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Thursday, 30 April 1987
Page: 2270

Mr LANGMORE(1.20) —I would like to comment on many of the points that have been made by the honourable member for Barker (Mr Porter) but most are off the subject of this debate. The honourable member comes from the party that would like to reduce the welfare payments to the poor and cut the taxes of the rich, the party that wants to lift the incentive to work by reducing the incomes of the poor and increasing the incomes of the rich.

In seconding the motion, I would like to congratulate the honourable member for Moore (Mr Blanchard) for his sense of priorities and foresight in giving notice of this centrally important subject. The motion draws attention to the unacceptably high inequality in the distribution of income and wealth in Australia-the subject that the previous speaker should have been discussing-and to policies which could be used for reducing those inequalities. After making a few preliminary comments on poverty I am going to concentrate on the inequalities in the distribution of wealth because less is known about this than about poverty or the distribution of income. Inequality in the distribution of wealth in Australia seems to be increasing. Though the proportion of Australians who are impoverished has probably fallen during the last four years the wealth of the wealthiest seems to be rising rapidly. The extent of poverty has fallen because of the Government's success in stimulating the growth of employment and so reducing unemployment. Unemployment, as the honourable member for Moore has said, is the principal cause of poverty. With the decline in unemployment, the unemployment rate has fallen from just over 10 per cent, which it was four years ago, to 8.4 per cent, due to a growth in the employed labour force of three-quarters of a million during that period. The remaining chronically high degree of unemployment is still the principal cause of poverty, and policies aimed at reducing poverty must concentrate on increasing employment opportunities.

Of course, there are many other causes of poverty, of which one of the most serious is family breakdown, which leaves on low incomes many single parents with dependent children. A large number of single parent families have extremely low incomes and the social security review is giving priority to finding ways of supporting them more effectively. In relation to that group, it is pleasing to see that the decline in the real disposable incomes of pensioners and beneficiaries with children which occurred between 1976 and 1983 has been reversed. Between 1982-83 and 1985-86 pensioner beneficiary and other low income families with children enjoyed increases in real disposable incomes of up to 3.3 per cent a year-primarily because of additional payments for children and the introduction of the family income supplement. The improvements in both payments for children and in the unemployment benefit which have occurred during the last four years have made a significant contribution to easing the burden of poverty, and that is something of which the Government can be proud. The problem of poverty remains immense, but these improvements show that social security programs can make an important contribution to easing the burden of poverty.

Mr Deputy Speaker, the issue on which I want to concentrate this afternoon is that of the distribution of wealth for in recent years there appears to have been a sharp increase in inequality in the distribution of wealth. There are no comprehensive and authoritative figures on the distribution of wealth in Australia. The last comprehensive survey was conducted in 1915, more than 70 years ago, so it is clearly impossible to be certain what has been happening in recent years. However, some careful estimates were made in the 1970s and early 1980s using estate statistics, surveys and estimates of investment income. In combination, these estimates give us a fairly reliable basis for discussing the distribution of wealth. All of these figures show that there is severe inequality in the distribution of wealth in Australia. In the 1970s, the top one per cent of adults held around 25 per cent of all wealth. That is, the top one per cent of wealth-holders held a quarter of all of the private wealth in Australia. Those figures are absolutely reliable. At the same time, the top 5 per cent held about 50 per cent of all of the private wealth of Australians. The top 10 per cent held more than 60 per cent. This means, of course, that the bottom 90 per cent of wealth-holders held less than 40 per cent of all of the wealth of Australia. This shows quite clearly that there is a very severe inequity in the distribution of wealth in this country. The figures confirm what must be apparent to everyone-that large numbers of people have next to no assets at all.

The researchers also estimate that the distribution of wealth is slightly more concentrated in Australia that it is in the United States of America. The United States is, if anything, less unequal as a society than is Australia. However, we compare favourably with Britain, which has an even more concentrated wealth distribution than we do. It will surprise few to learn that Australia has a more egalitarian society than has Britain, but it will surprise many to learn that we have a less fair society than has the United States, in respect of which we hear so much about the massive accumulations of wealth of the very rich. Since World War I there has been some improvement in the equity with which wealth is distributed in Australia. Since 1915 the proportion of wealth that is held by the top one per cent of adults has fallen sharply. However, in the 1970s the top 10 per cent-which includes that one per cent-have almost the same proportion of the wealth as they did in 1915-about 60 per cent. Those figures are the agreed baseline from which we can talk about wealth in Australia. It is impossible to be certain what has been happening overall since the 1970s but there is clearly visible evidence of a tendency for a sharp increase to occur in the value of the assets of the already wealthy. For the last three years, the Business Review Weekly has published a survey of the richest 200 people in Australia. In 1984 the survey covered 206 fortunes, including those of 38 families, all with net assets of more than $10m. The average value of those personal fortunes was $35m. Their combined value was $7,300m. By 1985 the total wealth of the top 200 had risen to $10.5 billion. By 1986 the total wealth of the 200 wealthiest individuals and their families had risen to $14.8 billion. So, between 1984 and 1986, the total wealth of the richest 200 Australians more than doubled, from $7.3 billion to $14.8 billion.

One obvious reason for that massive increase is that the prices of equities on the stock exchange rose by 63 per cent over the same period. The value of property also rose, so that a substantial part of the increase in the net worth of the wealthiest 200 has simply been due to market trends. The relatively low rate of inflation has had next to no impact. However, another substantial part of that massive increase in the net value of the assets of the wealthy has resulted from the well-publicised financial dealings of some of the wealth-holders. In 1983, the Business Review Weekly estimated Alan Bond's wealth conservatively at $25m. Today, even after a heavy discount is made for borrowings, his wealth totals $200m. In the same period, Larry Adler has built a $25m fortune into a $280m fortune. Again, Robert Holmes a Court has added $500m to his net worth in the space of three years.

The response of some people to this massive multiplication of wealth would be to say `Good on you'-most people like to see success rewarded-but let us think a bit more carefully about the implications of these massive accumulations of wealth. One of the problems is that the type of activity which is being rewarded by this growth in wealth is financial manipulation, rather than productive activity. Intellectual energy and financial resources are going into speculation, rather than investment which would lead to a more general growth of incomes and employment.

Another cause for concern is that most of the wealthiest people in Australia have a substantial part of their assets in the media industry. In fact, in 1983 the seven wealthiest people had all concentrated their assets in the media. There has been some diversification since then, but the media remain one of the principal bases for huge concentrations of wealth. The principal cause for concern, though, is that wealth is fundamentally anti-democratic. Wealth leads to increased economic, social and political power. Wealth is power and most people believe that power corrupts. Power need not inevitably corrupt, but the wealthy certainly have a clear tendency to act in their own self-interest and to find ideologies which justify the way they act. It would be extremely difficult for a Minister to treat an age pensioner with as much care and attention he or she would give Robert Holmes a Court. The powerful can find many subtle ways of influencing public opinion and the political process. At the very least, inequality in the distribution of wealth gnaws away at the foundation of democracy, which is about equality of opportunity in life. The foundations of most fortunes lie in inherited wealth, not the activities of entrepreneurs. It is clearly unfair for some people in the community to inherit millions while others-the vast majority-inherit little and often nothing. Inherited wealth ensures access to a much greater range of opportunities than is available to someone whose family is not wealthy, and this is obviously unfair. Since these vast fortunes are fundamentally undemocratic, it is important that the extent of inequality in the distribution of wealth in Australia be reduced. Without the presence of policies designed to reduce the severity of these inequalities, the social divisions in Australian society will intensify, leading to greater conflict and the undermining of the low key, easy-going egalitarianism which characterises so much of Australian life.

It is essential that the inherent destructiveness of severe inequities in the distribution of wealth be recognised so that, as Professor Don Aitkin says, we may develop an attitude that makes excessive wealth about as attractive as excessive weight and erects appropriate barriers against the conversion of wealth into political power. One step which reduces the potential political power of the wealthy has been taken by this Government. I refer to the public funding of election campaigns. With public funding of elections there is a reduction in the potential influence which donors can earn by contributing substantial amounts to election funds. The Government's capital gains tax will make a contribution to restraining the Australian growth of wealth through capital gains.

Most other Western countries, though, have other measures as well to control wealth, generally through inheritance or estate taxes, or direct taxes on wealth. Estate duties in Australia were abolished by both the Commonwealth and the States in the late 1970s and early 1980s and Australia has never had a direct tax on wealth. There would seem to be a good case for considering one or other of these taxes. Wealth taxation is the most popular form of taxation because most people know that they are not wealthy. However, wealth taxes are complex to administer, not least because of the difficulty of valuing assets. Estate and gift duties involve far fewer administrative problems because they are collected only when estates or gifts change hands and interfere not at all with investment by entrepreneurs. Estate and gift duties are consistent with the democratic principle of attempting to move closer to equality of opportunity.

The doyen of public finance economists advocated, during a briefing session for honourable members that was held last Tuesday evening, the introduction of one or other of these capital taxes as part of a tax reform package. The introduction of a wealth tax or estate and gift duties would allow other taxes to be reduced. It would make a significant contribution to reducing inequality. The time has come to look again at the appropriateness of imposing estate and gift duties. That would be one way of reducing the dangers that exist to the strong egalitarian traditions that represent one of the central foundations of Australian life. Those traditions are being threatened by the amassing of huge fortunes.