LEIGH SALES, PRESENTER: Over the next year or so you're going to hear a lot about inequality.

Bill Shorten's made it central to the political strategy that he plans to take to the next election.

Tonight Labor's former Treasurer, Wayne Swan, tells 7.30, that capitalism as we know it must change because of inequality.

Political correspondent Andrew Probyn takes a look at how much traction that inequality message might be able to gain.

ANDREW PROBYN, POLITICAL CORRESPONDENT: Inequality, it's become the political byword in Western politics. And it's made rock stars out of white-haired men.

JEREMY CORBYN: Looking to global policies that actually share the wealth. Not glory in the levels of injustice and inequality.

BERNIE SANDERS: There is no justice when so few have so much and so many have so little.

ANDREW PROBYN: Even younger, more photogenic politicians have leapt on the bandwagon.

JUSTIN TRUDEAU: Increasing inequality has made citizens distrust their governments. Distrust their employers. It turns into us versus them.

JEREMY CORBYN: That politics that got out of the box is not going back in any box.

ANDREW PROBYN: In Australia, inequality is well and truly out of its box as a political weapon.

BILL SHORTEN, OPPOSITION LEADER: Inequality kills hope. It feeds that sense, that resentment that the deck is stacked against ordinary people, that the fix is in, the deal is done.

ANDREW PROBYN: It's contested territory.

SCOTT MORRISON, TREASURER: This idea that people and inequality and incomes has been going in the wrong direction. That's not borne out by the facts. It hasn't got worse, inequality. It's actually got better.

ANDREW LAMING, LIBERAL MP: Governments should be focused on alleviating poverty. Inequality staring over the fence and noticing another guy has got a jet ski and you don't have one. Inequality doesn't cause suffering or falling out of the education system or poor health.

SAUL ESLAKE, ECONOMIST: You would have had to have had your eyes and ears closed for almost 20 years to believe that inequality hasn't increased in Australia.

BEN OQUIST, THE AUSTRALIA INSTITUTE: For many people it's a real lived experience, we're there seeing their wages not grow. Meanwhile, they're seeing other parts of the economy or other companies and people doing very well.

JENNIFER WESTACOTT, BUSINESS COUNCIL OF AUSTRALIA: Anybody who tells Australians that the way to deal with inequality is to weaken the business sector is actually being very dishonest with people.

ANDREW PROBYN: So what do the statistics show? Since 1995, incomes for the top 10 per cent of wage earners have steadily increased. By comparison, incomes for the bottom 10 per cent of earners have only marginally improved.

The gap between the richest 10 per cent and the poorest has increased by 78 per cent over two decades, even with inflation taken into account.

CHRISTINE LAGARDE: Well I hope people will listen now.

ANDREW PROBYN: Christine Lagarde, the head of the International Monetary Fund surprised many economists in 2013 when she warned that inequality was an economic risk. This view is spreading as Reserve Bank Governor Phillip Lowe showed today.

PHILLIP LOWE, RESERVE BANK GOVERNOR: If workers are getting no real wage increase year after year after year that's insidious and it reduces support for sensible economic policy.

REPORTER: Do you think inequality is rising or getting better in Australia?

PHILLIP LOWE: Well, it's risen.

BEN OQUIST: Interestingly, the pointy heads have changed their view on the economic orthodoxy. We know that inequality is bad for economic growth.

WAYNE SWAN, FORMER LABOR TREASURER: Rising income and weath inequality is hollowing out the middle class around the developed world. Creating vast armies of working poor and leading to stagnant economies and political polarisation. It is the pre-eminent issue of our time.

ANDREW PROBYN: Former Treasurer Wayne Swan says inequality has redefined the economic rules.

WAYNE SWAN: There's no question about that. The economic model that has delivered the inequality is trickledown economics which is basically tax cuts for the rich, deregulation for the powerful and wage suppression for the rest.

ANDREW PROBYN: Are you saying capitalism has to change?

WAYNE SWAN: Unquestionably. Capitalism needs to be saved from itself. That's what people like the Governor of the Bank of England are saying. It's what the financial institutions around the world are saying. Capitalism is thoroughly discredited at the moment because it's produced rampant income and wealth inequality.

ANDREW PROBYN: It is quite extraordinary to hear from a former treasurer. Is your thinking different to what it was when you were Treasurer?

WAYNE SWAN: It is somewhat. I've talked about inequality all of my political life but what I've discovered when I was Treasurer was just the extent to which powerful vested interests would try and drive policy to make outcomes even more unequal.

ANDREW PROBYN: The next target of the inequality campaign is going to be those tax cuts to the big end of town. Are these calls and is this fight going to get even louder?

WAYNE SWAN: It certainly is. The Labor Party is going to lead this battle because it needs a whole set of policies for inclusive growth.

JENNIFER WESTACOTT: We have got to remember that if we want people's incomes to rise. If we want to create jobs, we have to have a strong and competitive business sector.

ANDREW PROBYN: Bill Shorten has set about rebranding existing policies under the inequality banner. And you get the sense the Government has been caught flat footed. Labor's policies on housing affordability through curbs on negative gearing and capital gains tax are now framed as inequality issues. So too are ALP policies on tax and superannuation. It's part grievance politics where identifying irritations is far easier than solving them. But it's very effective. And Mr Shorten's next target will be family trusts which some say vastly favour the rich.

BEN OQUIST: Inequality is reshaping economics and it's reshaping our politics.

ANDREW PROBYN: New lines loom in the inequality war cry.

JEREMY CORBYN: Nothing was given from above by the elites and the powerful. It was only ever gained from below.