complication in the progressive tax story. A flat rate tax like the GST is generally regarded as regressive because it impacts disproportionately on lower-income households (who spend a great proportion of their income on GST-taxable consumption). While this is undoubtedly true, the fact that social transfers in kind disproportionately benefit those on low incomes, and that as a state tax the GST goes fairly directly to the provision of those services, provides something of an offset against its regressiveness – although this is probably only partial and not an argument for increasing or broadening the GST.

Finally, the movement of people up and down the extended income scale suggests that when we focus services and concessions on those in the lowest money (disposable) income brackets, we may in some cases be providing services and concessions to those who are relatively better-off, and missing out on people with fewer economic resources (just because all their resources are cash incomes). However, this is not as straightforward as the similar argument above about tax because in some cases it is the provision of concessions and services (i.e. social transfers in kind) which lifts households out of the lower income brackets. There may be a circularity in targeting based on extended incomes, but targeting services and concessions based only on money incomes is equally flawed.

The extended income analysis is not a policy panacea, but I think it does provide a better window on income distribution from which to do policy analysis.

Conclusion

My previous post asked for an analysis of inequality based on a broader understanding of income, one that combined income and wealth into one metric. Having now got data thanks to Yuvisthi Naidoo’s great work, I can see that my first estimate of increased inequality was wrong (because the impact of wealth inequality is offset by the progressive impact of social transfers in kind). But the analysis throws up a whole range of questions and challenges for progressive tax and transfer policies. The discussion above is only the beginning of an analysis, and it is fraught in an era when we must fight for even the basic principle of progressivity. In that sense, my take-home message from all this is: be careful what you wish for!

And yet …

I continue to believe that categories and statistics are socially/politically constructed, not neutral reflections of reality. Uncritically using definitions and statistics that are designed for other purposes or other theories limits our vision and the potential for change.

“Alarm Bells” or “Business as Usual” state budget

Today, Adelaide’s online newspaper, InDaily published an opinion piece from my boss, (SACOSS CEO) Ross Womersley. The piece is titled ‘Business as usual’ state budget won’t cut it, and is an analysis that basically says that SA’s economy is in trouble, and that we are becoming poorer as a community.

Cover photo and link to InDaily article "'Business as Usual' state budget won't cut it".

The article walks through the data that shows the state’s relative economic decline, and concludes that we need a 2023-24 state budget with a bold and interventionist approach, a budget that “provides a vision, strategy and, most importantly, investment on a new scale in industry and regional development, skills development (including raising levels of digital competency and inclusion), and population retention and attraction.” The alternative, as the conclusion makes clear, is decline and inequality.

It does not take a close reading of the InDaily piece to see echoes of my previous post on “Inequality Alarm Bells for South Australia“. It is ok. It is not plagiarism, or theft of intellectual property. More a ghostly presence at my workplace.

But remember, you heard it here first! 🙂