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Canberra
Thursday, November 26, 2020
Ian Cubitts
Ian Cubitts

Pandemic welfare reduces gap between rich and poor

New University of Canberra research has discovered a reduction in income inequity during the pandemic – meaning the gap between the richest and poorest has shrunk – and they have put it down to increased welfare payments.

Director of the National Centre for Social and Economic Modelling (NATSEM), Professor Brenton Prosser, said the large change in the short timeframe was significant.

“To put this in perspective, we saw more change in three months that we would normally see in three years,” he said.

“The Productivity Commission has found a slow level of growth over the last 30 years, even though our standard of living has gotten better.

“This research shows it reversed the direction it would normally go.”

Professor Prosser explained the larger the gap between the rich and the poor in society, the more people live below the poverty line and the harder it is for those people to recover.

“Long-term unemployment and inequity can set up generational disadvantage,” he said. 

“When it becomes something that is long-term it ceases to be able to be placed at the responsibility of the individual; there is something structurally wrong or policy issues that are keeping people in poverty.”

The study used ‘nowcasting’ economic simulation methods, using real-time data to complement observed data and estimate changes.

The NATSEM team incorporated three unique Australian datasets into the nowcasting method – the Australian Bureau of Statistics (ABS) monthly Labour Force Survey results, weekly payroll statistics data for between February and June 2020, and biannual income/housing surveys.

Lead researcher Professor Jinjing Li said analysing data so quickly in response to a global event such as COVID-19, was important in influencing government policy.

“The story behind these figures is that without government intervention, disposable incomes would have plunged considerably, with severe consequences for income inequity and poverty levels,” Professor Li said.

Professor Prosser said he hoped the data could be used by the government for upcoming policy changes.

“What we are seeing is more people staying in work, spending money in the economy and household incomes increasing at a time that history tells us we should see a reduction,” he said.  

“We have a Budget coming up, government are changing policies but we hope the data reveals to the government the impact of policy decisions that have been made so far and puts them in a better position to make them in the future.”

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