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What is wealthy in Australia?

A recent poll has shown that wealth is a subjective term, with some Australians believing that being “wealthy” means you’re earning between $60,000 and $80,000.

Mortgage Business sister title Nest Egg ran a poll asking readers how much taxable income Australians need to be considered wealthy, and it revealed some interesting numbers.

Nearly 10 per cent of readers think you’re wealthy if you’re earning between $60,000 and $80,000.

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Another 15.6 per cent think you’re well-off if you’re earning between $80,000 and $150,000, while a further 22.4 per cent of readers think you’re wealthy if you’re earning between $150,000 and $200,000.

Then there’s this: Most readers, 53 per cent, think you’re not wealthy until you’re earning $200,000 a year.

However, the average salary for a full-time worker is $1,597.90 a week, as of November 2017. That’s an annual income of $81,530.80, and Australia is considered a pretty wealthy country.

That’s before we factor in household wealth, which really complicates the picture.

It’s also before we consider the wealth that comes with living in a country with public health care, education, infrastructure and opportunities.

It’s a tricky question, so we also asked the experts.

Saul Eslake, independent economist –

To be a wealthy Australian is to have both a solid income and wealth

“There’s a difference between income and wealth. So, wealth is your balance sheet, how much in assets you own and what you owe, if anything, on those assets, Mr Eslake said.

“There are quite a lot of old folks around who are wealthy in the sense that they might own a home in what is now an expensive suburb, and they dont have any mortgage on it, so theyre wealthy. But if theyre on the age pension, its not necessarily clear that theyre rich.”

According to figures from the Australian Bureau of Statistics, the top 20 per cent of income earners in 2015–16 were earning around $110,000 a year before tax. The top 10 per cent of wealth-holders hold $1.2 million.

“So, someone to be considered rich, Id say someone would need to have to be in the top tax bracket, which would mean a taxable income of over $180,000. And, maybe $1 million or more of net worth, Mr Eslake said.

“And even then, you might say that could be excluding your principal residence.”

However, the economist noted that most Australians don’t consider themselves to be wealthy.

“Its amazing how many people think theyre middle class, Mr Eslake said.

Bernard Salt, demographer and commentator 

Wealth is having the funds to support your lifestyle, but societal lifestyle expectations affect this

“The reality is that you can be a hermit living up in the Daintree and not give your financial situation concern, but I think that its more practically just having enough to live the kind of lifestyle that you want. So, everyone can be wealthy if they just tailor their aspirations in life in that regard, Mr Salt said.

“But I do think its a trade-off between how you expect to live. The problem with that is that is changing. It is rising. This idea of a caravan holiday to Coolangatta, which was actually quite aspirational and a sort of almost like a show-off thing to do back in the 1950s, is a bit embarrassing today.”

Liz Moran, FIIG –

Wealth is freedom, but not everyone knows they’re wealthy

“Its freedom to do what you want to do, to have choice in how you spend. And it’s having that security of either the assets behind you, or youre comfortable in your position. To me, you dont have to own your own house. If you have freedom and choice and you can go and have that smashed avocado on toast and have a holiday to Fiji or put your kids in private school, I think thats wealthy. I think all those things are wealthy, Ms Moran said.

“I think a lot of Australians are wealthy, but they dont recognise it. And I should say I always think being wealthy is having your health, and we have a good health system. Nothing else matters if you don’t.”

Brendan Coates, Grattan Institute –

Wealth can be influenced by when you were born and, in the future, your parents

“Australia has become a really wealthy country and that wealth is being pretty broadly distributed. So, if you bought a home 30 years ago today, or even 20 or 15 years ago, you wouldve done exceptionally well over the last couple of decades,” Mr Coates said.

“[However,] what weve seen is a widening in wealth and equality across generations,” Mr Coates said, pointing to the changing housing market and the lower rates of younger home owners.

“The issue is that in time, thatll translate into a shift from intergenerational wealth inequality to intragenerational wealth inequality, so whether you own a house will depend much more on whether your parents owned one. And your wealth as a 50-year-old will depend much more on the wealth that your parents passed on to you than what youve earned and saved and invested over your life.

“The real challenge that we sort of grapple with as a society is that a housing market and record low interest rates delivered enormous windfall gain for some Australians, and not others; that wealth level and income will become over time a much more important determiner of social class and how well-off we feel.”

Stephen Koukoulas, Market Economics 

Political discourse is part of the problem

While his definition of wealthy is being able to comfortably pay the bills and lead the lifestyle you want, Mr Koukoulas believes the current political discourse tends to “pick on people’s vulnerabilities” and suggests that the cost of living is terrible.

The current energy price debate is a good example.

“The thing that interests me about electricity bills is that the average household will spend three times more on takeaway food and alcoholic drinks than we do on electricity. Just that we get an electricity bill once a quarter, its a big ticket item,” Mr Koukoulas said.

When it comes to health care, life expectancy, living standards and education, we’re doing quite well.

“But its very hard for a politician to say. I think John Howard once said, ‘Youve never had it so good’. And the funny thing is he was right, but he just got shot down politically for saying it,” Mr Koukoulas said.

What do you think it means to be “wealthy”? Let us know in the comments section below.

What is wealthy in Australia?
Australian cash, money, Australian dollars, wealthy, wealth creation
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