How Australia’s richest households are widening the wealth gap

AUSTRALIA’S richest are getting richer quicker and it’s not because of their wages, as our claim to be a land of the middle class is eroding fast.

RICH Australians are getting richer quicker, and it’s not because of their wages.

The incomes of the nation’s top 20 per cent wealthiest households are growing 50 per cent faster than average households, and their net worth is rising at twice the pace.

Wealth specialists and social researchers say the rise reflects growing investments rather than wage income, and they expect the gap between the haves and have-nots to widen further.

Between 2010 and 2016 the average weekly income for a so-called “highest quintile” household rose 12 per cent to $5036 a week, a News Corp Australia analysis of Bureau of Statistics data has found.

Other households’ income climbed 7-8 per cent, apart from an 11 per cent rise for the bottom 20 per cent thanks to increasing welfare payments.

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The net worth of the richest jumped 15 per cent to $2.91 million, while the poorest 20 per cent rose just 0.6 per cent to $36,500.

Social researcher Mark McCrindle said the spread between rich and poor was likely to widen further as wage growth remained flat but superannuation balances, property, shares and other assets grew.

“It is our national identity that we’re the land of the middle class but that is no longer the case,” he said.

“The increase in income of the top 20 per cent is not wages income. It’s mainly investment income. Retirees have been growing incomes above some of the Generation Ys starting their careers.

Social researcher Mark McCrindle says the land of the middle class is gone.

“More worryingly, if you track the life trajectory of people as they start their earning years, we now have the younger generation being left behind if you look at where the older generations were at the same age.”

Mr McCrindle said this could lead to more government taxes on wealth.

Catapult Wealth director Tony Catt said many richer households had invested money in overseas markets that had grown strongly in recent years.

“The old saying ‘money makes money’ is ultimately true,” he said.

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“They’re gaining exposure to assets the bottom bracket wouldn’t attempt to get.”

Mr Catt said higher-income people often had jobs that were difficult for artificial intelligence and other technology to replace.

“There are pockets of jobs that are not in a position to demand pay rises because of technology replicating them,” he said.

Wealth for Life Financial Planning principal Rex Whitford said many of the wealthiest Australians were self-employed “and control their own destiny”.

“Should we persecute a person for being successful in life? No,” he said.

“If you equally distributed all the money over again, within 10 years the wealthy people will be wealthy again and the also-rans will be back to where they were.

“It’s not because they earn 20 times more, it’s because they spend less on consumer goods that they don’t need.”

WHERE DOES YOUR HOUSEHOLD SIT?

For average weekly incomes …

2010 2016 Growth

Top 20% $4503 $5036 12%

Fourth quintile $2320 $2489 7%

Third quintile $1510 $1616 7%

Second quintile $889 $960 8%

Lowest 20% $411 $456 11%

For average net worth …

2010 2016 Growth

Top 20% $2.54 million $2.91m 14.5%

Fourth quintile $823,300 $949,800 15.4%

Third quintile $487,700 $528,400 8.3%

Second quintile $223,500 $235,100 5.2%

Lowest 20% $36,300 $36,500 0.6%

Source: Australian Bureau of Statistics

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Originally published as How Australia’s richest households are widening the wealth gap