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Chart 1 shows an index of real median household income based on ABS Income Surveys since 1981–82.For middle-income Australian households, income growth over the first decade was very low, with small gains in the late 1980s lost in the recession of the early 1990s.
Individuals or households at a particular point in the income distribution in one year are not necessarily the same as those who are at that level in other years.
Individual incomes are dynamic: even if most people are better-off than similar people in the past, individuals rise up and fall down the income ladder.
In the “disappointing decades” of the 1970s and 1980s, to use economist Bob Gregory’s label, real wages stagnated, unemployment increased fourfold and male full-time employment as a proportion of the population fell by 25 per cent.
Since 1991, by contrast, Australia has been one of the fastest-growing advanced economies in the world, enjoying twenty-one years of unbroken economic growth and largely escaping the global financial crisis, or the Great Recession as it is still known in Europe and the United States.
Chart 2 shows the pattern of growth for households at different points on the overall income distribution, ranging from households at the tenth percentile (where only 10 per cent of the total population have lower incomes) and for different decile points up to the ninetieth percentile (where only 10 per cent of the population have higher incomes).
Although the poorest households haven’t done as well as higher-income households, their real disposable incomes are now more than 40 per cent higher than they were in 1995.And individuals face risks over the course of their lifetime that can have a significant impact on their incomes.The Household, Income and Labour Dynamics in Australia survey, or HILDA, has tracked a sample of around 13,000 people in 7000 households every year since 2001.It shows how individuals experience a wide range of life events with potentially major implications for their economic status.Around 3 per cent of the population are fired or made redundant each year, for example.But the richest 10 per cent of Australian households had the highest real increase in incomes of any advanced economy, with the result that inequality grew quite rapidly until 2008.Since then, inequality has reduced a little for two reasons – the age-pension increase in 2009 boosted the incomes of the poor, and the income of lower-income working families grew more quickly between 20 than did incomes among higher-income households.As a result of these and other life events, around 3 per cent of the population have a major worsening in finances each year.Between 20, between 40 and 50 per cent of Australians experienced a drop in income, and roughly 10 per cent fell more than 20 percentiles in the income distribution.But it is fair to point out that many other countries had similar or worse experiences; real median incomes in New Zealand, for example, fell 15 per cent in the 1980s.As Australia’s economy started to recover from recession in 1995, median incomes began to grow, accelerating once the mining boom got under way in 2003.