Peak performersFirst the good news: Australians are getting richer.
Average net worth per person hit a record high of $327,263 in the March quarter, according to CommSec: a rise of $4,248 on the previous quarter. It’s been a dramatic recovery from the global financial crisis when average wealth dropped to near $250,000.
The main reason for rising wealth has been the boom in house and share prices, both of which grew by double digits in the financial year just ended.
But as anyone who is struggling to enter the housing market and therefore doesn’t benefit from rising prices can attest, averages can be deceptive.
We may be getting richer as a whole, but more and more of the gains are going to people who are already relatively well-off.
A recent report from the Australia Institute highlighted the gaping chasm between our poorest and richest. It said the seven wealthiest billionaires in the country hold more wealth than the poorest 1.73 million households combined. Another study by Oxfam earlier this year found the rise in income that the top 1 per cent have enjoyed in the last three decades was second only to the increase experienced by their peers in the United States.
There are clearly some divergent trends at play here. As the country gets richer, it is becoming more unequal.
This is hardly unique to Australia – it’s happening around the world. But it’s still worth pausing to consider these change in how the wealth is shared, for a number of reasons.
For one, it’s an economic risk. More and more economists around the world are now reaching the conclusion that an ever-growing gap between rich and poor is bad for growth.
Even the hard-headed economists at the International Monetary Fund now acknowledge that prolonged growth in inequality is bad news because it tends to breed instability.
At the same time, it’s worth thinking about these trends because there appears to be a gap in public awareness about how the wealth is shared. The figures suggest most of us don’t really know how wealthy we are compared with others.
The Australia Institute’s survey found that when we are asked what the average income is, most of us tend to think it’s similar to our own.
Most people earning less than $20,000 thought that was average. More than two thirds of people earning $40,000 to $60,000 thought that was average, while 61 per cent of the people on $60,000 thought they were average. Obviously these can’t all be right. For the record, the latest figure from the ABS on average household income is $47,000.
But the point is, many of us have a limited idea of what is a typical amount of wealth or income, and how our circumstances compare to “normal.”
As a result, we may underestimate the extent to which the country is getting more unequal, even if it is also getting richer.
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