What is income? Income is the amount that is received in a given period of time. It is a flow of funds



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Income and Wealth Distribution in Australia


Anthony Stokes, Lecturer in Economics.

Australian Catholic University, Strathfield.

What is income?

Income is the amount that is received in a given period of time. It is a flow of funds.

How is income distributed in Australia?




According to the ABS - in 1999-2000, the richest 20% of income units received 48.5% per cent of total income. The poorest 20% of income units received less than 4% of total income.

Note: Income units are made up of one person or a group of related persons within a household, whose incomes are assumed to be shared.




What are the main sources of Income in Australia?

The main sources of income are: -



  • Wages and salaries – 56%

  • Business profits – 21%

  • Property income – 9%

  • Social security – 10%


What is Wealth?




Wealth is the value of the things a person owns at a point in time. It is a stock of assets. Wealth distribution shows greater inequality. In 1998 the richest 20% of income units owned 65% of the total wealth. The poorest 20% had negative wealth – They were in debt.




What are the main sources of Wealth in Australia?




The main sources of wealth are:-


  • Land, houses, units – 57%.

  • Business assets – factories, capital, shares – 28%

  • Consumer durables - cars, furniture, etc. – 6%.

  • Government Securities – 3%.

  • Investments overseas - 4%.

  • Cash deposits – 1%

Is there a relationship between income and wealth?

High levels of income allow a person to increase their level of wealth, eg savings, buying property. Income is also earned from wealth, eg interest on deposits, dividends from shares, rent from property. Wealth produces income and income can be used to accumulate wealth.




How is income inequality measured?




Income inequality is measured by a Lorenz Curve. A Lorenz curve graphs the cumulative percentage of income against the cumulative percentage of income units.

The following table shows the percent of income and wealth of each quintile (20%) of income units in Australia in 1990-2000.



Income Units Income Wealth___________

Cumulative Cumulative Cumulative

Percentage Percentage Percentage Percentage Percentage Percentage



A Lowest 20 20 4 4 0 0

B Second 20 40 9 13 3 3

C Third 20 60 15 28 10 13

D Fourth 20 80 24 52 22 35

E Highest 20 100 48 100 65 100




These statistics can be then plotted on a Lorenz curve as shown below. It demonstrates that inequality of wealth is greater than inequality of income.

I

Line of Equality

Income

Wealth
ncome and Wealth in Australia 1999-2000




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