‘Neoliberalism lite' is no solution to Australia's cost-of-living and productivity crises. We must curb wealth concentration
The treasurer, Jim Chalmers, signalled his intent to 'grasp the nettle' on tax reform – a bold invitation to reckon with a structural driver of slowing productivity.
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The scale of the task is significant. The top 10% of households now control 44% of all wealth in Australia. The collective wealth of the richest 200 Australians has nearly tripled over two decades, mostly from property and resources – economic activities that extract value from existing assets rather than new productive capacities; what economists call 'rent-seeking'.
The relationship between wealth concentration and productivity warrants examination. As economist Joseph Stiglitz argues, not all wealth represents productive capital. Rent-seeking concentrates wealth away from productivity-enhancing investments – in business innovation, public infrastructure, and worker wages. This leaves ordinary people paying ever-higher proportions of their income for necessities.
French economist Thomas Piketty expanded Keynes' insight; without deliberate countermeasures, market economies naturally concentrate wealth as returns on assets outpace wages growth, making inequality an inherent feature of capitalism.
This natural tendency can be accelerated by crises. The 2008 financial crisis and Covid-19 pandemic both triggered massive upward wealth transfers. While central banks' emergency measures prevented economic collapse, they disproportionately benefited those at the top. This marks a dramatic reversal from post-second world war prosperity, when countries like Australia, Canada, the UK and the US experienced broader wealth distribution. Institutional safeguards of the era, such as strong unions and progressive public policy, have steadily eroded, contributing to growing wealth concentration that now approaches pre-war levels.
When middle and working-class families lose purchasing power, consumer demand falters. Since consumer spending drives 60-70% of economic activity in advanced economies, wealth concentration and income inequality trigger a demand spiral that weakens both business profitability and government revenues. Meanwhile, wealth inequality frays the social fabric. Financial hardship brings higher rates of anxiety, depression, suicide, addiction, family breakdown and domestic violence – placing further strain on public resources and healthcare systems.
Despite growing awareness of wealth concentration's role in undermining economic performance and social health, political responses remain muted.
Labor's re-election offers a revealing case. The party won not by proposing bold redistributive reform but by channelling voter anxiety around global uncertainty and cost-of-living pressure while keeping structural inequality off the table, as evidenced by Australian Labor's retreat on negative gearing reform. Despite commendable efforts to lift wages, wages of Australians have only returned to 2011 levels.
This strategic ambiguity epitomises a modern centre-left paradox: parties can win elections on cost-of-living concerns only because they don't threaten the wealth concentration causing them.
As seen in other advanced economies, failure to address underlying inequality eventually opens the door to movements that scapegoat minorities, immigrants and institutions while further slashing taxes for the rich – deepening the very discontent they exploit and threatening democracy.
Chalmers has broken ranks with the usual political caution, stating that 'no sensible progress can be made on productivity, resilience or budget sustainability without proper consideration of more tax reform'. He has vowed to 'dial-up' Labor's ambition to change the tax system, signalling he is open to controversial ideas. However, newly surfaced Treasury advice suggests that while Chalmers signals political ambition, the institutional response remains conservative – tinkering at the edges while avoiding any serious confrontation with wealth concentration.
Such a reset will require acknowledging a core contradiction at the heart of current policy: those who champion deregulation and resist redistribution undermine the very consumer base their prosperity depends on. The wealthy few cannot consume enough to replace the spending power of millions and the resulting demand weakness eventually undermines the economy.
Unlike past technological revolutions, generative AI can perform non-routine cognitive tasks – affecting professionals across virtually every knowledge-based field . AI entrepreneur Ed Newton-Rex warned that tech elites are openly discussing their ambition to own the entire means of production through 'full automation of the economy'.
As the adoption of generative AI accelerates, it threatens to decouple productivity from labour input – increasing unemployment and underemployment, pushing down wages and reducing disposable income.
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Unless proactively managed, the transition to an AI-driven economy will see instability due to large-scale job displacement and unprecedented wealth capture.
The current policy mix – 'neoliberalism lite' – will not solve these challenges. Australia needs a bold vision beyond tax reform that redirects economic returns toward broad-based prosperity. Norway's Government Pension Fund Global and Alaska's Permanent Fund show how sovereign wealth funds deliver public returns that can be reinvested for collective benefit.
The entrepreneurial state model also ensures public investment yields public returns. Governments already underwrite innovation but rarely retain equity.
Social production wages could pay those displaced by automation for charity work, caregiving, environmental restoration, informal mentoring and civic participation. Job guarantee schemes would ensure full employment through public service roles, underwritten by the returns of sovereign wealth funds.
Whatever the approach, rather than framing public investment as wasteful spending, we should recognise it as essential.
Central banks may be heralding their victory over inflation but ordinary Australians have little to celebrate. Slowing inflation merely reduces the pace of price increases – it doesn't reverse the cost-of-living surge. When wealth becomes too concentrated, it erodes not only economic dynamism but also the institutional foundations of productivity.
Chalmers is right to say that reform is a 'test of the country'. The upcoming roundtable should acknowledge wealth concentration as a systemic risk and confront it directly.
Now is the time for cross-sector leadership. Curbing wealth concentration may no longer be just a progressive preference. It may be capitalism's only lifeline.
Associate Prof Jo-An Occhipinti is an NHMRC principal research fellow and co-director of the Mental Wealth Initiative at the University of Sydney's Brain and Mind Centre
Dr Ante Prodan is a computer scientist and complex systems researcher with the school of computer, data and mathematical sciences at Western Sydney University
Prof John Buchanan is a labour market researcher and co-director of the Mental Wealth Initiative employed in business information systems at the University of Sydney Business School
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