A new report being launched by the ACOSS/UNSW Sydney Poverty and Inequality Partnership, The wealth inequality pandemic: COVID and wealth inequality confirms that even though Australians are now, on average, the fourth richest people in the world, the distribution of wealth remains hugely unequal.
Overall household wealth has grown as much in the last 3 years as it did in the previous fifteen, despite the COVID-19 pandemic and the recession in 2020, thanks mainly to the soaring cost of residential properties across the country during that same period.
Soaring housing prices and their impact
Over two-thirds (69%) of the overall increase in household wealth during the pandemic was in residential property, which rose in value by 22% through the year to December 2021 – the highest annual increase in 35 years.
Rising house prices increase the divide between people who bought their homes when they were more affordable, and younger people and those on low and modest incomes who are shut out of home ownership or struggle with escalating rents and mortgage payments.
Although markedly worse of late, the situation is not new. Over the period from 2003 to 2021:
- home ownership among people aged 25 to 29 fell from 44% to 38% and among people aged 30-34 it fell from 57% to 50%;
- the proportion of median household disposable income required to service a typical home mortgage rose from 27% to 41%;
- the proportion of median household disposable income required to pay the median rent rose from 26% to 31%.
Out of almost 50,000 rental listings surveyed by Anglicare Australia in May 2022, only seven were affordable (costing less than 30% of income) for a single adult on Jobseeker Payment and just nine were affordable for a single parent on Jobseeker Payment with one child.
Previous ACOSS/UNSW reports in this series have shown how the pandemic related income supports and rental assistance offered by the Government early on helped to lift people out of poverty. This report shows that, with a return to ‘normal settings’ and the end of such supports, mortgage increases and higher rents are putting people on low and modest incomes under incredible financial pressure.
Wealth inequality
Household wealth in Australia is very unequally divided.
- The highest 10% of households by wealth has an average of $6.1 million or 46% of all wealth.
- The next 30% has an average of $1.7 million or 38%.
- That leaves the majority – the lower 60% – with an average of $376,000 or just 17% of all wealth.
The report shows that the over 130 billionaires in Australia each hold an average of $3,600 million in wealth.
Since owner-occupied housing wealth is less unequally shared than other assets such as shares and investment property, the recent boost to housing wealth eased the growth in wealth inequality under way for the last two decades. The top 10% of households by wealth held 42% of all wealth in 2003, rising to 47% before COVID in 2018, then fell back to 46% in 2021.
Due to our high and rapidly growing home prices and relatively easy access to credit, this latest report also shows that Australian households are overcommitted or ‘more indebted’ than many other wealthy nations. The Organisation for Economic Cooperation and Development (OECD) regards households in the lowest 40% by income with debt at least three times their annual disposable income as ‘over-indebted’ and nearly a third of Australia’s low-income households are currently in this position.
Acting ACOSS CEO, Edwina MacDonald said:
“Everyone deserves a roof over their heads, and a home that meets their basic need for shelter. It is simply wrong that something so fundamental has become so challenging for those on low and modest incomes to achieve.
“This research also points to the precariousness of life for people on low incomes in Australia, 39% of who are unable to cover 3 weeks of lost income, and the need to bolster the social safety net so that unemployment does not inevitably lead to poverty.”
Scientia Professor Carla Treloar, Director of the Social Policy Research Centre (SPRC) and the Centre for Social Research in Health (CSRH) at UNSW, said:
“Once again, this report reminds us that wealth in Australia is distributed very unevenly. We have over 130 billionaires in this country, and last year the wealth of those same billionaires grew, on average, by $395 million or 12%. It means they now hold almost as much wealth as the 2.8 million households in the lowest 30%.
“This research makes it clear we have an economic model that delivers profits for the wealthiest at the expense of those with least in our community, and it’s time for the inequality in our economic system to be addressed and made fairer for all.”
Key Findings
- Households in Australia are on average the fourth richest in the world, but many are financially vulnerable due to high debt or low financial buffers.
- Household wealth grew as much over the past 3 years as in the previous 15 years. Two thirds of the increase in wealth came from house price inflation. Residential property values rose 22% through the year to December 2021 – the highest annual increase in 35 years.
- Wealth inequality rose sharply from 2003 to 2018, then declined slightly in the pandemic. Rising house prices moderated overall wealth inequality, as housing is distributed more evenly across the population than other kinds of wealth) but shut younger people and those with low incomes out of home ownership.
- Household wealth is still shared very unequally: The richest 10% of households has an average of $6.1 million and almost half of all wealth (46%), while the lower 60% (with an average of $376,000) has just 17% of all wealth.