Rising on the Tasman Tide: Income Inequality in New Zealand and Australia in the 1980s

Peter Saunders

Interest in the topic of income distribution has recently been spurred by the increased quality and availability of survey data, and the evidence for a range of countries that the distribution of income has become more unequal. The cross-national comparative method has grown particularly rapidly, and has found that much of the cause of the recent increase in inequality was international. This puts the spotlight on the effectiveness of governments in alleviating the inequality emanating from the world at large.

The main objective of this paper is to present estimates of mean incomes, living standards and income inequality in Australia and New Zealand between 1981/82 and 1989/90. The results reveal that the benefit system in New Zealand has been more effective in achieving income replacement for groups at risk than was the case in Australia. In general, the trend to inequality is clearer in New Zealand, although in both countries those on the highest incomes have rapidly pulled further way from those below them on the distributional ranking.

The paper concludes that the rising tide of inequality raises questions about the acceptability and, ultimately, the sustainability of the kinds of market-oriented policies pursued on both sides of the Tasman during the 1980s.