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Financialisation and inequality in Australia

Author

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  • Mark Westcott

    (University of Sydney, Australia)

  • John Murray

    (Stockholm University, Sweden)

Abstract

The process of financialisation has been cast as a major contributor to increasing inequality of wealth and income in a number of advanced industrialised economies, but the nature of the link requires precise clarification. In this article, we argue that financialisation in Australia has advanced inequality, but in a particular way. Charting several features of ‘financialisation of the macroeconomy’, we accept that this process has contributed to increased inequality in the sense that the wealthy have increased their wealth faster than households and individuals at the lower end of the wealth distribution. However, there is limited Australian evidence to suggest that income redistribution has occurred as a result of the ‘financialisation of the firm’. At the level of the firm, increased inequality of wealth can be attributed directly to financialisation if firm practices are oriented to increasing shareholder value at the expense of returns to other stakeholders such as workers or suppliers, and increased income inequality can be linked specifically to financialisation through increases in earnings to financial agents. We suggest several reasons for the relative absence of a firm-level dimension of financialisation but caution that such a trend remains possible, particularly if regulation of the labour market is weakened.

Suggested Citation

  • Mark Westcott & John Murray, 2017. "Financialisation and inequality in Australia," The Economic and Labour Relations Review, , vol. 28(4), pages 519-537, December.
    • Handle: RePEc:sae:ecolab:v:28:y:2017:i:4:p:519-537
    DOI: 10.1177/1035304617710417
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    References listed on IDEAS

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    1. Michael Fletcher & Ben Guttermann, 2013. "Income Inequality in Australia," Economic Roundup, The Treasury, Australian Government, issue 2, pages 35-56, December.
    2. Greg Kaplan & Gianni La Cava & Tahlee Stone, 2018. "Household Economic Inequality in Australia," The Economic Record, The Economic Society of Australia, vol. 94(305), pages 117-134, June.
    3. Susan Black & Joshua Kirkwood & Thomas Williams & Alan Rai, 2013. "A History of Australian Corporate Bonds," Australian Economic History Review, Economic History Society of Australia and New Zealand, vol. 53(3), pages 292-317, November.
    4. Tim Callen & Steven Morling & Jill Pleban, 1992. "Dividends and Taxation: A Preliminary Investigation," RBA Research Discussion Papers rdp9211, Reserve Bank of Australia.
    5. Susan Black & Joshua Kirkwood, 2010. "Ownership of Australian Equities and Corporate Bonds," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 25-33, September.
    6. Roger Wilkins, 2015. "Measuring Income Inequality in Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 48(1), pages 93-102, March.
    7. Richard Burkhauser & Markus Hahn & Roger Wilkins, 2015. "Measuring top incomes using tax record data: a cautionary tale from Australia," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 13(2), pages 181-205, June.
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    Cited by:

    1. Zhang, Ying & Andrew, Jane, 2022. "Financialisation and the Conceptual Framework: An update," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 88(C).
    2. Ricardo Barradas & Rishi Lakhani, 2024. "The finance–inequality nexus in the era of financialisation: Evidence for Portugal," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(3), pages 3510-3544, July.

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    More about this item

    Keywords

    Financialisation of the firm; financialisation of the macroeconomy; income redistribution; inequality; investment; wealth distribution;
    All these keywords.

    JEL classification:

    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General

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