COVID helped to reduce inequality: Productivity Commission

New research from the Productivity Commission has revealed changes to income and wealth levels during COVID-19.

"The initial pandemic period saw an unprecedented decline in income inequality. The incomes of lower-income households grew rapidly in relative terms in the early stages of the pandemic, due to the massive increase in support payments from the government," Productivity Commission commissioner Catherine de Fontenay said.

"Income inequality increased later in the pandemic period as the economy recovered and government support was phased out."

The report found that wealth inequality fell across the pandemic period, but that it is on the rise again.

"Some lower-income Australians were able to save or reduce debt due to early government support. And although house prices soared during the pandemic period, the strongest price increases were in regional areas where house prices are lower. This all had the effect of reducing wealth inequality," de Fontenay said.

The report examined three cohorts in closer detail: older people, women, and Aboriginal and Torres Strait Islander people.

The report found that while older Australians have relatively low incomes compared to working age Australians, many have significant wealth they can draw on to fund their spending.

"When you look at wealth and income together, older Australians are doing better on average than younger Australians," de Fontenay said.

The report examined gender differences in income and wealth. It found that women still had lower income than men at all levels of the distribution, but that the share of women at the top of the income distribution had increased.

"We are seeing some improvements in the income gap between men and women consistent with an increase in women's workforce participation and a declining gender pay gap," de Fontenay said.

The gap between the average incomes of Aboriginal and Torres Strait Islander people and the Australian average income narrowed slightly early in the pandemic before widening in 2022.

"Economic measures provide only a partial indicator for overall wellbeing," de Fontenay said.

"This is a particularly significant consideration in the case of Aboriginal and Torres Strait Islander people, for whom wellbeing encompasses cultural identity, community connections and other measures of quality of life."