Ann Harding

The Suffering Middle: Trends in Income Inequality in Australia, 1982 to 1993-94

This article analyses labour force trends, household composition and income inequality between 1982 and 1993–94, principally using unit record tapes for the two years produced by the Australian Bureau of Statistics. The results suggest that earnings and private income inequality increased during these 11 years. However, increasing progressivity in the income tax and, in particular, the government cash transfer system fully offset this growing market‐based inequality. Summary inequality measures thus suggest that the distribution of disposable (post‐tax/transfer) and equivalent disposable income was much the same in 1993–94 as in 1982. However, this apparent stability disguised real income gains at the top and bottom of the income spectrum and losses for the middle 50 per cent of Australians.

Measuring Housing Stress: How Much do Definitions Matter?

There has been extensive debate in Australia in recent years about the most appropriate measure of housing stress. This article presents estimates of housing stress in Australia and examines the comparative effects of various definitions on the proportion of households in housing stress. Six measures of housing stress are tested, all with different types of income and criteria. Up-to-date estimates of housing stress at the national and state/territory level are produced from the 2005–2006 Survey of Income and Housing from the Australian Bureau of Statistics. These estimates are then compared to identify the least sensitive indicator of housing stress across household tenure type.

Financing Higher Education: An Assessment of Income-contingent Loan Options and Repayment Patterns Over the Life Cycle

There has been growing worldwide interest in income contingent loans (ICLs) for tertiary students in recent years. This paper lists the design issues which have to be tackled when introducing an ICL and describes the solutions adopted by the Australian and New Zealand governments. Although there is keen interest in the likely repayment patterns for ICLs after graduation, it is very difficult to model such repayments using standard economic cohort techniques. This study uses dynamic micro-simulation to simulate the likely future repayment profiles for the two Australian ICL schemes and assesses the proportion of total debt repaid.

Improving Work Incentives and Incomes for Parents: The National and Geographic Impact of Liberalising the Family Tax Benefit Income Test

The effective tax rates and possible work disincentives created by Australia’s tax and welfare systems have been receiving extensive policy attention in recent years. Family Tax Benefit-Part A (FTB-A) is one of the key causes of high effective marginal tax rates for many families. This study uses national and spatial microsimulation models to evaluate the national and local impacts of a possible FTB-A reform option, which involves reducing the income test withdrawal rate associated with the FTB-A income test. The modelling suggests that the option would be an effective way to reduce high effective marginal tax rates for around 415,000 parents of FTB-A children, would benefit around 850,000 families, and would deliver additional assistance to middle income families living on the outskirts of our cities.

The Distribution of Taxes and Government Benefits in Australia

Governments influence income distribution in many ways, including through an extensive web of regulatory and non-budgetary policies. However, the distribution of income is more directly affected through the billions of dollars of taxation revenue that government raises annually and the social programs upon which a large part of that revenue is spent. This study examines the distribution and redistribution of income in Australia in 2001–02.

The Lifetime Distributional Impact of Government Health Outlays

This article examines the lifetime redistributive impact of government health outlays and finds that such outlays redistribute income from the lifetime rich to the lifetime poor and from men to women.

Simulating the characteristics of populations at the small area level

These days spatial microsimulation modelling plays a vital role in policy analysis for small areas. Most developed countries are using these tools in ways to make knowledgeable decisions on major policy issues at local levels. However, building an appropriate model is very difficult for many reasons. For example, the creation of reliable spatial microdata is still challenging. In addition there has not been much research on testing statistical significance of the model outputs yet, and deriving estimates of how reliable these outputs may be. This paper deals with the spatial microsimulation model building procedure for simulating synthetic spatial microdata, and then estimating small area housing stress in Australia. Geographic maps for small area housing stress estimates are illustrated. The research also demonstrates a new system to test the statistical significance of the model estimates.

Towards a Negative Income Tax System for Australia

The undue complexity of the Australian tax‐transfer system is outlined as are the associated high effective marginal tax rates for many individuals and families. A negative income tax system is a possible solution to these problems. The most radical version of negative income tax is a ‘basic income/flat tax’ system which combines universal tax credits (that vary according to presence of children, disability etc.) and a flat tax rate on private income. Using NATSEM’s microsimulation model STINMOD it is found that to ensure that no current social security beneficiaries become worse off under such a system would either be very expensive to introduce or require a tax rate that is likely to be unacceptably high. Less radical versions of negative income tax are also costed, incorporating the possibility of varying tax rates, the tapering out of tax credits, and placing some restrictions on the granting of tax credits. This makes negative income tax look more feasible. The analysis does not incorporate behavioural responses. Since the motivation for a negative income tax system is largely to achieve such responses (for example, labour supply responses), this feasibility analysis might have been unduly harsh. Research is required to incorporate behavioural responses into the analysis.

Conclusions and Future Research Directions

The aim of this chapter is to review progress in spatial microsimulation as portrayed through the chapters in this book. We structure this review around four key themes which resonate throughout the book. First is the actual task of building a spatial microsimulation model – the nuts and bolts of model construction in terms of data sets required and how spatial microsimulation can add considerable value to the social sciences through data merger/integration. Second, we review progress made in terms of techniques for the creation of new spatial microdata. Third, we discuss the new contributions relating to model calibration and validation. It is these areas which have possibly developed most rapidly. Finally, we take stock of the breadth of applications given in the book in relation to both static and dynamic models. In addition to reviewing progress in these areas, we also speculate on the future research agenda.

Trends in Effective Marginal Tax Rates in Australia from 1996-97 to 2006-07

This article reviews trends in effective marginal tax rates (EMTRs) from 1996–1997 to 2006–2007 for working-age Australians. Although sweeping income tax cuts reduced effective tax rates for many taxpayers, the extension of income-tested welfare payments and tax concessions worked in the opposite direction. The proportion of working-age Australians facing EMTRs of more than 50 per cent increased during the period, from 4.8 to 7.1 per cent, representing some 910,000 Australians. This article also provides the first international comparisons of how the distribution of EMTRs for earners in Australia compares with those prevailing in Europe.