But there's a big step between taking the piss out of class divides and concluding, therefore, that we don't really have any. As Craig McGregor puts it in his book, Class in Australia, the ''attempt to run away from class does credit to the heart of Australians - because class is one of the most invidious and unfair ways in which people are divided up - though not to their mind''. Our egalitarian self-image certainly doesn't match the facts. Australian inequality is, in fact, world-class. According to data gathered by the United Nations Development Program, we're the world's fifth-most unequal developed nation. Between the mid-1990s and mid-2000s, incomes of the top fifth of earners grew four times faster than those of the bottom fifth. But there's evidence that Australians realise that egalitarianism is becoming a non-core value. In various polls over the past decade, large majorities have consistently told pollsters that they believe inequality is growing. Yet class still doesn't get much of a run in the mainstream. Perhaps because the word has a hectoring edge to it; it sounds like it's looking for trouble. Much of the political class rhetoric came out of the blue-collar unions and their belligerent talk of silver tails, fat cats and parasites. But in recent decades those unions have been - depending on your point of view - reformed or persecuted, but either way stunningly diminished. Radicals still talk class, but their revolutionary hopes, vested in a fragmented ''working class'' that doesn't seem to understand its Marxist destiny, seem more forlorn than ever. Even in academic circles, some see faith in the explanatory power of class waning. ''Just when class differences seemed to be intensifying and the concentration of power and wealth intensified globally,'' argued John Pardy, an education academic at Monash University, in a recent paper, ''class went into a hiatus for sociologists.'' Of course, everyone knows that Australian society has more layers than a MasterChef gateau. But the socio-economic basis of our social divisions has largely faded out of sight. What defines us in everyday life are social markers - things like our age, our job, clothes, sexuality, the make of our car, our kids' schools, religion, where we live or what paper we read, if any. Since most of these things are about preference, we don't have to take them too seriously. And we don't. Flick on the telly to Fat Pizza or Kath & Kim or reruns of The Castle to see the comic riches of our cashed-up bogans, latte-sippers, ferals or nouveau riche types. Class? You're standing in it, darl.

This contemporary perception that class isn't relevant to who we are, or to who gets what and why, is partly about our pleasant egalitarian dream. But it's also linked to changes in the way we've come to see society since the economic transformation of Australia began in the mid-1980s. In a new era of personal responsibility that promised the freedom to be and buy whatever you liked, class politics looked increasingly passe. These were the decades of getting ahead. By 2002, there were more self-employed Australians than members of trade unions. In our ''shareholder democracy'', stock market reports became an essential part of any news bulletin; ''networking'' became a virtuous verb, and airport bookshops filled with Anthony Robbins' guides to financial self-discovery. Income inequality grew sharply at this time, but with deregulated markets came deregulated tolerance levels for equality. In 1998, UK cabinet minister Peter Mandelson declared that New Labour was ''intensely relaxed about people becoming filthy rich''. Economists assured us that inequality makes everyone richer. There was a whiff of ''some animals are more equal than others'' about this, but in some ways it wasn't such a stretch for Australian notions of fairness. Our egalitarianism has traditionally focused on equality of opportunities rather than outcomes. We recognise that inequality can motivate people to strive, to achieve excellence, to educate themselves. How many people would bother training so long to become a doctor or engineer unless they could expect a superior pay packet at the end of it? Harvesting the bounty in an age of unsentimental competition wasn't necessarily easy: right across the spectrum Australians found themselves dealing with more risk, more user-pays and eye-watering credit card statements. But we were better off overall, better educated and enjoyed much more consumer choice. You could, if you chose, buy a Hummer, a vehicle that came out of a US state, California, that built 21 new prisons and only one new college between 1984 and 1998, and which looked very much like it had.

At the bottom, though, some people didn't think their situation had much to do with choice. Like the unemployed man researcher Mark Peel interviewed on the streets of Western Sydney for his book, The Lowest Rung: Voices of Australian Poverty. ''They should f---ing come here,'' the man suggested, ''and live like we f---ing do before they f---ing crap on about how easy things are.'' Ignoring ''class'' didn't make socio-economic divides go away, just harder to get your head around. Especially once the Howard government took to our class structure with a rhetorical Dymo, replacing labels such as ''ruling class'' or ''working class'' with new ones such as ''elites'' and ''battlers'' - a category that seemed to embrace anyone with a swinging vote. Meanwhile, our very rich (not part of the ''elites'', puzzlingly) got very much richer. ACCORDING to research conducted by Australian National University economist Dr Andrew Leigh in the early 1990s, a CEO in a top-50 company earned 27 times more than the national average; only a decade later it was 98 times more. And there has been an even greater concentration at the top end in terms of assets: in Australia, the inequality gap in accumulated wealth is twice as wide as it is in take-home pay. ''In depoliticised market societies,'' writes Mark Davis in The Land of Plenty, ''there are fewer and fewer ways of talking about social difference (class, race, gender) and therefore fewer ways of making adjustment for it.'' Of course, there is still plenty of adjustment. Nearly one in three adult Australians now receive some form of government income support. And non-government organisations such as the Salvos, the Smith Family and St Vinnies continue to make an enormous contribution to national wellbeing, regardless of what we call the problems they see.

But it seems true that losing sight of class has made our view of the structural inequalities in our society more superficial. The privilege gap separating rich private schools and the rest is a classic barbecue-stopper in Australia, but the gap that affects equality of opportunity more overall is the one between well-run, well-resourced public schools such as the fictional Summer Heights High - with the little cottage for remedial reading, its committed staff, that superb, if eccentric, performing arts stream - and the ones struggling in disadvantaged communities. That we have become accustomed to a permanent underclass, learned to endure it as a burr in the national sock as we march towards a prosperous future, suggests, at best, a fatalism about reality or, at worst, that we've quietly forsaken our belief in the universal fair go. In a 2002 article, American economics writer Paul Krugman pondered the trend towards grossly high executive pay. He considered some technical factors, including the impacts of globalisation and rapid technological change on supply and demand, but concluded that the answer was probably much simpler - that the wide disparity in incomes across society reflected a change in the social norms that used to dampen excess, a sense of shame and propriety that ''set limits to inequality''. Why weren't CEOs paid so much a generation ago? ''Fear of outrage kept executive salaries in check,'' Krugman argued. ''Now the outrage is gone.'' Well, it's back now. Krugman was writing when the dot.com bust had highlighted the income gap between hedge fund plutocrats and working stiffs; today it's the GFC. The collapse of the global finance sector, together with provokingly huge payouts to flunked execs who didn't look much like the ''aristocracy of virtue and talent'' Thomas Jefferson hoped American meritocracy would produce, have put perceptions of unfairness back into equality. It seems indicative of how far our tolerance of class divides has come that inequality should re-enter the national debate because of the spectacular riches of a tiny cabal, rather than because of the Cronulla riots, say, or the plight of Australia's estimated 100,000 homeless people. It's not just here, though. The US social justice website toomuchonline.org is focused not on the divide between America's broad middle and the working poor, but the ''vast gap that divides our wealthy from everyone else''. Either way, the idea that socio-economic disparities may be fundamental to how society works, or doesn't, has fresh legs. In the UK, for instance, where New Labour is not so ''intensely relaxed'' about data showing that levels of inequality in Britain have worsened during 12 years of Blairite reform, there is a new and lively debate about the social costs of inequality.

That debate has been partly driven by a book published this year called The Spirit Level: Why More Equal Societies Almost Always Do Better. Co-authors Richard Wilkinson and Kate Pickett present a vast amount of persuasive data suggesting that equality might be the master-key to a whole range of social and political problems and that inequality is, in and of itself, a pox on all but the very richest of us. Their analysis of data from 23 developed countries demonstrates that in societies where there is a big gap between the incomes of the rich and the poor, violent crime is worse, murder rates are higher, obesity and teenage pregnancy and drug and alcohol abuse are more widespread, levels of trust are lower, and life expectancy is shorter. For everyone. Ja'mie may not think she's part of the ''cycle of skankiness'', but she is. We all are. ABOVE a certain income threshold, Wilkinson and Pickett argue what matters isn't the average income of a country, but the income disparities within it. A person earning $40,000 a year in the US - the most unequal rich country in the world - is at significantly greater statistical risk of sickness, mental health problems and addiction than someone with an income of $25,000 in a less unequal country such as Norway or Japan. Status anxiety, it seems, is not just an affliction of suburban neurotics and the furtively ambitious: it's a society-wide plague. Competitive pressure to consume in societies with sharp income gradients leads to longer working hours and higher levels of personal debt. Rates of mental illness are five times higher in the populations of the most unequal rich societies than they are in the least unequal. The fact that those Anthony Robbins books now find themselves fighting for shelf space with self-help books on depression and anxiety would seem to back this up.

The reason for this seems to lie deep in our animal natures. Experiments have shown that when high-status monkeys from different groups are housed together, the ones who are forced down the new pecking order become fat and listless, and prone to arteriosclerosis. Humans respond to social demotion in comparable ways. A 2004 study conducted by UCLA psychologists Sally Dickerson and Margaret Kemeny found that the stress hormone cortisol, which raises blood pressure and can lead to self-destructive behaviour, is most consistently produced by situations where our status is threatened or exposed to negative judgment from others. ''Human beings are driven to preserve the social self,'' the authors noted. Unlike monkeys, which have no sense of democratic citizenship, people can perceive inequalities in terms of fairness. So resentment and hatred comes into it too. Violence is more common in unequal societies, Wilkinson and Pickett suggest, because ''it is often triggered by loss of face and humiliation when people feel looked down on and disrespected''. There are other causes of violence, of course, and no excuses. But while we may be horrified, we can hardly be surprised when young men with a gutful of grog and few prospects of earning respect by conventional means decide to earn some by kicking a stranger's head in. Pretending that Australians don't have alarmingly unequal degrees of choice is not doing us any favours. We need to find fairer ways of distributing opportunities to get ahead, to earn some power and respect. We don't need to call it addressing entrenched class inequalities; we could just call it building a society we all want to live in. And we could start by doing everything we can to make our most deprived schools look more like Summer Heights High.