Look alive, Australians, for we are the “richest people in the world”.
Or so many media outlets reported last week, after investment bank Credit Suisse released its latest Global Wealth Report.
It found the median Australian’s wealth was approximately $408,717 in 2021, with Belgium, New Zealand, Hong Kong and Denmark rounding out the top five. Almost 2.2 million Australians are now millionaires, up 390,000 since 2020.
According to The Australian’s wealth editor James Kirby, “it’s reassuring to know that we are not just a wealthy society but those riches do get spread around — relatively — better than just about anywhere else”.
Record wealth, evenly distributed — a cause for celebration, right? I hate to burst our bubble, but Australia’s economy isn’t nearly as enviable as these rosy headlines claim.
Growing the pie, but scrimping your slice
Firstly, Australia’s riches aren’t as equally distributed as they may appear. While median wealth (which approximates middle-class holdings) captures economic fairness better than average wealth (which can be inflated by the mega-rich in highly unequal countries), neither is perfect. And on more inequality-focused measures, Australia doesn’t perform so well.
We don’t even crack the top 50 on the World Bank’s Gini coefficient ranking, which measures economic stratification (however, data availability is limited for some countries). And on the OECD’s Better Life Index, we come 24th out of 35 nations in social inequality.
A recent report by the University of New South Wales and the Australian Council of Social Service’s Poverty and Inequality Partnership (PIP) found the richest 10% of Australian households hold an average of $6.1 million, constituting almost half of the nation’s wealth. Conversely, the lowest 60% (with an average of $376,000) hold just 17% of all wealth. These figures aren’t terrible by international standards — we’re no Russia — but many countries are less concentrated.
Credit Suisse notes that while Australia has grown more unequal since 2008, New Zealand has grown less unequal in the same period. Why the difference? It has a lot to do with how each nation’s wealth is comprised — and it makes neither look particularly egalitarian.
What is our wealth made of?
The wealth of both Australia and New Zealand is largely driven by speculatory asset inflation. The PIP found two-thirds of Australia’s increase in wealth during the pandemic came from residential property alone, while New Zealand’s housing market has also skyrocketed.
We both rely on housing much more than our global peers. Financial assets, such as company stocks, comprise about 39.5% of Australia’s total assets, whereas “the typical level for a high-income country [is] 55%”, with the rest made up mostly of housing, according to the AFR. However, Australia’s reliance on housing has eased slightly since 2008 because our stock portfolios (including superannuation accounts) fattened. Shares in mining and resource companies accounted for much of this growth.
New Zealand’s housing addiction is even more globally aberrant because its stock holdings are lower. Since fewer people hold lucrative stock portfolios than appreciating houses, New Zealand’s wealth has been somewhat more broadly distributed.
So while technically New Zealand might have grown less unequal, it’s only because its asset boom has benefitted the larger (but still increasingly exclusive) propertied class, whereas Australia also allowed mining barons to siphon the spoils of our resource booms while paying little tax.
Neither the housing nor resources sectors create significant jobs relative to profits, so their continued growth is more likely to crowd out rather than stimulate broader economic activity.
Meanwhile, The Australian’s Rich List, updated last week, showed investors in innovative, job-creating industries such as technology are sliding, while extractors and rentiers reign supreme. Our increasing affluence looks both exclusive and unimaginative.
You can’t eat houses
Housing also provides fewer realisable medium-term benefits to owners than other forms of wealth. While you can theoretically take out a reverse mortgage to capitalise on your home’s appreciation, few Australians do.
So residents in other wealthy but less housing-reliant countries feel — and for day-to-day purposes are — richer than most Australians.
This doesn’t stop most homeowners from voting to protect their home’s value, for they know it will help them secure their next home (or their inheritors’). We’ve locked ourselves into a spiralling Ponzi scheme for basic goods, subordinating the collective good.
Meanwhile, Aussies’ cashflow for everyday living is less enviable. Australia’s average wages are higher than the OECD average, but a higher-than-average percentage of our workforce takes home low wages, and we’re easily beaten by many European countries with more pro-worker bargaining systems. Our discretionary income is also close to the OECD average — not bad, but hardly world-beating.
Dragging on our incomes are high levels of debt (mostly mortgages). The PIP found Australian households are “more indebted than many other wealthy nations”, with nearly a third of our low-income households “over-indebted”.
Being the “wealthiest nation on earth” is only a contest worth winning if said wealth is actually useful and enjoyable for the vast majority. “Wealth” in the forms of unaffordable houses and Gina Rinehart’s super account aren’t the sorts we should want.
We’d be far richer, in the truest sense, if we were less wealthy but could afford to live well.
How do you feel about the way wealth is distributed in Australia? Let us know your thoughts by writing to letters@crikey.com.au. Please include your full name to be considered for publication. We reserve the right to edit for length and clarity.
