AS YOU DRIVE ACROSS sprawling Adelaide you can see that the city is one of unequal fortunes, where rich and poor are divided by the suburbs they can afford to live in. This is an unwelcome perspective at the end of an economic boom, in an age of western affluence. The recently released report Inequality in South Australia, prepared by the Public Health Information Development Unit at the University of Adelaide, reveals a city divided by socio-economic fault-lines and entrenched inequality. Meanwhile, the latest Economic Outlook from Professor Richard Blandy provides an upbeat assessment of South Australia's short-term economic prospects. How do we reconcile these two perspectives on the state?
Let's start with Blandy. Like most economic commentary, Blandy's assessment of SA's economic prospects deals with aggregates that obscure the great socio-economic differences that exist in any society. Recent economic and employment growth has been strong and the world economic outlook for 2005 looks good. State economic growth is high - indeed higher than the official numbers indicate, according to Blandy. He points to the high level of job advertisements and strong employment growth as evidence and concludes the economic outlook is good.
As close observers of the economic cycle realise, the state's relatively good economic and employment numbers are a function of the SA economy peaking later than other parts of the nation, rather than a sign of superior performance. While Blandy is right in his assessment of recent economic performance, he does not seem to hear the alarm bells ringing, warning us that one or a combination of factors including high household debt levels, declining property values, rising oil prices and a higher Australian dollar might trigger a significant economic slowdown. Blandy overestimates the benefits of the recent AAA credit rating upgrade for SA while being oblivious to the dark clouds gathering on the economic horizon. The most turbulent of these is the high level of household debt in this state and the nation. Household debt as proportion of household income is now higher than it was during the late-1980s and 1990s. Private consumption fuelled by debt will ultimately prove to be unsustainable. Household debt is now so high that even the smallest increase in interest rates is likely to hurt home buyers and investors.
The property boom is coming to an end. The problem for SA is that the construction industry has been one of the major drivers of economic and employment growth. As construction activity slows, unemployment will rise, perhaps at a faster rate than at any time in recent history, given our high level of dependence on construction industry employment over the past five years.
What most economists fail to acknowledge is that the recent period of economic and employment growth has done little to remedy the unequal distribution of income, wealth and power that persists in Australia. Sustained economic and employment growth is fuelling wealth accumulation and record profitability but it is not driving any significant reduction in the socio-economic and health inequalities that fracture our cities. High-income households are enjoying the escalating value of their homes and using this to fuel speculative ventures in property to add to their wealth.
The dark side of the property boom is that it has made home ownership an even more elusive goal, while thousands cannot secure affordable rental housing. About one third of South Australians cannot afford to buy a house in Adelaide, and the stock of affordable rental housing has declined dramatically. One of the major contributors has been the loss of about 10,000 homes from the rental stock of the South Australian Housing Trust.
The decline in housing affordability coincides with an increasing proportion of families living on low incomes - a formula for the intensification of hardship. The proportion of SA families living on less than $26,000 per annum rose from 19 per cent in 1996 to 24 per cent in 2001. Between 1989 and 2001 the proportion of children aged under 16 years living in low-income families rose from about 31 per cent to nearly 52 per cent. This represents an increase of around 68,000 children living in low-income families.
The health costs of tolerating inequality are high. If you live in the leafy eastern suburbs or near the seaside, you can expect to live up to five years longer than someone living in Port Adelaide. The average life expectancy for someone living in low-income areas of Adelaide is about 77 years, compared to around 82 if you live in an affluent area. In the Playford area, about 32 per cent more people than the state average reported their health as being fair or poor; in more affluent Burnside, the statistics for fair or poor health is 24 per cent lower than the State average.
The report reminds us that indigenous people remain the most disadvantaged group of South Australians. The median weekly income of indigenous people is about 40 per cent less than that of non-indigenous people. The apparent school retention rate for young indigenous school students in Year 12 is about 31 per cent, compared to 70 per cent for non-indigenous students. The unemployment rate remains around three times that of non-indigenous people.
The answer to inequality is not sustained economic growth, low interest rates and low inflation, as the majority of mainstream economic commentators advocate. It is certainly not lower taxes, as the mainstream media advocate. It is a combination of enlightened policies that address the distribution of income, wealth and power in society. At the heart of income inequality is the erosion of the progressive taxation system. The great divide between rich and poor is manufactured by a tax system which ensures the growing concentration of wealth, a system which privileges the privileged. Inequality in Australia will only increase while this privilege among other privileges remains undisturbed.
