Why are Australians so rich?
Australians are rich, very rich. In fact, they’re some of the richest citizens in the world. Close to 10% of its adult population are worth over $1m (USD, not Aussie Dollars).
The average Australian adult is worth $483,755, even higher than Luxembourg $477,306. The median figures put Australians in first place though as the richest citizens in the world.
The median Australia had wealth of $238,072. Belgium was close behind with a median wealth of $230,548, as well Iceland with a median wealth of $231,462. In 2018, Australians had a median net worth of $191,000, so good to see Australians are still getting richer each year.
The median person of Australia has more wealth than just about any other country. Countries that have more wealth include microstates such as Monaco and Lichtenstein.
Keep in mind that during the Global Financial Crisis, when a lot of countries went into recession and wealth levels dropped significantly, the Australian economy managed to avoid it.
So how have Australians got so rich?
Was it mining?
The Australian economy has been blessed with huge deposits of natural resources, made even better by recent price increases in many commodities.
Australia is the world’s largest producer of iron ore, bauxite, and opal. It is the second largest producer of gold, manganese, and lead. Then there are other commodities that are present within the Australian economy such as zinc, cobalt, uranium, natural gas, coal, and many more.
As well as this, Australia’s proximity to growing Asian markets helped its economy take advantage of the high level of natural resources within the country.
| Country | Australian exports (Aussie Dollars) |
| China | $158,734m |
| Japan | $46,558 |
| South Korea | $25,095 |
| Singapore | $15,984 |
The mining industry also helps provide well paying jobs to high and low skilled Australians. According to the Australian Bureau of Statistics, the mining sector employs over 250,000 people, with median weekly earnings being AUS$2,325, compared to $1,500 for the overall economy.
Even casual employees in mining had a median weekly wage above AUS$2,000. Some entry level positions will pay upwards of AUS$100,000 for highly skilled graduates.
Generating wealth is much easier when you have a high paying job. You’re able to save more and invest that money into assets that will hopefully boost your wealth over time. For those Australians that have a job in the mining sector, it has definitely helped.
Mining isn’t the only reason Australians are so rich though. There are millions of people that don’t work in the sector, and yet they still do very well on wealth indices, so what else has made Australians so rich?
Was it housing?
Australia is a very popular country to move to for studying or working. Equally, large swathes of the country are very sparsely populated, so most of the population is in a few urban hotspots, such as Sydney and Melbourne.
This has contributed to Sydney being the second most expensive housing market in the world, and Melbourne being the fifth. Sydney’s median house price is 15 times the median salary, and the ratio is 12 in Melbourne.
It’s not uncommon for Australian property prices to increase by over 10% per annum, and in some years, it has increased by over 20%.
If you’re a home owner in Sydney or Melbourne, this will be music to your ears. If you’re trying to get on the property ladder, it’s not ideal, unless you know of jobs increasing salaries by over 20% per year.
Prices are also pushed up significantly thanks to government policies, such as negative gearing which enables investors to buy property in a tax efficient way.
Australia also has some of the most restrictive planning restrictions, which makes it a challenge to boost supply. This is an issue New Zealand has had to deal with too.
According to the Reserve Bank of Australia, zoning increased prices of houses by 73% in Sydney, 69% in Melbourne, 42% in Brisbane, and 54% in Perth. These zoning restrictions have been tightened since 2000, which has contributed to high house price growth.
The Australian Labor Party won the recent election, and one of their pledges was to introduce a Help To Buy scheme similar to the UK version. Unfortunately, analysis of the UK’s Help To Buy scheme show it pushes up prices, so a rethink would be welcome.
For many Australians, property has been the asset that has made them wealthy. If you bought a property in Sydney or Melbourne 30 years ago and just paid the mortgage down, it’s likely you’d have a net worth of over AUS$1m.
Property has definitely helped more than mining, but there is one final piece to the puzzle that explains why Australians are so wealthy.
Superannuation
Superannuation relates to the way that Australians save for retirement. In 1991, the Australian Government introduced the superannuation guarantee.
This was a new law that meant that employees had to contribute a certain amount of their income to a pension scheme. These accounts are then invested into the market, like the 401k in America or a defined contribution pension in the UK.
These rules applied to pretty much every Australian worker. Today, the contribution amount is 10%. This is set to increase to 12% by July 2027. Employees can contribute more, and some day, as the superannuation scheme is a tax efficient way to save for retirement.
The UK introduced automatic enrolment around a decade ago for pensions. It essentially mimicked the Australian scheme, so hopefully UK wealth can increase too.
Let’s go through an example.
If we have an Australian worker earning AUS$100,000, they’ll be contributing AUS$10,000 each year to their superannuation pot. For the sake of simplicity, let’s assume this person doesn’t get a raise for 35 years and inflation is also 0% over the same time frame.
If that pot of money was invested in a standard equity fund, which averaged an 8% return on investment each year, that Australian worker would have a superannuation pot worth AUS$1.84m.
Even for those Australians on AUS$50,000 a year, using the same assumptions, their retirement pot would be worth AUS$921,000. Not bad when the Minimum Wage in Australia will see you paid around AUS$40,000.
The superannuation scheme basically guarantees that every Australian worker will be wealthy in retirement. This is what has helped Australians become some of the richest people on the planet.
At a time when state spending is under pressure, and a large chunk of spending goes on retirement benefits, Australia can act as a model for many other countries. It has meant that Australia can take a means-tested approach to the state pension, so that those with most get least from the state.
Conclusion
Australians are some of the richest people on the planet for many reasons. If you work in the mining industry, you’ll likely earn a lot of money. If you bought a property in one of the big cities and paid off the mortgage, that property will be worth significantly more than you paid for it.
If you’re not in the mining industry or an existing home owner though, there is still hope for you. The superannuation scheme will get plenty of people to a net worth of over AUS$1m.
Australia has one of the highest percentages of millionaires in the world, and it’s no surprise. Everyone is essentially forced to save and invest until retirement, with the amount they are forced to save increasing every few years.
That means that everyone in Australia can benefit from global growth, and it provides a much safer guarantee in retirement for people that have worked during their life.
