Most hard-up Australians know, from looking at their bank statements and unpaid power bills, that they are poorer now than a year ago. Most well-off Australians know, from their dividend reports and growing wine cellars, that they are richer.
As a new report confirms, 2018 has been an excellent year for Australia’s top 10%.
Credit Suisse’s annual global wealth report and wealth databook — which includes the increasing number of Australian millionaires — has confirmed that shifts in wealth since 2013 from the working- and middle-classes to the rich are continuing.
Mean and median wealth
If the wealth of any country increases overall, with all sectors enjoying prosperity, then both mean wealth and median wealth will increase. Median wealth is the point above and below which sit exactly half of the population. So if most of the increased wealth goes to the lower end, the median wealth will show a stronger rise than the mean. If most goes to the top end, the median wealth will decline.
The latter happened in Australia in 2014 and 2015, as the tax burden and costs of living began to disadvantage the vast majority. It has happened again this year. Mean wealth increased from $402,603 to $411,060. But median wealth fell from $195,417 to $191,453. (All values are in US dollars, as in the original reports.)
So the country is richer overall, but most of the benefit has gone to the wealthy.
The top 10%
The percentage of Australia’s entire wealth held by the richest 10% has increased significantly since 2013. The average for Labor’s last three years — 2011 to 2013 — was 50% exactly. It rose to 51.1% in 2014, then to 51.3% in 2015. It peaked at 52.7% in 2016, then settled back last year to 52.3%. It is now back up to the all-time high of 52.7%.
Wealth of the poorest half
Half the population owned 10.4% of all Australia’s wealth in 2012 and 2013, Labor’s last two years in office. Not much, but way higher than 7.7% back in 2010 when the Credit Suisse series began. The percentage actually fell during 2014 and 2015 to 10.2%, then collapsed in 2016 to 6.2%. That was apparently a statistical blip, as the level improved in 2017 to 9.5%.
This year’s percentage is 9.1% which confirms that 2016 was an aberration, but also that the steady decline under the Coalition is continuing.
National earnings per person
The most dramatic deterioration in Australia’s fortunes during the current global boom in trade, investment, jobs and profits has been in gross domestic product per adult. This measures the total income Australians enjoy from all sources.
This increased impressively through the Labor years — despite the global financial crisis — then more gradually through to 2016. Last year, however, it collapsed by almost 30% — from $99,452 per adult down to $71,403.
This was not a statistical aberration, as the level this year remains at $77,007 per adult, a slight improvement on 2017 but still way below levels for most of the last decade.
This was attributed last year to the decline in the Aussie dollar, the severe drop-off in productive capacity as reflected in construction, falling hours worked per person per month and the loss of billions in untaxed corporate profits shunted offshore.
Nothing much has changed this year.
World rankings
On most measures, Australia’s ranking in the world has tumbled since 2013 as the economy has failed to take advantage of the current global boom.
Australia’s share of the world’s total wealth has fallen from 2.78% in 2013 — the highest on record — to 2.40% now — the lowest.
Ranking on mean wealth is down from second in 2013, behind Switzerland, to fourth now, also behind Iceland and Luxembourg.
Median wealth was highest in the world from 2011 to 2014, but slipped to second in 2015, behind New Zealand (oh, the shame of it!) and third for the following two years, behind Switzerland and Iceland. It has just moved up to second again, still behind Iceland.
They seem to do a lot of things well in Switzerland, including providing very handy data on how well global economies are being managed. Or how badly.
The 6.2% ‘blip’ in 2016 may not be a statistical anomaly. Seems to me to coincide fairly with the peak of the housing market nightmare, especially if taken at the end of the year.
By the end of 2017 the housing market was starting to go off the boil, and this year has dropped further, so I suspect that the wealth of the bottom half will increase this year purely on the back of the drop in housing asset wealth for the top group.
Let’s see just how much of a blip it is, and recognise that measuring overall wealth is a tough ask, full of anomalies itself.
Overall, Allan, not a bad effort but a couple of “pointers” are in order.
Firstly your section “National earnings per person” confuses the difference between GNP and GDP. Confined to GDP there are trends in terms of real wage growth from circa 2000 to the present and the growth in executive salaries. You might have given this aspect some consideration.
As an aside Joe Lyons (as a teacher in Tasmania) incurred a 20% salary reduction when he became a politician in 1909. In real terms salary of a high school teacher (few were at high school in 1909 – with the standards being a LOT higher than today) ought to be that of a State back-bencher + 20%.
As to “Word Rankings” Australia toped the list in the 1890s and that was during a decade-long recession which was maintained until cica 1920.
Instances of sloppiness do exist in your article via your references to “hard up Australians” and “well-off
Australians”. Looking at the charts (pity they cannot be up-loaded) the defining point is circa A$60,000. Making the case (re-expressing your first sentence) ought to have been linked with the world-wide phenomena.
An exposition of the Lorenz curve and the Gini coefficient (Australia’s is same as the USA now) would have been equally beneficial given your remarks as to statistics such as the mean and median. Include quartiles next time and perhaps a line or two describing the standard deviation.
Despite appeals to the editors of Crikey there are no facilities to up-load graphs or charts and the posting of a link invite an embargoed reply. My subscription expires in nine days.