Wealth data: why Australians are richer than we think

Are you upset that so many other people seem richer than you? Numbers can play tricks, and you may be pleasantly surprised.

It’s easy to feel financially intimidated when reading about billionaires, rich lists, other’s peoples’ wages and superannuation balances.

But most Australians are much richer than they probably believe, and the negative thoughts are often caused by misleading numbers and statistics.

A big drain on confidence is the focus that statistics put on averages. A clearer picture is painted by looking at medians – which measure the middle person in any group and are not skewed higher by a minority of super-wealthy people.

Here are some examples why we’re richer than the averages suggest.

WAGES

The Australian Bureau of Statistics publishes average weekly earnings, which at last count were $1712, equating to $89,000 a year. An average full-time wage approaching six figures makes many of Australia’s 13 million workers feel their income is inferior.

However, median weekly earnings for all employees sits at $1150, or $59,000 annually, which means about 6.5 million workers are paid less than that.

So if you earn more than $60,000 a year, you’re doing better than more the half the workers in this country.

Averages can cause problems when working out your wealth and comparing it with others.

SUPERANNUATION

Averages also skew our nest eggs dramatically.

Statistics from the Association of Superannuation Funds of Australia (ASFA) show average super balances are $168,500 for men and $121,300 for women. However, the median balances are just $65,000 and $45,000 respectively.

For Aussies aged 55 to 64 three are also big discrepancies. The average for men of this age is $333,000 and the median is $183,000, while the average for women is $245,000 and the median is $119,000.

The averages are dragged higher by wealthy super fund members. A new report by ASFA says 27,000 Australians have super balances above $2 million, and 11,000 people have balances above $5 million.

To illustrate the averaging effect, imagine Australian had just two retirees – one with $5 million in super and one with $200,000 in super. This would make the average retiree super balance $2.6 million, and make the retiree with $200,000 feel decidedly below average.

INTERNATIONAL COMPARISONS

Some statistics are misleading, while others simply should be put into perspective.

Earning the average Australian income of $89,000 puts you in the top 1 per cent of all income earners globally. Earning just half that still puts you in the top 5 per cent.

Australia’s superannuation system is ranked among the world’s best, and a typical household’s wealth would rank it in the top 5 per cent globally.

PENSION BACK-UP

We are lucky to have a financial safety net that many countries just don’t deliver.

Aussies receiving a full government pension receive about $25,000 a year and this ranks them well inside the top 10 per cent of all income earners on the planet.

Of course, we pay more for stuff here than people do in poorer countries, which still leads to people in poverty across Australia.

Even as our superannuation balances build in the decades ahead, the age pension will still be paid to about half the population.

The difference for them will be that instead of existing on about $500 a week, the nest egg they saved over a lifetime will give them a richer retirement than most people can only dream about.

@keanemoney