by Jim Rose in income redistribution, politics - Australia Tags: top 1%

Source: topincomes-parisschoolofeconomics



As with New Zealand, plenty of people in the top income brackets in Australia would regard themselves as middle class – entrepreneurs and professionals who made their way up from the bottom.

As with New Zealand, there is a major spike in top earnings around the time of the 1985 tax reform when the top tax rate was cut from 66% to 49% in Australia.

Source: topincomes-parisschoolofeconomics



As for trans-Tasman comparisons, the top 10% and top 5% in Australia do earn more than their compatriots in New Zealand.

The top 1% in Australia are much better performers than the top 1% in New Zealand, but then again wages and incomes are about a third higher in Australia as compared to New Zealand.

The Australian 0.5% are clearly superior to their New Zealand rivals, earning at least 50% more than them on average.

The New Zealand chart is in New Zealand dollars in 2011; the Australian chart is in Australian dollars in 2010.

A reason for the higher earnings of the Australian top 1% is the larger economy offers a greater superstar effect.

Globalisation and technological changes would allow the Australian best performers, including the top managers and top chief executives, in a given field to serve a bigger market and thus reap a greater share of its revenue. But this would also reduce the spoils available to the less gifted in the business. Australia, as the seven times larger economy, allows their best performers to serve bigger domestic markets.