Causes Of Economic Inequalities In Australia And China

In the past few years, economic inequalities, which can be separate into two parts: income and wealth, has become a mainstream political issue. We often hear the economists from different countries speaking income and wealth inequalities, no matter they are from developed or developing countries. According to the research, both Australia and China are now facing some serious issues from income and wealth inequalities. As two examples of developed and developing countries, in this question the main areas of inequalities and the reasons that caused them in Australia and China will be discussed.

To begin with, China’s economy is one of the best in the world now, these are all owing to the first wave of economic liberation in the late 1970s. From
1978, the average gross domestic product (GDP) has grown at a significate rate of almost 10 percent annual (Cheng, 2007). But, what accompanied with the GDP growth was an increase in income and wealth inequalities. “A survey by Peking University the same year found that the top 5% of the country’s households took home 23% of the total household income in 2012, while the bottom 5% earned just 0.1%” (Wu,2014). The former leader Deng Xiaoping lunched the reform and opened the economy in China in 1978. As a result of the economic reform, the incomes of the poor were kept growing but the rich were getting much more rich, when comparing the ratio between the amount of rich and poor’s incomes increased, so it’s significate that there will be income. According to what Deng Xiaoping said: “We permit some people and some regions to become prosperous first, for the purpose of achieving common prosperity faster.” (Whiteley, 2007), the government was focusing on improving the top several individual people’s wealth first. The income and wealth inequalities are results of the government’s policy to try to increase the total economy as fast as they can.

Secondly, as one of the wealthiest countries in the world, many people in Australia’s society are falling behind. In Australia, although the minimum incomes are rising, there’s an increase in the degree of inequality in Australia in the last few years. This can be seen in the graph below.

From the mid-2000s to present, the income inequality grew significantly, although this was accompanied by large rises in real incomes.
One of the major reasons that increased income and wealth inequalities was the increase in wage disparities operated in 1980s, the rate of increase has never been steady but the income disparities have stayed same all the time, or the gap kept getting bigger and bigger. Not only income disparities, the increasing unemployment rate is also a factor that caused the issue. “Earnings are by far the largest source of household income.” (Australia National University, 2013). The difference wages between hours of works made the income gap became huge. “The distribution of incomes within the wages and salary system is very important to explain a good deal of the inequality in countries like Australia.” (Richard&Dannis, 2014). Other than the income inequalities issues, the distribution of income also led Australia facing wealth inequalities. People who are getting high incomes can also hold high wealth in hand whereas the wealth of poor are growing but the gap between the wealth of poor and rich is as huge as the distribution of incomes. Below is a graph of Australia’s wealth inequalities, as we can see clearly that the distribution of income is even much more unequal than the income distribution. It is ironic that if we take the top several individuals out and compare their wealth with the bottom twenty percent, they are holding more wealth than the
nearly two million households. In conclusion, Australia is now facing serious income and wealth inequalities that caused by the higher unemployment rate than before and the income distribution.

Overall, both Australia and China has income and wealth inequalities, and the income distribution always happen first then lead to wealth distribution since people’s wealth are basically depending on their incomes.
No matter China or Australia, the main reason that cause income and wealth inequalities are still wages and employments. The income and wealth inequalities effect the society negatively. So the governments must have some solutions to curb the growing negative
menace.