If it weren't for income support measures such as the JobKeeper and JobSeeker payments, the COVID-19 recession would have almost doubled the number of Australians living in poverty from just over 3 million people to 5.8 million people.
But the wage subsidies actually led to a 13% drop in the number of Australians living in poverty to 2.6 million people in June, according to a new report from the Australian Council of Social Services (ACOSS) and the University of New South Wales (UNSW).
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Using the latest ABS data from 2017-18, the Poverty and Inequality Partnership Report found that pre-COVID, the incomes of those in the top 20% income earners were six times higher than those in the bottom 20%, with that gap widening since 2015-16, when the ratio was five times.
The report also found the distribution of wealth in Australia is even more unequal.
The average wealth of the top 20% is roughly $3.2 million compared with the lowest 20% who have $36,000 in assets and savings.
Those in the lowest 10% held only $8,000 in average net wealth, while the bottom 5% are sitting on $5,000 in net debts.
ACOSS CEO Cassandra Goldie said millions of Australians will be in trouble when income support measures end.
"Timely action by the Government to double the unemployment payment with the Coronavirus Supplement and create JobKeeper has temporarily raised the household incomes of people without paid work or at risk of losing their jobs," Ms Goldie said.
“This report shows however that millions of people, pre-COVID, had very little by way of a financial buffer behind them.
"There is a real danger in now expecting people to spend down on their already meagre savings, in order to survive."
On Tuesday, Parliament signed off on legislation to extend the JobKeeper payments from the end of September until March 2021.
From September 28, the $1,500 fortnightly rate will fall to $1,200 for full-time workers, and $750 for part-time workers, followed by a further drop to $1,000 for full-timers and $650 for part-timers.
JobSeeker payments will be cut from $550 a fortnight to $250.
The report found that these reductions in income support payments will increase the amount of Australians living in poverty by a third to 3.4 million people by December 2020.
Ms Goldie said we have a choice about whether we prevent rising inequality from the COVID crisis.
"A substantial, permanent increase in the Jobseeker Payment would ensure that those who cannot get paid work can meet household costs," Ms Goldie said.
"Well-targeted and jobs-rich economic stimulus could prevent a further increase in unemployment. Permanently removing liquid assets tests and waiting periods to receiving income support are also vital.
"Applied together these measures will inoculate us against an increase in both income and wealth inequality and support our economic recovery from the pandemic."