According to the latest OECD report – the Organization for Economic Cooperation and Development – the gap between rich and poor keeps widening across the world. That’s not necessarily the case in Australia. Today we look at why the rich are getting richer with Michael Yardney, from Metropole Property Strategists.
Kevin: According to the latest OECD report – the Organization for Economic Cooperation and Development – the gap between rich and poor keeps widening across the world. That’s not necessarily the case in Australia.
To understand what that really means, I’m joined by Michael Yardney from Metropole Property Strategists. Hi, Michael.
Michael: Hello, Kevin.
Kevin: Michael, a brief overview on what the study showed and what the differentials are for Australia?
Michael: The OECD has 34 member countries, and what it showed was that the richest 10% of the population of these countries earns about ten times the income of the poorest 10%. That’s not unusual. But what it’s shown is that the inequality – the gap between the rich and the poor – has actually widened overall. But the good news for Australia is that not only are we amongst the wealthiest countries in the world, we’re also amongst the most even in our wealth distribution.
Kevin: How wealthy are the wealthy?
Michael: It depends where you look. The richest 5% of Australian households have a net wealth of about $2.7 million, which is marginally above the OECD average, while the richest 1% have equivalent of about $4.5 million (US). That’s the richest people. But interestingly the wealth of our poorest people is growing faster than the wealth of many other countries’ rich people.
The reason is in Australia most people have a job, most people own homes, and that’s keeping up the level of their wealth.
Kevin: How much of it’s geared on property, Michael?
Michael: Well, a lot of it has to do with property in Australia. While you and I keep talking about property investments, what we’re saying here is that it’s their home. In fact, the home represents 51% of the average Australian’s wealth. A lot of Australians – 1.9 million Australians – also own property investments, and that helps.
One of the other factors about wealth is wages. The equality of male and female wages in Australia is more than in other countries.
One of the reasons that the rich have been getting richer compared to the average person – we can’t really call them poor in Australia – is because of the number of part-time jobs that have come up since the Global Financial Crisis. But there was an interesting recommendation from the OECD to level inequality.
Kevin: How can we reduce that inequality, Michael?
Michael: It’s not what a lot of people say about taxing the wealthy, rich property investors or the big corporations. What the OECD suggested was to improve skills and educate people in promoting better jobs. What they were saying is rather than bringing the top people down and soaking the rich, it was actually wanting to raise the level of the poorer people in their countries.
Kevin: How do they do that?
Michael: A lot of it has to do with education and improving skills so that people can get better jobs. Part of the issue with inequality was that people weren’t well-equipped to take better-paying jobs.
Kevin: That’s a good part about Australia. There are so many opportunities for people who want to get ahead.
Michael: And the country is changing. We were living off the sheep’s back at Federation, and we were a manufacturing country, and then we had a little mining boom that came and went very quickly. Where jobs are going to happen in Australia, and the big growth prospects, is in service industries.
We are so well geographically situated to provide services to the Asian Pacific region. But Services are going to occur from the big offices in the capital cities, particularly the big four capital cities of Australia. That’s where economic growth’s going to be, that’s where wages growth is going to be, and in my opinion, Kevin, that’s also where property capital growth is going to be, because people will have more money and be able to afford better properties.
Kevin: Great stuff. Thank you so much for your time. Michael Yardney from Metropole Property Strategists. Thanks, mate.
Michael: My pleasure, Kevin.