On Household Inequality and Risk Sharing in Australia

The Australian economy escaped the 2007-2009 crisis, making it unique among OECD countries. To understand why, we document Australian household inequality cross-sectional stylized facts from 2001-2012 using the Household, Income and Labour Dynamics in Australia (HILDA) survey. Inequality of individual wages, hours worked and earnings remains flat. Household pre-government income inequality and non-durable consumption inequality decline slightly. Household income inequality exceeds non-durable and food consumption inequality during the global financial crisis, suggesting that households partially insure income shocks. The degree of progressivity and private intermediation of risk are high. Both equivalized net financial wealth and net total wealth inequality remain relatively flat. Taxes and transfers seem to reduce the variance of permanent income shocks, rather than transitory income shocks. Our findings suggest that on average households withstood the crisis, by insuring against wealth and income shocks.