Two fascinating studies on wealth in Australia within two days – it’s enough to make a former Rich List editor giddy.
The first is a study by the OECD, which examines wealth inequality across the developed world, with a particular focus on English-speaking nations.
It confirms that Australia’s wealthiest citizens have come through the GFC in pretty reasonable shape, with the top 1% of income earners increasing their share of national income from 4.8% at the end of the 1970s, to 7.2% in 2000 to 8.8% in 2008.
The report found that 80% of these top income earners are men (although the proportion of wealthy women is growing) and also looked at the way people come in and out of that top 1% – in 2008, 40% of this band were different to the year before.
The jump in the share of income held by the top 1% does point to a widening of the gap between the very wealthy and the rest, although the fact that the data is only up to 2008 – that is, before the worst of the GFC hit Australia – does make it hard to see whether the financial crisis has resulted in a widening of this gap or a closing.
But we do get a feel for how wealth has changed from analysis of the latest Household, Income and Labour Dynamics Australia survey, which is conducted by the University of Melbourne.
Early analysis of the survey suggests our wealth has taken a battering in the last few years, growing by just 3% a year – that is, less than inflation – between 2006 and 2011 after growing by 11% a year between 2002 and 2006.
Weak property and share price growth are the big problems here. While house values grew 21% between 2006 and 2010 – pretty reasonable, but nothing like the growth we saw in the five years before 2006 – the average value of shareholdings fell from $127,000 to $110,000.
These surveys give us a great indication of how important the “wealth effect” is in Australia. What happens with the top 1% doesn’t really matter – if middle class Australians feel wealthy thanks to rising property and share prices, they are confident and willing to spend.
The big question is: When will that wealthy feeling return for middle Australia?
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
