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Decomposing wealth inequality in Australia

Author

Listed:
  • Melek Cigdem-Bayram

    (Melbourne Institute: Applied Economic & Social Research, University of Melbourne)

  • Miranda Stewart

    (Faculty of Law, The University of Melbourne)

  • Stephen Whelan

    (School of Economics, The University of Sydney)

  • Gavin Wood

    (Centre for Urban Research, RMIT University)

Abstract

This paper examines dynamics in household wealth inequality in Australia spanning nearly two decades, from years 2002-2018. We use the Household, Income and Labour Dynamics in Australia (HILDA) survey to document trends in household wealth and employ a decomposition analysis to estimate the contributions of socio-economic and demographic factors to changes in inequality. Our analysis shows that while overall inequality in net wealth remained largely unchanged, these masks contrasting trends across the wealth distribution and between property and financial assets. We detect evidence of a ‘disappearing middle,’ with the wealth position of middle-income households deteriorating relative to both the rich and poor. The decomposition analysis highlights the degree to which declining homeownership rates exacerbate wealth inequality, and the countervailing influences of population aging and rising human capital. These findings illustrate how societal changes over two decades, in particular Australia’s worsening housing affordability challenges, are reshaping wealth inequality in Australia.

Suggested Citation

  • Melek Cigdem-Bayram & Miranda Stewart & Stephen Whelan & Gavin Wood, 2024. "Decomposing wealth inequality in Australia," Melbourne Institute Working Paper Series wp2024n13, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    • Handle: RePEc:iae:iaewps:wp2024n13
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    File URL: https://melbourneinstitute.unimelb.edu.au/publications/working-papers/search/result?paper=5169784
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    More about this item

    Keywords

    wealth inequality; decomposition; DFL technique; homeownership;
    All these keywords.

    JEL classification:

    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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