This issues paper examines educational inequality and its cost to Australia by analysing the costs of students at the bottom falling further below those at the top. It found that over the six years from 2009-15 alone, this growing inequality has cost Australia around $20.3 billion, equivalent to 1.2% of GDP. This underestimates the actual longer-term cost to Australia, because the gap was widening well prior to 2009. Educational inequality is increasing across a wide range of dimensions including in access to teachers, resources, curriculum and test performance. Furthermore inequality increases as students progress through school and while there is inequality in all sectors, the public sector is more unequal. The paper includes recommendations for addressing inequality.