Income Distribution and the Gov in the Macroeconomy

Income

Flow of money received over a period of time (e.g. wages, rent, dividends, welfare payments).

Wealth

Stock of assets owned at a point in time (e.g. property, savings, shares, superannuation).

Key difference between income and wealth

Income is earned or received regularly, while wealth is accumulated and can generate future income.

Wealth inequality

Generally greater than income inequality because assets accumulate and appreciate over time.

Lorenz Curve

Graph showing the cumulative percentage of income (or wealth) received by cumulative percentages of households.

45° line of equality

A reference line on the Lorenz Curve; the further the curve bends away from this line, the greater the inequality.

Gini Coefficient

Numerical measure of inequality derived from the Lorenz Curve, ranging from 0 (perfect equality) to 1 (perfect inequality).

Income Gini in Australia (after tax & transfers)

Approximately 0.31.

Wealth Gini in Australia

Approximately 0.61.

Commonwealth Government Revenue for 2024–25

Approx. $640 billion.

Main source of Commonwealth Government Revenue

Personal income tax (~45% of revenue).

Main areas of Commonwealth Government Expenditure (2024–25)

Social security and welfare (~36%), health (~17%), education (~8%), defence (~6%).

Direct tax

Paid straight to the government by the individual or firm (e.g. income tax, company tax).

Indirect tax

Levy on goods/services and paid via sellers (e.g. GST, excise).

Progressive tax

Higher-income earners pay a larger percentage (e.g. income tax).

Regressive tax

Lower-income earners pay a larger share of income (e.g. GST).

Proportional tax

Everyone pays the same rate (e.g. company tax at 30%).

Taxes on Income

Based on earnings (personal, company).

Expenditure taxes

Based on spending (GST, excise).

Personal income tax

Main revenue source; progressive rates up to 45%.

Company tax

30% for large companies, 25% for small-medium enterprises.

Goods and Services Tax (GST)

10% on most goods and services; regressive in impact.

Excise duties

Taxes on specific goods (fuel, alcohol, tobacco); used for both revenue and discouraging consumption.