Why do so few have so much wealth?

There’s an obvious wealth divide in Australia. Drive through or use Google street view to peruse Perth’s Cottesloe, Melbourne’s Toorak or Sydney’s Darling Point. You will find no shortage of decadent mansions worth more than any working-class person will likely make in their entire life. Walk through any capital city CBD. You’ll see flashy shops selling luxury items to the richest few alongside desperate people begging for loose change.

The Inequality in Australia 2024 report, published in April by the Australian Council of Social Service and the University of New South Wales, estimates that the richest 10 percent of households have on average fifteen times as much wealth as the bottom 60 percent. Almost half of Australia’s wealth is concentrated in the top decile, and less than a fifth in the bottom six.

Home ownership, or lack thereof, is the biggest contributor to the wealth gap. This is unsurprising, given that many working-class people find it difficult to find an affordable home to rent, let alone buy. And when they do rent, they’re probably paying that top 10 percent, who own (or rather, hoard) two-thirds of all investment properties by value.

Workers who do own their home are usually still paying off the mortgage, and are therefore subject to the whims of the banks that set their interest rates. Being squeezed for cash by the banks via home loan repayments is not a problem if you own your home outright and are adding a second, third, fourth, or fifth property to your portfolio.

Inequality in Australia 2024 compares household wealth in 2023 to 2003. To put the findings bluntly: the rich are getting richer while most Australians are falling further behind them. Since 2003, the top 10 percent accrued almost half of the overall growth in household wealth. Their average wealth went from $2.8 million to $5.2 million per household, an increase of 84 percent. The bottom 60 percent went from an average of $222,000 to $343,000—a 55 percent increase.

Why is wealth accumulating at the top? One part of the problem is government policy that favours the rich.

Negative gearing and the capital gains tax (CGT) discount are the most notorious housing policies. The latter was introduced by John Howard’s federal Liberal government in 2000, but every subsequent government, Coalition and Labor alike, has defended them.

Negative gearing lets investors deduct any losses on properties they own (including interest payments on property loans) from their taxable income. This subsidises investors and shields them from needing to sell their extra houses.

The CGT discount favours the wealthy. It lets investors who profit from capital assets (investment properties are one category) halve the amount of tax paid on that profit if they hold the asset for twelve months or more. By the Treasury’s own estimates, this left more than $23 billion in the coffers of property investors in the 2022-23 financial year instead of in public hands, where it could have been used to boost social welfare or—here’s an idea—build public housing.

Both of these policies primarily benefit landlords, especially big landlords. They make it less risky and more lucrative for investors to speculate on the housing market. They create an incentive to accumulate properties and endlessly push up house prices, driving the wedge between the wealthy and the rest of us ever deeper.

Scrapping negative gearing and the CGT discount would slow down the accumulation of wealth in the hands of a minority and alleviate the housing crisis. Even better would be forcing landlords to sell homes that are vacant for too long. But none of this is likely when parliament is full of landlords. That includes PM Anthony Albanese, who this year evicted a tenant from one of his several properties so he could sell it and put the money toward the $4.3 million mansion he bought in October.

Beyond real estate, other factors in wealth inequality include savings, superannuation, and assets like cars. These are all obviously heavily dependent on a household’s income level and necessary expenditures like rent and mortgage repayments.

To address this area of inequality, the simplest solution is a real wage rise for workers. In 2021 inflation exploded ahead of average pay rises. The Consumer Price Index (CPI, how much more expensive basic goods are than a year prior) peaked at just under 8 percent at the end of 2022, while wages were growing by 3.4 percent on average, according to the Australian Bureau of Statistics. Only this year did wages start rising more than CPI, and then only barely.

So Australian workers have been set back by years of real pay cuts. But the Labor government doesn’t seem at all interested in doing anything to get them caught back up to where they were, let alone substantially ahead. Many of their “cost-of-living relief” policies don’t do anything about inequality. For instance, the Stage 3 tax cuts gave all taxpayers an income boost, including the rich, who gained the most.

It’s not as though Albanese’s hands are tied. His government could raise welfare payments to the minimum wage and wipe out student debt. It could give public sector workers enough of a pay rise to make up for years of declining wages, which would put pressure on private employers to do the same.

It could pay for all this by taxing the living daylight out of the rich. Undoing the Stage 3 cuts for the top earners would give the budget $148 billion extra to work with over the next ten years—turning the dial back the other way and increasing their taxes would net even more.

If we wait around for governments to be nicer, nothing will ever get better. Things meaningfully improve only when the fucked-over fight back. And the most powerful force in this category is the working class.

Workers can strike to demand higher wages. By refusing to work, they hit their boss in the only place the boss cares about: the bottom line. The recent strikes by workers at Woolworths distribution warehouses should be defended and celebrated as the path forward for winning better pay and conditions.

But as powerful as they are, strikes are rare. The leaders of the trade unions, the highest body of which is the Australian Council of Trade Unions (ACTU), have, for the most part, collaborated with governments and bosses, rather than fighting them, for decades.

Any discussion about the working class’s declining living standards has to account for the failures of its organised leadership. Concessions can be forced, and bad policies overturned, but it takes a fight. Instead, this year, the ACTU has been helping and justifying the government’s hostile, undemocratic takeover and hamstringing of the CFMEU, one of Australia’s strongest unions.

But the main reason there’s a wealth divide in Australia is not government policy or the weakness of the trade union movement.

The main cause of inequality is capitalism itself. Capitalism is based on a tiny minority of the population owning and controlling society’s productive economic assets. Most of the rest of the population have to work for the capitalists, making their profits for them and getting paid relative scraps in return.

In capitalism, everything is commodified and organised via the market—including housing. For capitalism, houses exist primarily, not for living in, but for making money from. The housing market being rigged for landlords isn’t just because of negative gearing and the CGT discount. That housing is bought and sold on a market means it will always favour those with the most economic resources.

In a society organised around profit, workers will never get a fair deal. Every cent of profit the bosses keep for themselves is in effect stolen from the people who actually did the work. So, if we want an equal society without poverty and destitution, we need to end capitalism.