Keywords

Introduction

The cost of living is a major social and political issue in Australia. Political and media analyses of cost of living frequently focus on the cost of goods and services, with political rhetoric often centred around the need to reduce costs for consumers. While escalating costs are clearly important in contributing to unaffordability of essential expenses, less attention is focused on the economic inequalities that shape the experience of poverty in Australia. As research shows, the common factor across experiences of energy, food, and transport poverty is low income. Whereas housing unaffordability is shaped by multiple factors, one significant issue is low wage growth. Thus, discussions of cost of living, as important as they are, also need to occur alongside a broader analysis of the structural causes of economic inequality.

In developing this analysis, this paper focuses on attempts by successive Australian governments to weaken redistributive measures in Australia, such as taxation, and to undermine industrial relations regulations supporting labour. These strategies have fundamentally contributed to greater wealth and income inequality in Australia, which are underscored by increasingly insecure experiences of work. As this chapter argues, these policy reforms have shifted power from workers towards the owners of capital in Australia, in the name of creating a more favourable investment environment for business. This chapter connects the policy rhetoric around the apparent benefits of business profitability, with the resultant economic inequalities and insecurities which have shaped the lives of many people in recent decades. Thus, the ‘cost of living’ crisis can be understood more fully in relation to the structural reforms that have affected employment security, preferenced capital and contributed to the deepening of economic inequality in Australia.

‘Cost of Living’ Crisis for Households on Low Incomes: Energy, Food and Housing

The cost of living in Australia is a major political issue, with the 2022 Federal Election focusing on concerns related to energy and housing affordability, as well as the cost of food (Baker, 2022; Read, 2022). Major political parties addressed these issues by focusing on the need to either reduce costs, or introduce market mechanisms designed to help consumers meet these costs. In his speech announcing the 2022/2023 budget, less than two months prior to the 2022 election, Treasurer Josh Frydenberg (2022) repeatedly referenced the government’s ‘Cost of Living’ package, promising ‘cost of living relief now’. However, promises were largely contained to one-off payments of $250, the one-off $420 tax offset for low-to-middle income earners, and a pledge for cheaper medicines and a short-term fuel excise to help reduce the cost of petrol (Frydenberg, 2022).

Rather than address the causes of inequality, political rhetoric frequently focuses on the impacts of inequality, with debate around the cost of living centred around individual experiences that people have as consumers. Unaffordability of housing, energy, transport and food is conceptualised as a consumer experience, rather than thinking more deeply about the structural causes behind these varied inequalities that can significantly impact peoples’ lives. Income inequality, for example, and employment insecurity and precarity is frequently overlooked as a fundamental factor which has contributed to cost of living pressure. This chapter will first provide an overview of how poverty and inequality can be understood in relation to energy, food and housing, showing how these issues intersect with broader experiences of disadvantage, such as negative health outcomes.

Energy Poverty

Energy poverty is related to the ability of a person to be able to heat their home (Fry et al., 2022; Vera-Toscano & Brown, 2022). As Vera-Toscano and Brown (2022) describe, energy poverty is shaped by energy cost as a proportion of a person’s income. Energy prices have grown significantly in Australia (since 2007, the cost of electricity for households has grown by 76%), impacting people on low incomes. According to Vera-Toscano and Brown (2022, p. 515):

On average, low‐income households spend 6.4 per cent of their income on energy, while high‐income ones spend far less relative to their incomes—an average of 1.5 per cent. The situation for many low‐income households has gone from bad to worse, and one in four of these households are now paying over 8.8 per cent of their income in energy, a figure that goes up to over 9.7 per cent for those households relying on income support payments such as Newstart/JobSeeker.

Heating is directly connected to health and wellbeing, particularly among older populations. Owning wealth, including assets such as a home, is a key factor in protecting against energy poverty (Fry et al., 2022, p. 9). Conversely, people who are not homeowners are more susceptible to energy poverty. In addition, Vera-Toscano and Brown (2022, p. 526) found that people living by themselves, immigrants from non-English speaking countries, single-parent households, households with one member living with a disability are at a much greater risk of experiencing persistent energy poverty in Australia. As a recent ACOSS (2023) study showed, nearly two-thirds of people receiving income support had difficulty cooling their homes throughout the Australian summer, resulting from a range of factors including the cost of electricity.

Food Insecurity

Cost of living pressures are frequently associated with the cost of groceries, and experiences of food insecurity. Pollard et al. (2021, pp. 1–2) explain how food insecurity, often measured in relation to food stress (experienced when a household spend over 25% of income on food), is shaped by a number of factors including household income, housing costs, food availability and cost, and employment. Further, Booth and Pollard (2020) argue that food insecurity represents a form of structural violence, resulting from government inaction on economic inequality, including the meagre growth in welfare payments in Australia. Women on low incomes are at high risk of experiencing food insecurity, due to gender inequalities that they may have experienced in the workforce and in their private lives, such as unequal pay, heightened risk of precarity in paid work, unequal distribution of work in the home and experiences of gender-based violence (Lawlis et al., 2022). Lawlis et al.’s (2022) study of women experiencing poverty in Australia found that only 40% of participants consumed three meals per day, while 30% of participants ate only one meal per day. Charitable food organisations have become normalised as a source of food (Lawlis et al., 2022), whereas the structural causes of food insecurity, such as economic inequality, are not adequately addressed by governments in Australia (Pollard, 2020; Pollard & Booth, 2019).

Housing Affordability Stress

The cost of housing in Australia is prohibitively expensive for many people, both in rental markets and markets for home ownership. Housing unaffordability has emerged as a major example of inequality within Australia, with housing costs increasing at a rate that far exceeds wage growth (Banks & Bowman, 2020; Beer et al., 2016; Lawlis et al., 2022; Saunders, 2017). Housing affordability stress is inextricably connected to income inequality and employment precarity, and can have a significant impact on peoples’ mental and physical health (Baker et al., 2016; Beer et al., 2016; Bentley et al., 2016; Borrowman et al., 2017).

House prices in Australian capital cities have increased by 250% since the 1990s, while income inequality has also risen throughout this period (Sydes & Wickes, 2021). This has meant that many younger people, and people on lower incomes, have experienced significant challenges in accessing rental and housing markets (Sydes & Wickes, 2021). As a consequence, housing unaffordability stress, in inner-city locations in particular, has resulted in widening socioeconomic segregation in cities such as Melbourne and Brisbane (Baker et al., 2016; Baum & Duvnjak, 2013; Sydes & Wickes, 2021). Former working-class suburbs such as Collingwood and Fitzroy have become increasingly desirable locations for wealthier population groups, due to proximity to the city, leading to dramatic increases in property values (Baker et al., 2016; Randolph & Tice, 2014). Consequently, as Sydes and Wickes (2021) highlight, inner-city suburbs are now highly populated by people on high incomes, whereas low income, working-class populations have had to relocate to outer-suburban areas. This has caused a growing geographical divide between classes (Sydes & Wickes, 2021).

Housing unaffordability has forced people to relocate from inner-city suburbs, which have good access to services, job opportunities and public transport, to places that are more remote, have fewer available services and where employment options are reduced (Baker et al., 2016; Baum & Duvnjak, 2013; Borrowman et al., 2017; Randolph & Tice, 2014, 2017; Stilwell, 2017). While this disparity within cities is considerable, the divide between cities and regional areas is even greater (Stilwell, 2017). As Stilwell describes, spatial inequalities contributing to significant geographic variances in wealth and income are made apparent by differences in mortality rates (2017). Between 2009 and 2011, people who lived in the lowest socioeconomic areas in Australia experienced a 30% higher mortality rate than those living in the highest socioeconomic areas (Stilwell, 2017, p. 23).

Despite the structural causes of housing affordability stress, and the intersecting inequalities associated with this, the issue is framed as one of individual choices and behaviours. As columnist in The Australian, Bernald Salt, once claimed:

I have seen young people order smashed avocado with crumbled feta on five-grain toasted bread at $22 a pop and more. I can afford to eat this for lunch because I am middle aged and have raised my family. But how can young people afford to eat like this? Shouldn’t they be economising by eating at home? How often are they eating out? Twenty-two dollars several times a week could go towards a deposit on a house.

Transport Poverty

Socioeconomic segregation is also associated with experiences of transport poverty, which can be understood in terms of transport affordability, mobility and access (Churchill, 2020). Transport poverty results from disproportionately high expenditure on transport costs, and is related to poor public transport infrastructure and rising fuel prices (Churchill, 2020). Low income is therefore a major contributing factor towards transport poverty (Churchill, 2020). In addition, where people live is a key factor shaping public transport access. Thus, the spatialised inequality which is caused by housing unaffordability in inner-suburban areas and lack of resources and infrastructure in outer-suburban areas, is exacerbated by experiences of transport poverty which limit mobility. However, in maintream political discourses, the cost of living is frequently discussed in terms of petrol prices instead of the broader structural factors that impact transport mobility, such as public transport in outer-suburban areas or the over-reliance of Australian cities on cars.

Each of the issues highlighted here is framed in political discourses around the ‘cost of living’ crisis as financial transactions relating to prices. Through this discourse, people are conceptualised as consumers in markets. Policy responses focus on supporting people to participate in those markets, with very little mainstream political focus on the intersecting, structural causes and experiences of poverty. Within this context, the cost of living is framed as an individualised consumer issue rather than a deeper-lying consequence of broader social structures which have impacted labour, such as income and wealth inequality. In addition, as Stanford (2023, pp. 1–2) found, business profitability is a key contributing factor to the growing levels of inflation which is driving up costs:

As of the September quarter of 2022…Australian businesses had increased prices by a total of $160 billion per year over and above their higher expenses for labour, taxes, and other inputs, and over and above new profits generated by growth in real economic output… Without the inclusion of those excess profits in final prices for Australian-made goods and services, inflation since the pandemic would have been much slower than was experienced in practice.

Having highlighted how the cost of living is framed in these terms, yet is fundamentally shaped by income, I now turn to economic inequality and its causes in Australia.

Economic Inequality: Wealth and Income

Within the past three decades, income and wealth inequality has markedly increased in Australia. This has largely been facilitated by social, industrial and economic reforms of successive Australian governments (Redden, 2019). While the costs of necessities are undoubtedly an important part of this story of poverty in this country, inequalities in income and wealth are important to understand as a key driver of the cost of living pressure.

Income Inequality

Income inequality has risen rapidly in many Western countries since the 1970s, and is particularly pronounced in Australia (Freestone, 2018; Johnson, 2019; Kinsella & Howe, 2018; Piketty, 2014; Quiggin, 1999; Spies-Butcher, 2020; Stanford, 2019). For example, incomes for the top 1% in Australia have increased at a greater rate than in any other OECD country (Redden, 2019). Income inequality can be understood in relation to the significant income gains that have been enjoyed by those in the highest income brackets (ACOSS, 2020a; Redden, 2019; Saunders et al., 2022). The top 1%, 5% and 20% of income earners in Australia have captured the majority of income gains since the early 2000s, whereas those on low-to-middle incomes have experienced minimal increases to income (ACOSS, 2020a; Saunders et al., 2022). As Saunders et al. (2022, p. 567) explain, from 2005/2006 to 2017/2018, in relation to the Gini coefficient, ‘[t]he average proportionate gain for those in the top fifth of the income distribution was almost 50% greater than for those in the bottom fifth and inequality increased’. As Saunders et al. (2022) suggest, this reflects a significant lost opportunity to capitalise on the wealth generated by the mining boom to reduce inequality, while also highlighting how governments have prioritised economic performance over social performance. ACOSS and UNSW (2020, p. 14) suggest that income inequality is also closely associated with workplace inequalities, such as unequal access to permanent, full-time work, wide disparities in hourly pay, and the persistent gender pay gap in Australia (with average male wages 1.4 times higher than average wages for women). Further, the wealthiest 20% of the population capture a large share of income from investments (ACOSS & UNSW, 2020). This latter point illustrates the significance of wealth inequality, which I will highlight as a factor that compounds income inequality.

Wealth Inequality

Wealth inequality is a significant aspect of economic inequality. Ownership of wealth is concentrated among high-income households in Australia (Murray & Chesters, 2012; Stanford, 2019). According to OXFAM (2018), the wealthiest 10% of Australians owned 52.3% of wealth in Australia. Further, the wealthiest 1% owned 22.9% of all wealth, exceeding the wealth owned by the bottom 70% of the population (OXFAM, 2018). This reflects Richardson and Denniss’s (2014) estimation that in 2014, the wealthiest 7 individuals in Australia held greater wealth than the bottom 1.73 million households combined. As ACOSS (2020b) have recently highlighted, between 2003/2004 and 2017/2018, the wealthiest 5% of people in Australia experienced a 76% increase in the value of that wealth, whereas those on the bottom quintile (20% of the population with the least wealth) only saw a 6% increase in the value of that wealth. This highlights that while wealth inequality in Australia is great, there are clear indications that existing economic structures are likely to facilitate further increases in wealth ownership from the wealthiest people and the rest of society. These observations of growing wealth inequality are also closely associated with the relationship between wealth and power. Through various means, the wealthiest people in Australia have been able to convert their economic power into political power, exerting influence in ways that aim to restore the status quo and protect their wealth (Murray & Chesters, 2012; Stilwell, 2017).

The growing inequalities in wealth and income reflect similar trends occurring in other Western countries, though it is important to highlight that the commonality of this experience does not mean that inequality is a naturally occurring phenomenon. This chapter now addresses the question of why inequality is increasing in Australia, how is this allowed to occur in a rich country, and why discussions of cost of living pressure rarely focus on inequality?

Why and How Has Inequality Increased in Australia?

Neoliberalism, Power and Markets

In charting increases in inequality in Australia alongside escalating cost of living pressures, it is essential to consider the influence of neoliberalism. Prior to the emergence of neoliberalism in Australia, many key industries and infrastructure had essentially been owned and controlled by government. High levels of government intervention in markets designed to protect Australian business interests and those of the broader Australian workforce. This time, particularly from 1947 to 1974, is referred to as the ‘long boom’, which featured sustained high economic growth and low unemployment (Bessant, 2018; Pagan, 1987). During this period, the high levels of income and wealth inequality which had characterised the decades prior to the Great Depression, had gradually been reduced. Workers were largely supported through considerable union coverage across industries, while policy measures such as centralised wage fixing supported wage growth.

From the 1980s onwards, successive Australian governments have sought to restructure key aspects of Australian society, including industrial relations and work, welfare and taxation, finance and housing. In the name of creating free, competitive markets which would lead to a more competitive and productive economy, this economic and social restructuring has restored business profitability, created inequalities between high and low-income earners, and inequalities between labour and capital (Cahill, 2010; Redden, 2019). In this regard, the neoliberalisation of key aspects of Australian society can be understood as a political project, designed to facilitate the creation and expansion of markets, which have ostensibly shifted power from labour towards capital (Redden, 2019). According to Redden (2019, pp. 714–715), neoliberalism has legitimised the exploitation and concentration of wealth, from the broader population to upper classes in countries such as Australia, and from economically exploited countries to the wealthiest countries which benefit from that exploitation.

Despite the social and economic impacts associated with neoliberalism, the great power of neoliberalism is its capacity to be projected as common-sense, and as a naturally occurring order which operates outside of political intervention. Markets, for instance, are constructed as apolitical mechanisms for determining value and cost. However, Jessop (2016, p. 413) describes how neoliberalism does not occur spontaneously, but involves ‘the exercise of political power to establish and consolidate [markets] and, when confronted with crisis, to rescue them’. As Jessop (2016, p. 411) states:

Neoliberalization is a distinctive economic, political, and social project that tends to judge all economic activities in terms of profitability and all social activities in terms of their contribution to differential capital accumulation. This might suggest that neoliberalism promotes the primacy of the economic but, because its extension and reproduction require continuing state support and, indeed, often involve what Weber (1975) called ‘political capitalism’, one might well argue that it entails a primacy of the political.

In many ways, this reflects Pusey’s (2016, p. 1) contention that neoliberalism can be understood as ‘the doctrine that economies, markets and money can always, at least in principle, deliver better outcomes than states bureaucracies and the law’. However, Jessop (2016) draws attention to the political work required to protect and fortify neoliberalism, reflecting the ways that neoliberalism involves an extension of the powers of the state, rather than the retreat of the state from social and economic life.

As Jessop (2016, p. 412) describes:

Breaking with the post-war Atlantic Fordist settlements, based on an institutionalized compromise between capital and labour, neoliberal policies were pursued in order to modify the balance of forces in favour of capital. The neoliberal policy agenda has six key planks: liberalization, deregulation, privatization, market proxies in the public sector, internationalization, and cuts in direct taxation.

These ‘six planks’ are significant in understanding inequality and cost of living pressure in Australia. Before highlighting the influence of policies intended to reduce the collective power of labour in Australia, and weaken the capacity of taxation to redistribute income and wealth across society, I will draw attention to privatisation in key industries and markets, including energy and housing, which have shaped cost of living pressures.

First, the privatisation of energy markets in Australia is an example of policy making which preferenced liberalised markets rather than state-ownership, and has involved the sale of public assets (Cahill & Beder, 2005). Privatisation was claimed by business interests such as the Business Council of Australia to result in increased efficiencies due to competition within private markets, which would ultimately lead to cost savings for consumers (Cahill & Beder, 2005; Chester, 2015). However, Chester (2015) has argued that this claim is a ‘myth’ of privatisation, which has largely resulted in government assets being sold to private capital, without subsequent decreases in the cost of energy. Further, the net worth of the public sector was significantly reduced through privatisations in industries such as energy (Cahill & Beder, 2005). This is a significant change, and one which is rarely discussed in relation to power bills, that are often the centre of much debate concerning cost of living. While the Australian electricity sector consisted of 34 government-owned corporations, privatisation resulted in electricity being controlled by private corporations (Chester, 2015). This has reduced the capacity of governments to regulate energy prices, with faith placed in the willingness of energy providers to pass on any efficiency savings to consumers.

Second, in recent decades the policy shift towards market-based approaches to public sector policy issues has contributed to government neglect of public housing in Australia (Jacobs, 2015; Jacobs & Flanagan, 2013; Sisson, 2021). State and federal government support for public housing has declined, resulting in diminished public housing stock relative to demand, long waiting lists for public housing, and inadequately maintained buildings (Jacobs, 2015; Jacobs & Flanagan, 2013; Nicholls, 2014). Further, state governments have sold large tracts of inner-city public housing, reflecting the transference of state assets to private ownership. As Morris (2019, p. 1072) highlights, the New South Wales government sold 20,000 properties between 2011 and 2017, of which approximately 4,000 properties were public housing (Morris, 2019). The reduced funding for public housing, coupled with the sale of public housing dwellings, reflects a shift towards rental markets as a form of tenure in Australia (Baker et al., 2016). As Baker et al. (2016, p. 73) describe, rental assistance payments provided by the government have assumed priority, as a market-based approach to supporting housing:

This shift in policy focus moved welfare housing from the (largely) fixed public housing infrastructure to the more widely distributed and flexible rental sector. As a result, many households in receipt of housing assistance also moved from the relatively security of ‘tenure for life’ to the shorter, and less secure tenancies provided in the private sector.

While rental accommodation is less secure than public housing, the cost to renters on low incomes is illustrated through increasingly unaffordable rental prices (Hannam, 2023).

The emergence of inequalities in income and wealth, coupled with the increasing cost of living pressures, are largely a consequence of decades of state and federal government policy designed to restore the power and profitability of capital. In responding to the question of why inequalities have persisted in countries such as Australia, Raewyn Connell (2013, p. 279) replies:

The short answer is that they are intended to. The global spread of neo-liberal politics through the last 40 years has led, in almost every affected country, to rising inequalities of income and wealth, new and startling concentrations of privilege and the weakening or dismantling of redistributive mechanisms. This is not an accidental side-effect. Restoring privilege is central to the political dynamics of neoliberalism…Inequality is central to neo-liberal strategies for capitalist development especially creating labour market insecurity (flexibility) and replacing collective bargaining with incentives for individual ‘achievement’.

Reducing the Costs of Doing Business

The recent Liberal National Coalition Governments have aimed to enhance business profitability, claiming that this is in the best interests of Australian society. Reducing the costs of doing business, namely through restricting taxation and reducing the cost of labour, is a key means through which governments have sought to prioritise business growth and investment. This claim is based on the flawed logic that enhanced prosperity at the top will ultimately flow through to all members of society (Saunders et al., 2022; Western et al., 2007). This logic of ‘trickle-down economics’ has been widely debunked (Stiglitz, 2015), though is still prominent in Australian policy discourses and political rhetoric. In particular, the recent Liberal National Coalition Government responded to the economic challenges created by the Covid-19 pandemic, promising to enable private enterprise to ‘earn our way out of this crisis’, as then Prime Minister Scott Morrison claimed (O’Keeffe & Papadopoulos, 2021; Papadopoulos & O’Keeffe, 2023).

Similarly, pressures created by global competition for investment are framed as another motivating factor for creating economic conditions which favour capital. The rationale for this argument is that the potential for investment in Australia is undermined by high wages and supposedly prohibitive environmental protections (Quiggin, 1999; Stanford, 2019). As then Prime Minister Tony Abbott claimed:

Our competitors are cutting taxes, reducing compliance costs, building infrastructure and reining in government expenditure. We need do likewise if we are to compete with them. (Department of the Prime Minister and Cabinet, 2014, p. iii)

This rationale is further illustrated by the lament of Australia’s richest person, Gina Rinehart, that Australian workers were not competitive against African workers, who she claimed were ‘willing to work for less than $2 per day’ (Ryan, 2012). While this is an extreme perspective, it reflects the more widely held belief in Australian policy circles that wages and taxation have been too high (Quiggin, 1999; Stanford, 2019). This paper will now focus on attempts from successive Australian governments to restore the profitability of capital, by introducing taxation and industrial relations reform which reduces these costs.

Taxation

Taxation reform, implemented by successive Australian governments since the 1980s, has weakened its redistributive effect and contributed to increasing economic inequality in Australia (Duck, 2019; Redden, 2019; Saunders et al., 2022; Whiteford, 2017). This is evident in a range of policies that have either sought to alleviate tax paid by high-income earners, businesses and owners of capital, or shift the tax burden onto the wider population.

First, reductions in the corporate taxation rate are particularly significant. The Hawke and Keating governments reduced corporate tax from 49% to 36%, which the Howard Government further reduced to 30% (Redden, 2019). Second, ongoing support for negative gearing, which enables property investors to reduce income tax payments, and reductions to the capital gains tax, have significantly benefitted owners of capital (Beer et al., 2016; Redden, 2019). The Howard Government introduced a 50% reduction to the Capital Gains Tax in 1999, resulting in an annual $6 billion loss to the federal budget (Redden, 2019). As cited by Redden (2019, p. 717), the highest 2% of income earners capture 50% of capital gains in Australia, illustrating that this reform directly supports the richest people within Australia with little discernible benefit across society. Third, successive attempts to restructure income tax in Australia have overwhelmingly benefitted high-income earners, which significantly weakening government revenue (ACOSS, 2020b; Duck, 2019; Redden, 2019; Saunders et al., 2022;). As Redden (2019) and Duck (2019) suggest, income tax reform implemented by the Howard Government was made possible by the mining boom, yet this ultimately led to longer-term budgetary restrictions which limited the government’s capacity to fund social and human services. In addition, cuts to superannuation tax, contained within the 2022 Federal Budget, are projected to reduce government revenue by $52.5bn (Karp, 2023). Fourth, the Howard Government’s introduction of a flat 10% Goods and Services Tax (GST) also contributed to increasing economic inequality in Australia, with consumers essentially bearing the same cost increases regardless of income (Redden, 2019, p. 715). In the context of reduced taxation for high-income earners, businesses and owners of capital, this policy disproportionately impacts people on low incomes who have less capacity to purchase goods such as food and absorb the additional cost created through the GST.

Reducing the Cost of Labour

Alongside the inequalities created through taxation reform, industrial relations reform throughout the past four decades in Australia represents a systematic attempt by policy makers to weaken the collective power of labour (Cahill, 2010; McKenzie, 2018; Stanford, 2019). An example of this is the introduction of income Accords by the Hawke Labor Government, which sought to suppress wage growth and limit actions such as strikes (Humphrys, 2018a, 2018b; Stanford, 2019). As Humphrys (2018b, p. 50) states, the Accords (operational between 1983 and 1996) were signed by the Australian Council of Trade Unions and the Labor Government. According to Humphrys (2018b, p. 50), the Accords:

…set out wide-ranging economic and social policy. In return for trade unions restraining wage demands to the level of inflation and making ‘no further claims’ via industrial action, the agreement promised moderation on prices and non-wage incomes, an expansion of the social wage, and the implementation of progressive tax reform.

Restraint on wage growth was essentially traded for workers’ benefits in other areas, such as renewed government support for Medicare (Stanford, 2019, pp. 186–187). However, this contributed to a decline in real wages and reduction in labour’s share of profits (Stanford, 2019).

Further, measures designed to transfer power towards employers, such as decentralised wage negotiations, have further reduced the capacity of workers to demonstrate collective power (Cahill, 2010; McKenzie, 2018; Western et al., 2007). This shift introduced individualised wage bargaining and enterprise-level bargaining, whereby wages were negotiated either between the individual and their employer, or collectively negotiated by workers (and representatives) and the employer. This process has gradually replaced the award system whereby wages and working conditions were negotiated across sectors, necessarily involving trade unions, and were administered by Federal and State courts (Stanford, 2019; Western et al., 2007). The dismantling of this system is a clear example of a policy that sought to curb the power of workers and trade unions. This occurred alongside sustained campaigns from conservative lobby groups and think tanks, such as the National Farmers Federation and the HR Nicholls Society, which agitated for industrial relations reform that would weaken the position of unions and collectivised labour (O’Keeffe, 2021).

Declining wage growth and union membership, as well as income inequality, is a significant consequence of the shift away from centralised wage bargaining (Falzon, 2018; Kinsella & Howe, 2018; McKenzie, 2018; Stanford, 2019). These changes are also associated with increased flexibility of labour markets, which have contributed to the decline in permanent full-time work, and dramatic increases in casual, short-term work throughout the 1980s and the emergence of the gig economy in more recent years. As stated by Stanford (2019, p. 187):

…the history of Australian labour market policy since the 1980s reflects a sustained and multidimensional strategy to enhance employers’ control in workplaces, discipline workers and their unions, individualise employment relations, and restore and support profits.

The most notable example of this approach is the Workplace Relations Amendment (Work Choices) Act 2005, introduced by the Howard Government to drastically reduce the capacity for workers to collectively organise, essentially criminalising some actions taken by workers and unions (Cowling et al., 2006; Peetz & Pocock, 2009). As an example, Cowling et al. (2006, p. 228) describe how WorkChoices would enable businesses with less than 100 employees to be exempt from unfair dismissal laws and be able to summarily dismiss their workers. Further, as Greg Combet (2005) described, workers and union officials would be liable for fines of up to $33,000, for seeking inclusion of basic union activities in an enterprise bargaining agreement.

The Labor Government’s introduction of the Fair Work Act and Fair Work Commission in 2009 sought to re-introduce some element of collective bargaining, though this was restricted to the enterprise level and in many ways reinforced employers’ power in their relationship with workers (Creighton, 2011; McKenzie, 2018). For example, the Fair Work Commission did not entail a deeper engagement with trade unions, as had existed previously in arbitration of work place disputes, with unions relegated to the role of an ‘interested party’ to the dispute (McKenzie, 2018; Stanford et al., 2018). In addition, the Fair Work Commission set minimum wages in relation to employment and economic conditions, as opposed to the centralised process that had previously connected wage growth to reasonable expectations of living standards.

Each of these policy measures adopted by successive governments since the 1980s has weakened the capacity of workers to collectively organise in ways that would support stronger wage growth. This has shifted the balance of power towards employers, while also fundamentally weakening the power of the union movement in Australia. Alongside taxation reform, which has fundamentally reduced taxation costs to businesses, owners of capital and high-income earners, industrial relations reform has sought to reduce the cost of labour. These reforms reflect a sustained approach, adopted by Liberal National Coalition Governments and Labor Governments, to create more favourable conditions for business.

Stagnating Incomes: Labour and Capital, Wage Growth and Wage Theft

An important aspect of the overall picture of global inequality is the rapidly increasing gap between the value of capital and the value of labour (Piketty, 2014). Capital has become highly concentrated among the wealthiest members of Western, capitalist societies such as Australia, and the value of capital is growing at a much faster rate than the value of labour (Piketty, 2014; Piketty & Zucman, 2014). Growth in the value of property, corporate shareholdings and superannuation, for example, far exceeds the growth in peoples’ income, through wages and salaries (Christophers, 2018; Khoury, 2015; Kinsella & Howe, 2018; Piketty, 2014; Stilwell, 2017). This trend is particularly pronounced in Australia, Britain and the United States, and is closely associated with the emergence of neoliberalism from the 1980s onwards. The measures highlighted in this paper, such as reforms in taxation and industrial relations, are central to this shift.

Consequently, an increasing share of wealth created in the Australian economy is being captured by capital (Johnson, 2019; Kinsella & Howe, 2018; McKenzie, 2018; Stanford, 2019; Stilwell, 2017). The share of economic value captured by labour, including wages and superannuation, has dropped to 47%, which is lower than at any point since the 1950s (Stanford, 2019). This suggests that in Australia, capital is becoming increasingly profitable, while incomes are not keeping pace with economic growth. Connected to this point, labour productivity has become decoupled from wage growth in recent times. In other words, wage growth is no longer aligned with increases in labour productivity (Johnson, 2019; Stanford, 2019; Stanford et al., 2018). For instance, total labour compensation in Australia has increased by just 1.3% on average since 2012 (Stanford, 2019). This rate of compensation growth is well below the average growth of the economy (an average of 2.35% since 2012 according to The World Bank, 2023), and below the inflation rate, which had reached 7.8% by the 4th quarter of 2022 (Trading Economics, 2023). As this data suggests, improvements in labour productivity are contributing to the increased value of capital, yet are not resulting in higher salaries and wages.

This is a long-term issue in Australia, where wage growth has been stagnating in Australia for close to two decades (Banks & Bowman, 2020; Bowman & Banks, 2018; Falzon, 2018; McKenzie, 2018; Stanford, 2019; Stanford et al., 2018; Stilwell, 2017). Real earnings have declined since 2013, as cost of goods and services continues to increase (Redden, 2019; Stanford, 2019; Stanford et al., 2018). A key issue contributing to low wage growth in Australia is the relative decline in the minimum wage (McKenzie, 2018; Stanford, 2019). As McKenzie (2018, p. 56) describes:

Relative to average wages, the minimum wage declined dramatically from almost 65% of median wages in 1983, to less than 45% in 2017. Relative to the median wage, the erosion of minimum wages is only slightly less dramatic: falling from nearly 70% of median wages in 1983 to around 55% in 2017. This erosion in the effectiveness of minimum wages has paralleled the concurrent erosion in the labour share of GDP.

In this sense, the lack of growth in the minimum wage is effectively restraining growth in wages for many workers across Australian society and is occurring alongside the declining share of economic value captured by labour.

Wage theft, which essentially results from the inability to enforce minimum wage in Australia, is another key factor associated with low wage growth in Australia is wage (Falzon, 2018; McKenzie, 2018; Stanford et al., 2018). PwC has estimated wage theft costs workers $1.35bn per year, impacting 13% of employees (Bonyhady, 2020). In many instances, this issue impacts young workers in temporary, casual positions, and migrant workers, where the power disparities between individual worker and employer are significant. According to McKenzie (2018, p. 57), this issue is particularly prevalent in fast food, where 84% of employers have committed wage underpayments, through non-adherence to base rates, penalty rates and leave loadings. Significant examples of wage theft in Australia also include 7-Eleven, which ultimately back-paid 4,043 current and former employees for wages and superannuation payments, with interest, totalling $176.3 million (Clayton, 2020). In addition, the University of Melbourne committed to repaying over 15,000 current and former casual academic staff $22 million in unpaid wages for work completed between 2013 and 2021 (Carey, 2022). The Mantle Group, a hospitality-based organisation operating in Queensland and New South Wales, had implemented a ‘zombie’ agreement which had enabled it to avoid paying penalty rates to staff since 1999 (Henriques-Gomes, 2023). The widespread nature of wage theft, particularly in industries which are largely comprised of casualised labour, reflects the reduced rights and access to support and representation that many workers have. This issue is both symptomatic of, and contributes to, the diminished power of labour, relative to capital in Australia.

Finally, the minimal growth in welfare payments for job seekers is central to understanding the causes of economic inequality in Australia (ACOSS, 2020a, 2020b; Falzon, 2018; Whiteford, 2017). This is most pronounced for couples and singles receiving the Jobseeker Payment, which scarcely increased between 2000 and 2018 (ACOSS, 2020a, 2020b). This relative decline in welfare payments is particularly significant when considering the cost of living pressures, with research suggesting that people who are either not in paid work, or underemployed, are much more susceptible to experiencing energy poverty, food insecurity and housing insecurity (Beer et al., 2016; Lawlis et al., 2022; Vera-Toscano & Brown, 2022).

Conclusion

The ‘cost of living’ crisis should be understood alongside the neoliberal project in Australia, where successive Australian governments have sought to enhance business profitability in the name of economic prosperity. Through taxation reform and industrial relations reform in particular, governments have attempted to reduce business costs, encouraging corporate growth and investment. Ultimately, these measures have weakened the power of labour in Australia, resulting in an increasingly fragmented workforce, comprised of a growing base of casual and ‘gig’ workers. In casualised industries such as hospitality, workers are highly susceptible to wage theft and mistreatment by employers. Labour market deregulation is connected with policy measures that have essentially sought to restrict the influence of unions. Systematic attempts to weaken the bargaining power of workers are associated with the low growth in wages. The diminishing share of economic value being captured by workers is a key outcome of this, though is not an accidental consequence of these reforms which have sought to restore business profitability.

Consequently, income and wealth inequality has increased markedly in Australia, shaping the experience of poverty for many people. Job seekers, older Australians, single mothers and students are among the population groups most affected. As this analysis shows, people on low incomes experiencing the cost of living crisis most acutely. Experiences of energy poverty, food insecurity, housing affordability stress and transport poverty are shaped by income and work status, though are also deeply interconnected. However, political discourses around the cost of living are frequently devoid of structural analysis, meaning that public debate rarely considers the ways that experiences of poverty intersect. In addition, the driving factors behind the cost of living crisis, such as low wage growth and economic inequality, are not given sufficient public and political attention.

Attempts to weaken labour power, restore profitability and reduce business costs, have transferred risk onto workers, families and communities. People bear the social and financial risks of this shift; in relation to employment, but also in relation to food, housing, energy and transport. These risks are not felt evenly across the population. Spatial impacts of inequality have deepened precarity and disadvantage in working-class, socioeconomically segregated areas. This underscores how the more marginalised sections of the population are required to bear the burden of this risk.

The cost of living crisis is an extreme example of the transference of risk onto the population. This current crisis is largely a result of decades of government policy in Australia which has favoured capital by reducing protections afforded to workers and weakening their collective power. Taxation reform has, in turn, limited government revenue and reduced its capacity to provide a safety net for those populations that are required to contend with that risk. Rather than address the systemic and structural causes of inequality and cost of living pressure, policy responses focus on short-term initiatives that support consumer participation in markets. This underscores the framing of ‘cost of living’ as an individualised concern, rather than as a consequence of social and economic restructuring in Australia.