Consumption and income inequality in Australia

Consumption may be a more appropriate measure of household well-being than income or earnings. Using four ABS Household Expenditures Surveys collected between 1975 and 1993, we compare trends in consumption and income inequal ity among Australian households. We find that consumption is much more equa l than income. While there were significant increases in both income and co nsumption inequality, consumption inequality rose by much less. One interpr etation of the results is that some income inequality in Australia reflects transitory fluctuations which households can smooth, and that part of the growth in income inequality reflects an increase in these transitory fluctu ations.