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- top 10% have a disproportionately high amount of wealth, holding 46%, with the bottom 60% having a mere 15/17%
- income equality is not in a very good shape
- cost of living is getting worse, as the percentage of median disposable income required to service a mortgage has increased by 14% to 41%, and by the same metric, median rents have increased by 5% to 31%
- these cost of living issues do not apply to the highest income households, as they typically own their assets and have high levels of disposable income, meaning they are not feeling the same cost of living squeeze as the rest of Australia. Cost of living is mainly affecting low/middle class citizens

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progressive tax
- will reduce inequality by reducing the wealth levels of the top 10% who hold a disproportionate level of wealth (46%).
- increased progressive tax will decrease the amount of disposable income the top 10% have, which may result in lower aggregate demand, however this will be largely offset by increased government spending

increasing minimum wage
- unequal wealth distribution where lowest 60% have 15-17% of wealth
- no impact on the top 10% - policy ineffective at dealing with inequality on the top end
- increase in minimum wage pushes up hourly wages in general.
- example: (min wage $21 --> $25). a job that pays $25 before the rate increase will ask to be paid a higher wage as otherwise they will join a lower skill/effort job
- increasing minimum wage will help the lowest income Australians as they are more likely to be paid hourly and earn a rate at or close to minimum wage
- cost of living pressure currently high
- median disposable income % for a mortgage 27% --> 41%
- median disposable income % for rent 26% --> 31%
- minimum wage will help these cost of living pressures as disposable income ↑

increasing cash rate
- pretty silly idea right now - will make cost of living worse for low income Australians while high income households with outright owned assets will profit from higher interest rates
- (last two dot points about mortgages and rent) increasing the cash rate will increase rent and home loans even further, pushing more Australians into poverty

increasing jobseeker
- I'm assuming jobseeker encompasses income support:
- no/negligible impact on high income households (means tested) (most are employed)
- will greatly help income inequality for low income Australians as they are guaranteed to be living above the poverty line (depending on the magnitude of the increase)
- expensive scheme, therefore should be used in conjunction with additional progressive tax reforms

implementing inheritance tax
- wealth is usually generational, meaning in effect this is a progressive tax
- medium --> long term impacts
- will help income inequality, by reducing the amount of money the richest Australians have
- ^ will slightly decrease aggregate demand due to lower disposable income which may help with cost of living, but as this is in the long term it won't help the current situation for low income Australians

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In red, analyse the big trends visible in the data 

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In red, analyse the big trends visible in the data 

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In green, write some thoughts on how this could relate to the 5 potential questions

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In green, write some thoughts on how this could relate to the 5 potential questions

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For example, universal basic income would cause AD to shift to the right, would increase inflation. However, .....

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In blue, see what relationships exist between sources of data 

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In blue, see what relationships exist between sources of data 

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bottom quintile:
most of the bottom 20% are unemployed, meaning the majority of this scheme's benefits will go towards them. standard of living will be significantly increased, especially if increased above the poverty line. it increases the incentive to actively search for jobs, eventually allowing them to become independent from government support. overall very good

top quintile:
no direct effect, as means testing will eliminate all, or almost all of this category. depending on how jobseeker increases are funded, they may pay higher taxes.

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increasing jobseeker payments to above the poverty line will cost multiple billion dollars, which may decrease the quality of government services

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The increase of cash rates purpose is to eventually decrease inflation. This is the positive impact of the policy

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When investment rates increase, it often leads to higher levels of capital accumulation. Capital includes assets such as stocks, bonds, real estate, and other financial instruments. Those who already possess significant amounts of capital are more likely to benefit from these increased investment opportunities, leading to a further concentration of wealth among the wealthy individuals and corporations. This can widen the income gap between those who own capital and those who rely primarily on labor income.

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Promote social mobility by reducing the advantages of rich households, providing less privileged backgrounds an opportunity to accumulate wealth, reducing inequality

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The main somewhat negative impact is that it unfairly targets the upper to middle class, however that is going to be an impact when helping inequality most of the time.

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Progressive tax will greatly help with providing the government with more while not taking from the poor, this is because the tax makes the middle and upper classes pay more that the lower class.

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may increase underemployment as businesses can not afford to hire employees for as many hours.

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Taxes are considered a leakage, aggregate demand could decrease somewhat if taxes levied on the wealthy are increased, however, the impact of additional government spending (injection) may outweigh this

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An increase of the cash rate can incentivise higher number of households to increase savings, as increased investment rates on savings accounts would give higher returns to households thus making more people opt into higher savings. Increased savings can provide higher financial stability for households preparing households for unexpected future events, thus contributing to a higher standard of living.

However, since savings are considered a leakage in the circular flow of income, money would be leaving the Australian economy which would lead to lowered aggregate demand and thus a decrease in gross output which will in turn lower total savings, otherwise known as the paradox of thrift.

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the factors of production will increase for business as wages are higher, consequently increasing the price of goods and services. which then reduces the SOL of lower income earners

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It would increase the SOL as higher tax revenue would allow the government to spend more money on social services

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by increasing minimum wage, the lowest percentile of income will be able to afford essentials. This may reduce government expenditure in social welfare that currently is relied upon by lower income earners. Therefore, the government can channel money into other services

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Tax money may not be all used to support lower-income households, in turn reducing standard of living

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Reduces the rapid growth of average household disposable income or wealthier, reducing inequality

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impacts of increasing inflation won’t be mitigated by increasing supply in the labour market since unemployment is currently at an all-time low. thus, there will be further upwards pressure on prices from low supply along with high demand

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Might push people above Henderson poverty line

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Increasing the cash rate could be a valid solution in decreasing the extremely high inflation rates, which have reached upwards of ~7% in 2023 which is outside the RBA 2-3% target range. This control of inflation will help lower the high Cost of Living crisis, aiding the more than 3 million people living bellow the poverty line.

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the policy may have negative effects in increasing inflation. This is due to the population having a higher wage which allowed them to consume within the economy (C+I+G)(X-M). This therefore drives inflation upwards- potentially mitigating positive effects

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Could encourage wealthy people to find more tax loopholes which could result a decrease in government revenue. With this,  lthe government could have less money to invest in social programs which as mentioned previously disproportionally affects low income households thus this policy will have the opposite intended effect

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number of people living in poverty decreases -> current jobseeker payments are below the poverty line

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income inequality decreases with low-income earners having more income, while high-income earners wouldn’t receive payments

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high income earners may earn more with increased profits (high consumption) -> large proportion of this profit goes to them as business owners

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Increasing minimum wage would disproportionately benefit poorer people

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In the long term with people having more disposable income they will spend more money, increasing inflation (which is already high) which will make the cost of living further increase. Thus decreasing the standard of living.

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standard of living increases in the short term since people, specifically low-income earners, have more disposable income. this makes it easier to afford necessities

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could increase employee retention as employees are more inclined to stay with a company

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could increase employee retention as employees are more inclined to stay with a company

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increased employee satisfaction higher wage encourages workers to put more effort in their jobs 

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increased employee satisfaction higher wage encourages workers to put more effort in their jobs 

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improve the overall standard of living for minimum wage workers by providing them with a more appropriate income level to handle cost of living increases 

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improve the overall standard of living for minimum wage workers by providing them with a more appropriate income level to handle cost of living increases 

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In purple, consider the impact of your policy on each quintile. The poorest 20% to the richest 20%. Think about what kind of lives each of the quintiles live.

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In purple, consider the impact of your policy on each quintile. The poorest 20% to the richest 20%. Think about what kind of lives each of the quintiles live.

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If its a "extra smart reasoning" point, or just an impact that isn't obvious, put it in a blue box

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If its a "extra smart reasoning" point, or just an impact that isn't obvious, put it in a blue box

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If its a positive impact, put it in a green box 

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If its a positive impact, put it in a green box 

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If its a "it depends" point, put it in a yellow box

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If its a "it depends" point, put it in a yellow box

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If it's a negative impact, put it in a red box 

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If it's a negative impact, put it in a red box 

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Increase inflation

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The implementation of an inheritance tax can potentially discourage wealthy investors from living and spending money in Australia. In turn this reduces injections into the economy, thus decreasing aggregate demand and job opportunities which primarily affects the standard of living of the working class.

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May encourage wealthy families to donate more to charities rather than the government, increasing societal wellbeing and standard of living

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Increase funds for social services such as infrastructure and  welfare payments, providing more resources and public goods and services to increase standard of living for lower-income households.