Welcome to Australia, where government cruelty is by design

A new report from the Productivity Commission this week found there was an "unprecedented fall" in income inequality during the pandemic, but it ballooned again in 2021. This shows inequality is not an entrenched economic reality, but a political choice of governments.

What happened to reduce income inequality during the pandemic? Well, the Morrison government temporarily doubled income support payments. No other Australian government has ever lifted so many people out of poverty so quickly than the Morrison government did when it introduced the coronavirus supplement; likely no other government impoverished so many Australians so quickly when they scrapped it. The Australia Institute calculated around 50,000 children were pushed beneath the poverty line when the supplement was reduced, while UNICEF found another 124,000 children were plunged into poverty when Morrison chose to scrap the supplement entirely.

Australia's unemployment benefits are the most miserly in the OECD; a deliberate choice. The cruelty is the point. There's nothing Australia loves more than punishing 'dole bludgers'. It used to be that we accepted people would inevitably find themselves without work from time-to-time, often through no fault of their own. But it was during the Howard era we made punishing dole-bludgers a national sport, one some politicians and sections of the media continue to play. "Cracking down" on welfare fraud remains a favoured tactic of unpopular pollies, almost as much as "cracking down" on law and order.

This persistent attitude is how we ended up with the crude, cruel and unlawful robodebt scheme, which deliberately devastated the lives of half-a-million Australians.

The reality is unemployment is used as a policy tool to suppress wages and inflation. When the Reserve Bank increases interest rates, it is deliberately trying to make more people unemployed. They euphemistically call it "softer labour market conditions", but what they mean is "more people losing their jobs".

The Albanese government isn't so vulgar as to demonise the unemployed, but it certainly has not chosen to lift them out of poverty by increasing the rate of JobSeeker and that is a policy choice, not an economic one. To say Australia cannot afford to increase JobSeeker is plainly false. Australia is increasing military spending by around $50 billion over the next 10 years. No one said paying $300 billion for nuclear submarines was unaffordable. Peter Dutton wants to spend around $60 billion building seven nuclear reactors that will double the cost of generating electricity when compared to renewables; that's not a policy of someone worried about affordability.

This is not to say the federal government is not making sensible policy choices that lower inflation and help Australians make ends meet. Reducing the cost of childcare and medicines and providing a nationwide $300 electricity rebate will help directly reduce inflation and the cost of living. Thanks to the Albanese government's changes to the stage three tax cuts, every taxpayer will get a tax cut from 1 July and more than $80 billion - that would otherwise have gone to CEOs and bankers - will instead flow to nurses, teachers, baristas, bus drivers and cleaners over the next 10 years.

But the reality is inequality has been getting worse - not just since the pandemic - and it's not by accident. Last year the Australia Institute released a report showing how the Australian economy operates has fundamentally changed. Once upon a time, Australians shared pretty evenly in the benefits of economic growth - the rising tide lifted all boats. From World War II until the Global Financial Crisis, the majority of the benefits of economic growth flowed to the bottom 90 per cent of income earners. However, between 2009 and 2019, the top 10 per cent of income earners secured 93 per cent of income growth. Now it appears the post-pandemic period is continuing this trend. The rising tide lifts those with yachts, while the rest are left treading water or struggling to keep their heads above it.

Luckily, corporate Australia keeps reminding us it's part of the problem. Although excessive corporate profits drove the lion's share of inflation post-COVID, big business has been trying to lay the blame on workers.

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Excessively privileged CEOs with similarly excessive pay packets are busy telling the federal government what the economy really needs is not a reduction in their prices, but a reduction in workers' wages and bargaining power. Kellogg's chief executive Gary Pilnick recently advised poor families struggling to afford groceries to "eat cereal for dinner". Billionaire mining magnate Gina Rinehart criticised the federal government's $300 energy rebate and backed Dutton's attempt to blame migrants for the cost-of-living crisis. The head of Mondelez (Cadbury's owner), Darren O'Brien, is concerned we are "profit-shaming" supermarkets, not that Australians can't afford to put food on the table.

Asking corporate Australia to feel shame for price-gouging is like asking Donald Trump to be humble.

The fact is Australia's tax policies benefit the rich. Our education system favours privileged private schools over public schools. Australia is expanding renewables but still subsidising the polluting fossil fuel industry. These are all the consequences of government decisions. And governments can make different choices.

Scrapping fossil fuel subsidies, taxing the fossil fuel industry fairly, and closing the loopholes that allow many of our wealthiest individuals and most profitable companies to pay no tax will reduce inequality and strengthen our society and our economy.

The way Australia collects and spends tax revenue is one of the major drivers shaping our economy and it's something completely within our control. Creating a fairer system will return both economic and democratic dividends that all Australians will benefit from.