Recent commentary on levels of inequality exposes the myth that Australia is an egalitarian society in which the privileges of birth have little currency.
Focusing on inequality in the distribution of incomes ignores an equally important dimension of inequality: wealth. Wealth is much more unequally distributed than income. Therefore, ignoring wealth inequality skews perceptions of social inequality.
Perceptions of the levels of income and wealth inequality are derived from our day-to-day experiences. This means that not mixing with people from the other end of the wealth distribution can colour our perceptions of inequality.
The lack of official data on the wealth holdings of Australians hampers research into trends in wealth inequality. Between 1915 and 2003-04, there is almost no official wealth data to examine.
In 2003-04, the wealthiest 20% of Australian households held 58.6% of total household wealth, and the poorest 20% of households held just 1.4% of total household wealth. In 2013-14, the wealthiest 20% of households held 61% of total household wealth, and the poorest 20% of households held just 1% of total household wealth.
These figures indicate that wealth inequality increased over the decade to 2013-14.
The table below details trends over time in various measures of wealth inequality. The P90 to P10 ratio compares the wealth of households at the 90th percentile with that of households at the tenth percentile. A larger ratio indicates greater levels of inequality.
In 2003-04, households at the 90th percentile held 45 times as much wealth as households at the tenth percentile. In 2013-14, households at the 90th percentile of the distribution held 52 times as much wealth as households at the tenth percentile. This indicates that wealth inequality increased in that decade.
Using the mean and median household wealth figures, it is possible to calculate the ratio of median to mean wealth.
The closer this ratio is to one, the lower the level of inequality. In 2003-04, the ratio was 0.63. In 2013-14, it was 0.57. This also indicates that wealth inequality increased.
The distribution of household wealth also varies between Australia’s state and territories, and by location within states and territories.
Households in the ACT recorded the highest mean household wealth (A$890,100). Households in Tasmania recorded the lowest mean household wealth ($595,600).
When these figures are disaggregated by location into capital city households and households located in the rest of the state, the largest wealth gap occurs in New South Wales. The mean wealth of households in Sydney was $971,700, whereas the mean wealth of households in the rest of NSW was $534,700.
The median-to-mean-wealth ratios show wealth was most unequally distributed in Brisbane and Perth.
Given a relatively large proportion of household wealth is held in the form of property assets, the recently released Household, Income and Labour Dynamics in Australia Survey report identifies property as the key driver of increasing wealth inequality.
The percentage of 18-to-39-year-olds with property declined by 10.5 percentage points between 2002 and 2014. And the level of debt of those with a mortgage doubled in real terms.
So, fewer young adults have mortgages now compared to a decade ago, and those who do have mortgages have higher levels of debt.
Two other sources of publicly available data on wealth are the lists of the super-wealthy published annually by the Business Review Weekly in Australia and Forbes in the US.
Figures published in the Business Review Weekly show that, after adjusting for inflation, in 1984 the wealthiest 20 Australians held $8.25 billion in assets. In 2017, the wealthiest 20 Australians held $104 billion.
Forbes’ lists of billionaires (in $US) show that the number of billionaires living in Australia increased from two to 26 between 1987 and 2014.
Having an increasing number of billionaires would not be an issue if all Australians’ wealth was increasing at a similar rate. However, if the gap between the wealth of the billionaires and that of the average residents increases dramatically, there is likely to be discontent.
Drawing on figures published in the Credit Suisse Wealth Report, it is possible to compare the wealth of the billionaires with that of average Australians.
In 2014, the wealth of the 26 Australian billionaires was equivalent to 214,914 adults with average wealth.
Recent turmoil in the UK and the US may be an indicator that the “peasants are revolting” and are not willing to return to the 19th century, when the very rich lorded over the masses.
Australia has yet to experience mass demonstrations and voter backlashes. But events overseas should be ringing alarm bells among our politicians in Canberra.