The rich get richer: Australia is at risk of becoming an inheritocracy

It’s been a little over a year since I last said this, but once again, there is a record number of billionaires in Australia. According to the Australian Financial Review’s annual Rich List, which names the 200 wealthiest Australians, our island nation is now home to 161 billionaires.

Compared to last year’s 150 billionaires, that’s a growth rate of 7 per cent over just 12 months. Compared to the first Rich List, which was published in 1984, it’s even more staggering. That list had just two people with the equivalent wealth of $1 billion in today’s money.

Born rich? The growing size of inheritances will entrench inequality in Australia.Credit: Dionne Gain

Each year’s list always makes for interesting reading. In part because it’s a pervy way of knowing more about notoriously private people, sure. But mostly because it tells us a lot about the state of personal wealth in Australia. And while this year’s list is no exception, the picture it paints is far from idyllic.

Some of the main takeaways from this year’s list: there are only 10 new names from last year’s, which makes the list’s entry rate just 5 per cent. For comparison, in 2000, there were 40 new entries.

It’s also worth noting that only one of the 10 new entrants is a woman, and women comprise just 21 per cent of the total list of 200 (42 people). The most remarkable name among the newcomers list, though, is easily Michael Dorrell, the founder of investment firm Stonepeak, who not only made the top 200 for the first time, but made his way to No.7 with a personal wealth of $13.8 billion.

Rich Lister Michael Dorrell.Credit: AFR

Then there’s the fact that the “poorest” person on the list has a personal wealth of $747 million. Meanwhile, the richest person in Australia, Gina Rinehart, has a whopping $38.11 billion. She’s also held the top spot for six years running.

Collectively, the wealth of these top 200 Australians comes to a combined $667 billion. That’s 20 per cent of Australia’s GDP. And did I mention that while the rest of us struggled through the cost-of-living crisis that feels never ending, the group’s wealth grew by a cool 6.9 per cent compared with last year?

Perhaps most significantly, though, is the analysis of economist Reuben Finighan, which looked at 40 years’ worth of Rich Lists (from 1984 to 2024) and compared them in real, inflation-adjusted terms. Here, he found that the spoils of the wealthiest 200 Australians grew 7.7 times faster than per capita wealth over those four decades.

Alan Schwartz, whose personal wealth alongside his wife is just over $1 billion and has them ranked No.159 on this year’s list, looked into this trend more broadly. He found that though the average wealth of all Australians climbed from $160,000 to $600,000 during the same 40-year period, among the wealthiest 200 Australians the figure grew 26 times faster than per capita income, climbing from $130 million to $3.1 billion.

In other words, the richest people in this country aren’t just getting richer, they’re also doing it faster than the rest of us.

The richest people in this country aren’t just getting richer, they’re also doing it faster than the rest of us.

Though these people may make up just 0.0007 per cent of the population, that this is happening at a time when the vast majority of Australians are struggling to make ends meet, let alone get ahead, feels significant.

Sure, most of us aren’t waking up each day with the express intention or aspiration of making this annual list (or even trying to be among the richest residents in the country, for that matter), but when the bar for entry is $747 million, we should all be paying attention.

All of which brings me back to the topic of new entries and, specifically, why the number of fresh faces seems to be rapidly declining: inherited wealth.

According to the Productivity Commission, almost $1.4 trillion has been passed on to Australians via inheritances over the past 20 years. But between now and 2050, that figure is set to climb to $224 billion every year. That’s a transfer of $5.8 trillion over the next two and a half decades.

For normal people like you and me, the average inheritance now sits at about $125,000. Among this year’s Rich List, about one-quarter of the 161 billionaires either inherited a business from their parents, owe a decent portion of their wealth to an inheritance or had a parent on previous rich lists (Rinehart’s father, Lang Hancock, routinely made early editions, for example).

Again, to normal people, the problem with this scenario is pretty obvious. And it turns out that it is to people at the top end, too. Now, the calls are coming from inside the house.

After analysing Australian wealth trends, Schwartz told the Australian Financial Review: “Although a moral argument may be made in favour of a wealth creator’s right to dispose of their assets as they choose, there are stronger moral and pragmatic arguments as to why this massive increase in inequality will become increasingly unfair and harmful.”

This, he says (and which I fully agree with), is because inheritances at such high volumes will simply continue to grow and be transferred among families, but also because they will further entrench the country’s growing intergenerational wealth inequality.

The other big issue is that generally, such vast family fortunes are managed by wealth fund management companies who, as a general rule, aim to keep wealth growing at a steady pace and are averse to risk-taking and innovation – both of which are essential for healthy economic productivity growth.

Considering Australia’s productivity levels have been lagging at 1 per cent for the past decade, this is a big deal. That’s because at 1 per cent, it will take 70 years for our national economic output to double.

That means the quality of life for those of us among the 99.9993 per cent of us who enjoy reading about the ultra rich from time to time suddenly becomes a lot less luxurious. And the chances of ever getting even close to joining that list become more of a pipe dream than they are already.

Victoria Devine is an award-winning retired financial adviser, bestselling author and host of Australia’s No.1 finance podcast, She’s on the Money. She is also founder and director of Zella Money.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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