"People with sufficient wealth to utilise every loophole and take advantage of every tax subsidy. Almost all of this is legal."

Mr Shorten's speech, in which he declared tackling inequality would be the "defining mission of a Labor government", was a scene-setter for a series of policy announcements between now and the next federal election which Labor says will be designed to engender fairness and balance the budget.

The new announcements will build on pledges to pare back negative gearing and capital gains tax deductions for investors, as well as increase the top marginal tax rate by 2 percentage points and cap the tax deduction for managing tax affairs at $3000. A Labor source said there were no plans to go further on superannuation, given the government had gone much further than Labor originally intended when paring back super tax concessions in the 2016 budget.

Mr Shorten also took aim at subsidies for business, singling out the research and development tax concessions by questioning whether the money could be better spent by increasing funding to the CSIRO, for example.

The government declined to comment directly on Mr Shorten's speech but one source said Labor should try to grow the pie rather than just distribute what's left. He said that already, 4 per cent of taxpayers pay 30 per cent of the nation's income tax.

Higher-income earners have been shouldering a rising share on the personal income tax tax. In 2014-15, the top 3 per cent of income earners in the top marginal tax bracket paid 30 per cent of income tax, according to tax office data.

An Australia Institute report found more than $3.1 trillion is sitting in trusts. But Nationals leader Barnaby Joyce defended the use of trusts by pointing out that the beneficiaries pay tax just like everybody else.

"A trust won't pay tax but the beneficiaries of the trust certainly do," he said.


"It is the door which money passes through before it ends up with you and you and you, and when you get that money, you pay the tax."

Mr Joyce, an accountant before entering parliament, said trusts were used legitimately for legal and tax minimisation reasons.

"There is no law against tax minimisation," he said.

Inequality is now the new buzzword in federal politics as disaffected voters desert the major parties in Australia and abroad for populists like Pauline Hanson and Donald Trump.

But Melbourne Institute of Applied Economic and Social Research deputy director Roger Wilkins said Mr Shorten's assertion that inequality was on the increase was "patently false".

Professor Wilkins told the Economic and Social Outlook conference that the Australian Bureau of Statistics data on which Mr Shorten based his claim that inequality was at a 175-year high was distorting and incomplete because its methods have changed over the years.

The data shows the personal income share of the top 1 per cent of Australians growing steadily from 4-6 per cent in the 1970s to 8.2 per cent in recent years.

Mr Shorten was using this data to assert that the case for dramatic policy interventions in tax and spending to reverse rising inequality has become irresistible.


But Professor Wilkins said the data for the incomes of the top 1 per cent were flawed because the ABS had changed its method of collecting this data, and the picture it painted was "valid" but at odds with other more reliable data.

"The ABS data would normally be the go-to data source, but the ABS has had a proclivity to change its methods over time, making it difficult to ascertain what true trends in in inequality are," Professor Wilkins said.

"It would be fair to say they are getting better at measuring inequality – they are more accurate in recent years than they were in earlier years – but those improvements are terrible for ascertaining trends."

Mr Shorten did not trifle with data.

"More and more of us can't afford to live near where we work. We're left relying on transport systems designed in the 1880s and brought up to the standards of the 1950s and 1960s," he said.

"For all those Australians living from one fortnightly pay to the next, the hard decisions never stop.

"And then there's the contrast. The most profitable banks in the world, ripping people off, an energy-rich nation with rapidly rising prices, house prices locking out a generation who can't rely on rich parents.

"In this set of circumstances, when politicians and commentators complain about "populism" they're just shooting the messenger."

Professor Wilkins said the rising crescendo of public debate about inequality – which Mr Shorten has tapped into – was more likely explained by incomes flatlining since about 2012, after the mining boom, as well as an echo of overseas debates.

US President Trump and British Labour leader Jeremy Corbyn have successfully tapped into concern about inequality in their countries – which is much worse than in Australia – to perform surprisingly well in elections.

-with Joanna Mather