Uninterrupted growth, redistribution and inequality: The Australian case 1991-2020

To what extent can a progressive tax and transfer system moderate the distributional impacts of uneven
economic growth? We revisit this question in the unique Australian context of three decades of
uninterrupted economic growth from 1991 to 2020. We analyse longitudinal tax records of millions of
Australian taxpayers and examine the distributional impacts of uneven growth and the redistributive role
of progressive income taxes and targeted transfers. Our results indicate that the uneven distribution of
income growth, favoring higher income groups of taxpayers, contributes to a rising trend in income
inequality. The increased progressivity of the tax and transfer system has been instrumental in moderating
these uneven gains across different groups. While inter-cohort income inequality has risen over time,
lifetime inequality within cohorts has remained relatively lower and more stable, revealing potentially
biased conclusions drawn from cross-sectional analyses. Employing a dynamic general equilibrium
lifecycle model, we highlight the trade-offs between efficiency and equity when implementing more
progressive tax and transfer policies.