Australia's wealth inequality at biggest level since World War II

In a finding that will add to the pressure on the federal government to provide more support to low-income households, analysis by the Actuaries Institute shows a key measure of inequality has increased by 7 percentage points in the last 40 years and the gap between wealthiest 10 per cent and the rest is as great now as it was in 1950.

Differences in income account for some of the disparity, the wealthiest 20 per cent of households enjoying six times the disposable income of lowest 20 per cent.

But by far the biggest difference is in wealth, the top 20 per cent holding net assets worth 230 times those of the bottom 20 per cent. This reflects the huge increase in the value of houses and shares in recent decades, while wage gains have been far more modest.

The report warns the divide will continue to grow without wide-ranging reform, including greater targeted assistance, particularly for the most disadvantaged and vulnerable, and significant changes to the tax system.

Report co-author Hugh Miller, a principal at consulting firm Taylor Fry, said the impact of inequality on people's lives was stark.

Those in the poorest 20 per cent of households were nine times as likely to be an unpaid carer, seven times as likely to have experienced homelessness or unemployment, five times more likely to have a child at risk of harm, four times as likely to struggle to pay the rent or mortgage, three times as likely to be a victim of crime and twice as likely to suffer psychological distress or die by suicide.

Dr Miller said the increasing casualisation of work, the rise of more tenuous work arrangements like the gig economy that frequently meant less going towards superannuation, and similar investments, were exacerbating the impact of inflation and interest rates on the income and wealth gap.

"The cost of living means that dollars are not travelling as far and that means economic deprivation is increasing," he said.

"Wages have not kept pace with economic growth and its share is falling."

Dr Miller said a "hollowing out" of the middle class was under way.

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The pace of wages has picked up in the past year and they currently growing at 3.3 per cent. But this is far below inflation, which rose by 7 per cent in the March quarter, which meant most income earners were going backwards.

Treasurer Jim Chalmers has indicated the budget will include living cost relief for households but he has tried to temper expectations about the scale of spending.

But the government is coming under intense pressure, including from within its own ranks, to take significant action, including increasing the JobSeeker allowance.