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KERRY O'BRIEN: Paul Keating may argue that Labor has not itself created social inequity in Australia but it can no longer deny that the gap between rich and poor has grown in its 12 years in office. That's a fact confirmed by a report on income inequality commissioned by the Prime Minister himself which draws on a number of other reports.

UNIDENTIFIED: They show things became worse in the 1980s but seem to have accelerated .. the earnings inequality seems to have accelerated in the 1990s.

KERRY O'BRIEN: And yet another report due for release soon says the conditions are now ripe for a permanent underclass caught in a cycle of poverty. Can we still call ourselves 'Australia Fair'. That's our story tonight.

When Labor came to power it promised it would be a government for all and Paul Keating said that despite the introduction of policies to encourage the big end of town, he would never forget the battlers. Now, a report to be released tomorrow says, that despite Labor's best efforts to cushion the combined impact of Australia's push to join the global economy, the technological revolution, wage restraint and the recession, by building various elements of a social wage and welfare net, the end result of 12 years in office is that we are a more unequal society than before.

Angered by repeated claims that Labor had increased income inequality, Paul Keating asked the Economic Planning and Advisory Commission to examine the research that had drawn the criticism. If he was looking for an endorsement of his government policies, he'll find little joy in the EPAC report. It endorses the bulk of the research finding showing a growing gap between rich and poor, not just over Labor's time in office, but over at least the past 20 years. The EPAC report notes that Australia is one of the least fair of the developed countries, slightly better than the United States, but about on a par with Thatcher's Britain. And the major piece of new data in the study which looks at the earnings for the 1990s shows the gap between high and low income earners has widened, even with a pick up in the economy. While male wage earners at both ends of the earning scale have done better since 1990, the highest earners have increased their wages by 16 per cent while the lowest earners have increased their earnings by only 6.5 per cent - a widening of the gap by nearly 10 per cent in four years. And the picture looks worse if you go back to 1983 with top income earners increasing their income by 17 per cent and low wage earners actually suffering a cut of one per cent. To discuss the report and its implications, I am joined by five guests tonight.

Peter Baldwin is Minister for Social Security and he joins us from his office in Canberra.

Professor Bob Gregory is Head of Economics and Politics at the Research School of Social Sciences at the Australian National University and he is currently finalising a major study on the impact of inequality in one third of Australian households and has authored previous trail-blazing research in this area. Bob Gregory is also in Parliament House tonight, as is Professor Julian Disney, Director of the Public Law Program at the Centre for International and Public Law at the ANU. A former Director of the Australian Council of Social Service, he was a key adviser to the Australian delegation at the recent UN Summit on Social Development in Denmark.

Professor Judith Sloan is Director of the National Institute of Labour Studies at Flinders University. She specialises in industrial relations, labour market and education issues, and is in Adelaide tonight.

And Eva Cox is a social policy analyst, convenor of the Women's Economic Think Tank and Director of a management and training consultancy, and she was a founding member of the women's electoral lobby, and joins us from Sydney.

First of all, Bob Gregory, your study, I think in neighbourhoods, draws on data or drew on data from the last four censuses, 1976, '81, '86 and '91. You covered, if I've got it right, nearly 2 million homes across 9,000 community groups around the country, that's pretty extensive I would have thought, and you grouped the households or broke the households down, into socio-economic groupings. So what were you looking for and what did you find?

BOB GREGORY: Well, Boyd Hunter and I were looking to see where the inequality is impacted on neighbourhoods because we thought there was a lot of evidence that neighbourhoods had become very much more unequal, and that's as interesting as individual income becoming unequal, and we've shown that since '76 that the bottom neighbourhoods have lost income, top neighbourhoods have gained income and that the major reason for that essentially is loss of employment in low income neighbourhoods over quite dramatic amounts. We find that male employment and female employment has fallen about 40 per cent since 1976 in low income neighbourhoods and in high income neighbourhoods, female employment has grown quite strongly and male employment has dropped.

KERRY O'BRIEN: Male employment has dropped at the high end as well?

BOB GREGORY:Yes, that's right ....

KERRY O'BRIEN: But not as much as ....

BOB GREGORY: Not as much as the bottom. And this fall in employment has gone on ever since '76 and the widening income inequalities has gone on ever since '76. The bottom faired particularly badly at the beginning of a period and the top has done particularly well at the end of the period.

KERRY O'BRIEN: Okay, and now give me some real sense of how wide that disparity has become.

BOB GREGORY: Well, on a household basis, since '76 the gap has opened by $21,000.

KERRY O'BRIEN: That's in current day prices.

BO B GREGORY: Male income in the lower socio-economic status neighbourhoods has fallen by about $6,000 to $8,000. Female income in the highest areas has risen by about $6,000 to $8,000.

KERRY O'BRIEN:Now, you also say that employment for women in the lower socio-economic areas has dropped by 40 per cent, but employment for women in the higher socio-economic areas has actually gone up. Now, can you draw a conclusion from that justifiably that most of these new jobs that have being created, that have been taken up by women over the last ten or fifteen years, have come from those better-off areas?

BOB GREGORY: Yes. They've either come from better-off areas, from people living in those areas or families who've managed to get two jobs and move to those areas. And I was very disturbed by that result because the female labour market has been fairly strong over the last 20 years - certainly stronger than the male market and it was disappointing to see employment drop so dramatically in low income neighbourhoods.

KERRY O'BRIEN: So there is an inequality that has developed in that regard as well?

BOB GREGORY: Yes, that's correct. Female income used to be fairly equal across areas and now it is very unequal across areas.

KERRY O'BRIEN: What about the equality of education, what sort of pattern do you pick up there?

BOB GREGORY: Well, we find again that inequality has widened, that high income areas have got much more of a slice of the increases in education than low income areas. So if you take degrees for example, in low income areas the number of people with degrees increased by one percentage point since '76. In high income areas it's increased by about 10 or 12. So, everybody's getting more education but the good areas are getting more of it than the bad areas and so it's not really an equalising force.

KERRY O'BRIEN: What do you learn about single parent families?

BOB GREGORY: Single parent families are increasingly congregating in low income neighbourhoods. In 1976, 10 per cent of families were single parents in low income neighbourhoods now it's about 20. Half the men for example, who live in low income neighbourhoods are not at work.

KERRY O'BRIEN:And of course your data ends with the '91 census just as the recession was really starting to kick along, so, do we assume readily from that that things got worse after that, that the picture would have grown even worse after your data ended?

BOB GREGORY: I think that's probably right. We actually don't know, but I would think that's right. We can check to some degree by using Social Security data and I think that also confirms that the neighbourhoods are drifting further apart and, you know, the rich half of Australia increasingly is disconnected to the poor half of Australia.

KERRY O'BRIEN: And are you of the view that the middle income group is actually shrinking, that there are more from that middle group who are joining the richer end, but also more from the middle group who are slipping back to the lower end.

BOB GREGORY:That's right, that's just another way of saying the distribution is becoming much more unequal.

KERRY O'BRIEN: Yes. What about the gap between lower and middle and between middle and top income groups?

BOB GREGORY: Well, we looked at what it would take to get from the one per cent of the bottom to the middle and to get from the middle to the top, in 1976 and today. In 1976, if you were an average income in the bottom group, you could get to the middle by taking an extra job for 12 hours a week. Now you need an extra job for 24 hours a week. To go from the middle to the top one per cent in 1976, you needed to earn an extra $25,000 a year, now you've got to earn an extra $50,000 a year. So, the steps all along are getting bigger and bigger.

KERRY O'BRIEN: And this of course, this data of yours, of course, coincides with the EPAC report; so the EPAC reports' findings wouldn't surprise you, but what about that incomes table of earnings in the EPAC report from 1990 to '94 showing the lower, middle and upper income groups for males and females - how worrying is that?

BOB GREGORY:Well, that's being going on for some time and I think it is worrying, but the neighbourhood work that I am doing suggests that the big source of poverty really is lack of jobs in low income areas. So I am more concerned about that than I am about the wages. But the wage distribution is widening in Australia as it is in most countries.

KERRY O'BRIEN:So whether you are talking about the poverty trap due to loss of jobs or whether you're talking even about people who have jobs, in both instances the gap between rich and poor, or the top end and the bottom end, is widening.

BOB GREGORY: That's correct. For men, for women, and for households and families.

KERRY O'BRIEN:Have we now got an entrenched underclass or at best, the pre-conditions for a permanent underclass?

BOB GREGORY: Well, I think we have more or less established the pre-conditions. It's very hard to know whether we have a permanent underclass or not because we don't have a great deal of information on mobility from neighbourhoods. So we don't really know how long people stay in poor neighbourhoods, what happens to their children, but it seems to me that the gap between the neighbourhoods are widened so much that it is not a good thing and so we are creating pre-conditions for underclasses as it were.

KERRY O'BRIEN:Okay.

Judy Sloan, do the EPAC and Bob Gregory findings surprise you at all?

JUDITH SLOAN: No, I don't think they do at all and in fact I think one of the most important things that Bob is telling us is that unemployment is the overwhelming factor which is having this adverse effect on the distribution of income. If you look at the wages story, there is something in it, but we should be more interested in the distribution of income and income at the household level than the distribution of wages and earnings. So, I think it is a story about both unemployment and the unequal distribution of unemployment. And I think one of the worrying things about the Bob Gregory thesis here, is that there may be a spatial element to unemployment which is ...

KERRY O'BRIEN: Meaning? Sorry, what do you mean by 'spatial'?

JUDITH SLOAN: Meaning that it actually matters where you live and to the extent that people are locked into where they live, perhaps because of public housing for example, that creates some real problems in terms of, say, potential ghettoisation. I think another point to pick up and perhaps the Minister might want to pick up on this later in the program, and that is this very unfortunate matching of unemployed couples and employed couples. Up until the Working Nation initiatives what we had was a very adverse set of incentives where, if you had one unemployed partner, there was actually a very strong incentive for the other partner to be unemployed. You actually lost income if, for example, one was working part-time and the other unemployed. Now, the Government is acting on that to try and treat as individuals, couples as opposed to the previous arrangement of treating them as couples, and that might help. But I think the worry is that there might have been some locking into, you know, patterns of continuing unemployment in these particular locations which will be hard to break.

KERRY O'BRIEN: Question is: Can we reverse the trend? Obviously to the extent that it's connected to unemployment, but also to the extent that there is a disparity even between those actually in jobs - can we reverse that trend or can we merely cushion it with more welfare?

JUDITH SLOAN: Well, I am perhaps less of a doomsayer than some of your other guests in the sense that I would like to stress that the middle is still the middle in Australia. It is overwhelmingly the middle. If you look at the curve, it is bell-shaped. Now it's flattened off a bit, but the notion that somehow we've lost the middle-class in the past decade or so is just not true.

KERRY O'BRIEN: But we are talking about a continuous trend as I understand it, over some 20 years, and it's not just an Australian trend.

JUDITH SLOAN: No, no, but I mean to the extent that you confine your analysis to the top decile and the bottom decile, you're getting a picture about changes at the extreme and you're not really focusing on where most people are. Look, I think probably the reality was that the level of inequality, which was quite low that we experienced in the '60s and early '70s, along with many other countries, was never sustainable. And once the overall level of real wage growth began to slacken off, it would always be associated with an increase in inequality. The thing is to use the tax transfer system to bolster the income of those of the lower end of the pay distribution, but, you know, avoid intervening in the labour market in ways that will adversely affect the employment opportunities of those of the lower end of the spectrum. We do not need more unemployment amongst the most disadvantaged.

KERRY O'BRIEN: I know that one of the things you argue for is labour market deregulation, but if you do have labour market deregulation, what do you do if, perhaps not the worst fears of critics of labour market deregulation, but at least to some degree their fears come true, and you do see wages drop to a point where you see a growth of the working poor - the syndrome of the working poor. Now, how does their situation get alleviated, how does that inequity get redressed?

JUDITH SLOAN: Well, of course as long as you have a robust tax transfer system, perhaps even in that idealistic form of a negative income tax or a minimum guaranteed income, you are always setting a floor below which wages can't fall. So, you know, in my world you run that highly targeted and active tax transfer system, pitched at the lower income earners and allow the labour market to be relatively unfetted in its operation.

KERRY O'BRIEN: And you leave the middle unwelfared, if you like, without any kind of welfare benefit?

JUDITH SLOAN: Yes, that would be my aim and I think it's better never to give them the taste of it because it's dreadfully difficult to take away.

KERRY O'BRIEN: Okay, but you are also assuming in that, that government will always have the will to underwrite that flaw even if there is a pressure built from the haves, if you like, who say: We are sick of paying taxes to support the other.

JUDITH SLOAN: Well, the alternative is to try and intervene in the labour market and to try and alter the distribution of wages. Now the trouble with doing that is that that may be well intentioned, but if you tip of lot of people out of jobs onto the unemployment queue, then in fact that will have a more adverse effect on income inequality than leaving the labour market relatively unfetted but bolstered with good tax transfer arrangements.

KERRY O'BRIEN: Eva Cox, Judy Sloan says the middle-class should never get a whiff of welfare, that welfare should be better targeted towards those at the bottom of the heap. Does the middle-class then become the forgotten group or can they be expected to fend for themselves and shouldn't they be expected to fend for themselves?

EVA COX: Well, I think it becomes a very interesting question of how we build a certain amount of legitimacy into our system. If we have a tax transfer system .. first of all I think Judy is contradicting herself because if you have a highly targeted welfare system, you also have huge tax disincentives or effective marginal tax rates - they are inevitable. So in a sense you trap your low income families often into single income families which are fairly tenuous relationships to the labour market and drop right into the welfare thing if that one income gets lost. So, I think we need to encourage dual income families, and yet if you don't actually provide, say, some resources in relation to cost of children, cost of child care and so on for the next group up, they are going to have some considerable difficulty maintaining their role in the labour market and their household income. I think it's a case of whether or not we go back to the idea .. and I don't like the idea that we are moving into a necessarily much more divided society. I think we have got to make some decisions about putting some more money into the public pot, raising taxation and ensuring that at least all families with children get some sort of support which allows them to feel that they have got an investment in the State and the State has an investment in them which encourages them to stay in employment rather than fall into that bottom part, because we've got a movement down and I think we have got to try and work out why that movement down occurs and make sure it doesn't happen, and use the tax transfer system to bolster it.

KERRY O'BRIEN: And as I understand it, you also talk about this social glue and those who are part of it .. the extent to which the middle-class are a part of the social glue. I mean, what are the fears of the middle-class that you talk about?

EVA COX: Well, I think the middle-class are very concerned that the social safety net won't be there for them. Because we have got so much battering of the social safety net, we are constantly saying we can't afford it; we are constantly have these screams of middle-class welfare if anything goes to anybody who isn't obviously down on their uppers; we have constant discussions of who's truly needy. People don't like the unemployed and they don't like sole parents, which is why they keep ending up at the bottom of the heap with very little ability to assist them specifically.

KERRY O'BRIEN: And there is now a fear in the middle-class to some degree is there not, about whether the safety net might be there for them in their old age if they haven't properly provided for themselves?

EVA COX: Exactly. And what you are doing by failing to involve the middle-class in any way in the tax transfer system is that is exactly when you get the tax revolt, when they start saying: Why should I pay tax? You get in what's called a compliance problem because they don't feel that the system is actually fair; because they feel that they are working very hard, that they've got to pay to put their kids through university; they've got to pay for their old age, they've got to pay for almost everything that they do and use when we get more user-pay and they just don't want to pay it then. They think: Why should I pay for those bastards?

KERRY O'BRIEN: Although I guess at least they are getting their kids .. their kids are going to university.

Julian Disney, how serious do you believe the situation is, and can the trend be reversed?

JULIAN DISNEY: Well, I think it is very serious, Kerry. I think Bob's research is extremely important, although with one exception, it won't come as a surprise to those of us who for much of this time have been working in front-line agencies. But I think the particularly important thing that he's added is the gravity of this locational disadvantage - the extent to which the problems are concentrated in particular pockets and neighbourhoods. There are a number of factors that have been at work, and he's highlighted the special importance of unemployment and I think the .. what one could say colloquially is the divide between the no-dog .. no-job and the two-job families. What I would want to add to his picture though, or particularly emphasise, is that it is not just a matter of your current level of income, there are also problems about the insecurity of people's level of income. By and large, people in the lower socio-economic areas now are much more insecure in terms of their prospects of getting a job and of that job being properly remunerated and being one that they'll be able to keep for a while and that's a major problem. Also, there's the problem of access to services. By and large, for example, the big social expenditure increase under Labor in Medicare was something that largely helped the middle and high income people. Low income people already had access to those services. I think there are, as he said, that the pre-conditions for an underclass to develop .. of course we've had some to some extent before even if only in relation to the Aboriginal people. But we can I think reverse it, we can take action, but the most important things are in general macro-economic policy, not just in trying to patch up the problems once they have been caused.

KERRY O'BRIEN: Because this Government has tried various recipes to reverse the trend and to use the tax transfer system to redress the imbalance, but the trend continues it seems.

JULIAN DISNEY: Well, I think there is no doubt that the single greatest thing one could do to reduce severe hardship in Australia at the moment is to substantially reduce unemployment. Part of the answer to that may be some changes in labour market regulation but that has major problems as well. But much more important things are macro-economic policy, things which will encourage more productive levels of investment and particular investment of a kind that will help with our current account deficit and provide jobs. And I think it's important to emphasise in that context the damage that's being done by our tax system. Because it's not just that we don't collect enough tax - though that's true - it's also that our tax system actively discourages productive investment in ways that would produce long-term productive enterprises and create jobs, it encourages speculative activity. It also aggravates inequality by what one might call an upside-down welfare system. The superannuation tax system, the tax treatment of homes, and various other aspects are upside down and they are of greater benefit to the higher income people and of little or no benefit to low income people. So it's a very perverse structure.

KERRY O'BRIEN: And yet at least some of those things relate very much to the politics of this country and it would be a brave government indeed that attempted to impose, for example, a capital gains tax on the family home which is what you're talking about in part.

JULIAN DISNEY: It depends how they do it and how they structure the situation. I think that would have been said, for example, about some of the very brave and far-sighted changes they did make in the middle of the last decade when they did introduce the capital gains tax and some other measures which are very important, but we then had a lost decade for tax reform, very disappointing refusal to address the underlying problems which again are not just a matter of raising more revenue, though we need that. We are a much too low tax country to be sustainable. We shouldn't seek to I think be as high a taxing country as the European countries, they are going to encounter problems, but we are way, way below the average for developed countries, and one of the prices of that is that we can't invest properly in long-term infrastructure, and also we can't address the sort of things Judy Sloan was talking about, which is to top up low income wages with some form of general assistance, which I think has much to be said for it, but I hope of course that the advocates of that will be there at the barricades fighting for the tax increases necessary, not just for the deregulation of the labour market.

KERRY O'BRIEN: I am sure Judy will be.

Very quickly, before we come to the Minister, Julian Disney, one point that Bob Gregory didn't cover from his findings was that, I think, the children in, again, in those top income areas and the lower socio-economic groupings, it wasn't just the parents where this gap was growing, there was a similar pattern with the children of that generation where, at the wealthier end, the children were much more inclined to be in part-time work, the children weren't at the lower end. Now, you've got some figures related to under 35s and home ownership, which is another of the sacred cows of this country. What is that?

JULIAN DISNEY: Well, I think there are at least two factors to mention there. One is that amongst the younger group, perhaps under 25, there has been a shift from such work as they can get towards the children of higher income families, but the second feature of changes in home ownership, which I think is very worrying in the longer term, is that there is a big drop in the levels of home ownership in people under the age of about 35. Now, some of that is attributable to the fact that people are tending to have children and form families later, but I think there are longer term changes at work there, particularly due to the severe deterioration in housing affordability, and that has very profound impacts on patterns of work within families, the danger of overstress within families and the kind of locational disadvantage that Bob was talking about.

KERRY O'BRIEN: Okay, Peter Baldwin, we are obviously not going to have the time tonight to cover all of the ground, to respond to all of the points that have been raised, but broadly, is this country at a crossroads? Do you share Bob Gregory's concern that we are staring at least at the pre-conditions for an entrenched underclass, if that day has not already arrived?

PETER BALDWIN: I think it's fair to say that this country, along with the great bulk of developed countries has experienced an increase in disparities in market incomes over the past period and there is no doubt about that, and the EPAC report makes reference to some of factors that are driving that the globalisation of the world economy, the impact of technological change, the fact that the nature of work is changing in such a way so as to provide extra advantages to those who have got the skills and education relative to those who don't, and so forth. So there are a number of underlying structural factors having that impact. It's true to say though that notwithstanding that, that earnings in inequalities in this country, contrary to what was said in the introduction piece are not among the highest in the world. In fact the EPAC report itself contains a table which shows that only the Scandinavian countries, I think, have more equal earnings distributions than we do, but it can't be denied that there has been an underlying pressure towards greater disparities in market incomes. What is true is that over that period, and particularly since this Government's been in office, changes in the tax system and changes in the social security transfer system and changes in social wage provision, have acted to very significantly off-set those factors. The safety net has unambiguously improved. The real levels of assistance going to low income families have been clearly improved.

KERRY O'BRIEN: But, it would have had to improve to do anything at all and, although you may have improved the trend to some degree, or cushioned the trend to some degree, but you have not broken the trend. And in terms of our comparison with other countries - there is another point in the EPAC report where it rates us in social equality terms - rates us very much at the low end of the OECD grouping, above the US, but about on a par with Britain.

PETER BALDWIN: Well, I mean there are a number of studies on this and one of the difficulties you have in this area is getting genuinely comparable international data. The only really comparable international statistical data to make these sorts of judgments is based on a thing called the Luxembourg Income study which is based on data dated back to the 1980s which precedes many of the major improvements in family payments and so forth and improvements in the safety net.

KERRY O'BRIEN: Okay, we'll suspend judgment on that one but ....

PETER BALDWIN: I don't accept that premise at all.

KERRY O'BRIEN: Okay, but is this the future? What we have here now in Australia, this trend that's been going for 20 years that Labor has not broken, you might have cushioned, you've done various things to attempt to break it, but the trend has not broken. Is this the future that there will be an increasing group of Australians relying on welfare on the welfare net to be able to live a remotely decent life?

PETER BALDWIN: This Government has no greater priority than to prevent that eventuality. Last year's White Paper on employment was overwhelmingly about putting in place measures to ensure that we don't get an entrenched group of long-term unemployed people permanently alienated from the work force. And there is evidence that the measures in that White Paper are having an impact. If you compare the recovery from ....

KERRY O'BRIEN: But the jury will still be out on that for some time though, won't it?

PETER BALDWIN: Yes, okay, but already we can see some clear evidence. If you compare the recovery from the last recession to the recovery from the 1982 '83 recession, as a result of these measures we have been unable to ensure that the long-term unemployed, the most disadvantaged in the labour market, taking up a much higher proportion of the jobs, the employment growth that's been occurring, than was the case in the recovery from the previous recession. So, already the labour market interventions and other measures involved in the White Paper, and that includes, as Judy Sloan points out, a major redesign of the income support system for unemployed people to make sure that they always benefit by raising their work effort. That wasn't the case before and we've tried to reform that. But the combination of those measures, I believe, the evidence is starting to come in, that they are having an effect and they are specifically designed to prevent the entrenchment of a large body of permanent unemployed people who form the basis of an underclass.

KERRY O'BRIEN: You must be disappointed about the education picture that Bob Gregory also fingers in that report, as a Labor man, and Labor going back to Whitlam, has endeavoured to establish an equality of opportunity for education and yet we are hearing tonight that, at the high income end and those sort of high income communities, a 10 per cent increase in kids getting degrees at university; at the low end, a one per cent increase.



PETER BALDWIN: I haven't seen Bob's analysis there and I'd be interested to have a look at it. What is certainly true is that the proportion of people for example completing secondary school has gone from about 36 per cent in 1982 to around about 80 per cent now. Now, obviously that sort of improvement in participation must be filtering through to a pretty broad cross-section of the population. So I find the claim that the benefits of this increase in participation aren't flowing through very substantially to those on lower incomes rather surprising. But again, this Government has set itself the target to bring about an increase in educational participation and training participation to make it virtually universal for people as they come out of school by the time we get to the end of this century. That is a central objective, and again I think the evidence is that we are starting to have an impact there. But, you know, I haven't seen Bob's work but I'd be quite interested to see it.

KERRY O'BRIEN: Okay. Bob Gregory, there have been various calls at various times for a full-scale inquiry into wealth distribution in Australia. Is such an inquiry now overdue or at least timely, or do we now know enough?

BOB GREGORY: Well, I think we know a fair bit. What I'd like to see myself is more emphasis on longitudinal work. That is how long people stay in states of poverty; how states of poverty of adults affect children. So a time series analysis would work. I think one good thing about a wealth survey and a wealth study would be it keeps the pressure on governments and keeps the concern in front of people's minds that we do need higher taxes to sort out most of these problems. So in that sense it would be a good thing, but on the other hand, if you have inquiries, you've got to respond to them, and I can understand why governments don't really want to go down that track.

KERRY O'BRIEN: Peter Baldwin, what about a wealth inquiry? Cabinet was pretty strong on it back in 1987, but Bob Hawke never really followed through, and in fact the leader of the Left and the Deputy Prime Minister Brian Howe, was one of the strong advocates of that at the time.

PETER BALDWIN: Well, whether you need a big, high-profile wealth inquiry as such or whether we need to get a lot of information from a number of different studies providing us with information about degrees of inequality and factors that contribute to it, I think we have now got a lot more information than was the case before. And in fact some of the information has been from studies which have been directly funded by my department of the Social Policy Research Centre at the University of New South Wales for example. I mean, I think, we do have a lot ....

KERRY O'BRIEN: Some of what they found hasn't been too heartening for the Government either.

PETER BALDWIN: The basic underlying point that is true of this country and it is true of the great bulk of developed countries, is that there has been a number of structural factors driving market incomes inequalities greater. That is true. My point is firstly, that notwithstanding that, it remains the case that this country is not a highly unequal country when compared to others and the material in the EPAC report itself confirms that. And secondly, that the impact of government policy on the tax system, the social security system, on the social wage provision in various forms, has been to a considerable extent off-set that trend. Now, I agree that those underlying forces are a matter of concern. We need to think about policies to avoid the emergence of an underclass. The Government has committed itself to a $6.5 billion investment over the next four years through the White Paper to ensure that we don't end up with an underclass coming out of the unemployment problem that we, along with other developed countries, have had in recent years.

KERRY O'BRIEN: Okay. We are out of time and of course you can now go back to your budget deliberations which ironically includes some quite significant spending cuts. We are going to have to leave it there, but thanks very much to all of you for joining us tonight. Thankyou.