Income Inequality in Australia
Australia has always been a country that has been considered egalitarian by the rest of the world, a place where all citizens had a ‘Fair Go’ at the Australian Dream, – that is, until recently. Australia has suffered a shift in income equality that has created a sizeable gap between the rich and the poor. “In Australia, the richest 1% are as rich as the poorest 60% of Australians,” with wages for top earners increasing at a more rapid rate than the wages of the everyday Aussie.
A big factor in this troubling trend is that Australians’ assets are skewed toward real assets as opposed to wage earnings in determining their net worth. With median home prices on the rise throughout Australia it is no wonder that we are witnessing a steadily decreasing middle class.
A large difference in net worth can be seen through generational gaps. Baby Boomers came into the market in a time when Australian home prices were lower. They bought properties and were easily able to pay them off with a single income setting them up for greater earning potential and financial security in their future. Generation Y on the other hand, hasn’t had such luck. They are typically known as the generation who has been shut out of the property market with rising prices of real estate.
Australian home prices in 2016 are high when compared directly with the average Australian income. In January 2016 the Australian average weekly wages were measured at $1160.90 by the Australian Bureau of Statistics which is considerably out of proportion with the rising cost of real estate. Sydney currently has the highest mean house price in the nation with the average home price as high as $780,900 AUD, pricing many younger buyers out of the market completely resulting in a drop in first time home ownership.
Generation Y, on the other hand, earn significantly more than Generation X , but they have significantly less investments, relying heavily on their income as a source of wealth. This has given them a significantly lower net worth; the effect of this is made more severe by the lack of wage growth in the past years. Wage growth was down by as much as 3% in 2015. With little hope of that big raise, the hard-working Generation Y Australian won’t have much opportunity to increase their wealth and will have a tough time competing with an older generation with growing investment returns.
Millennials are also being generationally affected by these factors. Many young Australians are opting to move back in with mom & dad after university to combat rising home prices and cost of living. For many it’s the only way to save enough for a down payment.
So what does this mean for Australians? The average Australian is going to have less disposable income than they had 8 years ago. That means less money for consumer spending. Inequality and the growth of class differences could potentially have a big effect on the way the economy grows and negatively affect our communities.