Imported bosses get richer quicker
Fleur Anderson
Australian Financial Review, 15 March 2006, p4
Australia's rich are getting richer at a quicker pace than everybody else and control the largest share of the nation's income in 50 years, thanks to cuts in the top marginal tax rate, a study shows.
But the fastest growing incomes are not those of Australia's 200 richest people but of the imported chief executives of the country's top 50 companies, according to research by economists Andrew Leigh from Australian National University and Oxford University's Anthony Atkinson.
The earnings of the richest 10 per cent accounted for 31.34 per cent of the nation's total income in 2002, compared with 28.5 per cent a decade earlier.
"Reductions in top marginal tax rates during the 1970s and 1980s appear to have coincided with a rise in the income share of the richest," Dr Leigh said.
In a blow to tax reform advocates who are arguing for a reduction in the top rate of 47 per cent, Dr Leigh said the research suggested the rich would get richer with another cut to the top marginal rate.
Nor was there any evidence a lower tax rate had any effect on the "brain drain" of skilled workers.
In 1992, a typical executive in one of Australia's top 50 companies earned 27 times the wage of an average worker.
But the increasing frequency of global searches for top executives for Australian companies, paying millions of dollars in golden handcuffs and golden handshakes, boosted the typical executive's wage to 77 times that of an average worker.
The arrival of US businessman Bob Joss in 1993 to become Westpac's $7.8 million man started a trend that had pushed up the salaries of the chief executives of top 50 companies faster than the incomes of even the richest 200 Australians, Dr Leigh said.
"We are now paying international salaries to chief executives," he said.
The research also found the incomes of senior public servants, High Court justices and chief executives had increased faster than the income of the average worker over the past decade.
The Association of Chartered Certified Accountants yesterday urged the Australian government to consider introducing a hybrid flat tax system in which the first $15,000 earned would be tax-free before a 30 per cent flat tax rate cut in.