The Times Australia
The Times World News

.

Our analysis of wealth trends suggests Australia’s middle class may be ‘shrinking’

  • Written by Melek Cigdem-Bayram, Ronald Henderson Senior Research Fellow, The University of Melbourne


There are growing concerns about wealth inequality in Australia and what it means for people’s ability to get ahead.

For many, home ownership has become a pipe dream. Huge numbers of Australians now feel the cards are increasingly stacked against them.

Our recent working paper[1] examined changes in absolute and relative wealth held by Australians, using data from the Household, Income and Labour Dynamics in Australia (HILDA) Survey.

We examined trends in holdings across different asset classes between 2002 and 2018, also breaking down this data by age.

In absolute terms, Australia’s wealth gaps are large and growing. Between 2002 and 2018, the absolute wealth gap between the top 10% and the bottom 10% of households increased – from A$1.33 million to $2.19 million.

But if we look beneath the surface at relative measures, some groups – including the poorest households – have actually improved their standing on certain metrics.

For young people and middle Australia, however, it’s a sobering picture – especially when it comes to property ownership.

Read more: How much do you need to retire? It's probably a lot less than you think[2]

How do we measure inequality?

First, it’s important to note that wealth and income are different measures of a person or household’s financial position.

Net wealth refers to a household’s stock of assets – for example, real property, superannuation or shares – minus its debts and liabilities.

businessman on stairs
Income and wealth are related, but different, measures of financial position. GillianVann/Shutterstock[3]

Income, on the other hand, is a cash flow measure that can include wages from employment, taxes and transfers, and returns on investments.

We can express levels of wealth or income inequality using a measure called the Gini coefficient[4].

A Gini of 0 means total equality – everything is divided exactly equally among a population.

A Gini of 1, on the other hand, means total inequality, where one person has everything.

As you’d expect, countries in the real world fall somewhere in the middle[5].

Inequality stable – but it’s not so simple

Looking at this measure, Australia’s wealth inequality remained fairly stable over this period.

Between 2002 and 2018, Australia’s net wealth Gini increased only marginally, from 0.602 to 0.606, indicating that wealth inequality grew only slightly over this period.

But this overall picture masks trends that are visible if we zoom in on different parts of the wealth distribution.

The relative wealth gap between the richest and the poorest households in Australia – the net wealth of the top 10% divided by the net wealth of the bottom 10% – has actually fallen.

Between 2002 and 2018, the bottom 10% increased their wealth by 83%, albeit from a very low level.

This rate surpassed that of the top 10% of households, whose wealth grew by 65%. As a result, the relative share in total wealth of the poorest has increased.

Middle Australia losing ground

Why, then, do so many perceive wealth inequality to be much worse? The answer probably lies in what’s happening to middle Australia, and to the young relative to older generations.

Our analysis compared households in the middle of the wealth distribution – those with more assets than exactly half the population – to those at the top and the bottom.

We found the wealth of those in the middle grew more slowly than that of those in the top 10%, increasing the relative gap between them.

But this group has also become poorer relative to the bottom 10%, reducing the gap between the bottom and the middle.

Combined, this suggests a “disappearing”, or at least, a “shrinking” middle.

A 'for sale' corflute in front of a brick house in Australia
Traditionally, housing has been an important store of wealth for Australians. doublelee/Shutterstock[6]

More financial wealth

Our analysis unpacked wealth trends further by comparing changes in holdings of financial assets (cash, shares, superannuation and so on) to holdings of real property assets.

Looking solely at financial wealth, both young people and the bottom 10% of households actually saw their relative share increase between 2002 and 2018.

For the bottom 10% of households, average financial wealth increased by more than 200% over this period.

This improvement might seem impressive, but it’s important to note that it starts from a very low base.

The average financial wealth of the bottom 10% of households grew from about $2,800 to just over $9,000.

The main driver of this improvement is the Superannuation Guarantee[7] - a mandated contribution made by employers to their employees’ superannuation funds for use in retirement.

Overall, the Gini coefficient for financial assets actually fell over this period, indicating greater equality in financial wealth.

Increasing polarisation in property ownership

Looking solely at property ownership, however, tells a story of increasing polarisation. The Gini coefficient for net property wealth worsened between 2002 and 2018, rising from 0.57 to 0.65.

At the bottom, more poor households owned no dwellings in 2018 than in 2002. In contrast, at the top, more property-rich households owned multiple properties.

The richest 10% enjoyed a 69% growth in their housing equity, while for the poorest households, housing wealth remained at zero.

The middle group increased their housing wealth by around 30% over this period. But middle households exhibited worse outcomes in housing wealth than the rich, in both absolute and relative terms.

Home ownership a fading dream

This trend is consistent with other data showing a decline in home ownership[8] among Australians.

The decline in ownership of real property has been dramatic among those aged 25 to 34. Many of this cohort may go on to become homeowners in the next stage of their lives, but a growing number will never own a home.

A retirement time bomb?

Housing and financial wealth are deeply intertwined. The financial wealth of most households is tied up in their superannuation.

Owning a home, on the other hand, has traditionally provided vital financial and living security for retirees, especially if they rely on the publicly funded age pension

This is why home ownership is sometimes described as the “fourth pillar[9]” of Australia’s retirement system. Falling rates of home ownership should sound alarm bells.

Australia’s declining levels of home ownership date back to the 1980s. They mean a growing number of Australians are likely to reach their retirement years either as renters or highly mortgaged.

This presents a growing challenge for policymakers. There’s likely to be increasing demand for public support for those who have retired without owning a home, while an ageing population puts a strain on tax revenue.

References

  1. ^ working paper (papers.ssrn.com)
  2. ^ How much do you need to retire? It's probably a lot less than you think (theconversation.com)
  3. ^ GillianVann/Shutterstock (www.shutterstock.com)
  4. ^ Gini coefficient (databank.worldbank.org)
  5. ^ somewhere in the middle (journals.sagepub.com)
  6. ^ doublelee/Shutterstock (www.shutterstock.com)
  7. ^ Superannuation Guarantee (business.gov.au)
  8. ^ decline in home ownership (www.ahuri.edu.au)
  9. ^ fourth pillar (link.springer.com)

Read more https://theconversation.com/our-analysis-of-wealth-trends-suggests-australias-middle-class-may-be-shrinking-245140

Times Magazine

Building a Strong Online Presence with Katoomba Web Design

Katoomba web design is more than just creating a website that looks good—it’s about building an online presence that reflects your brand, engages your audience, and drives results. For local businesses in the Blue Mountains, a well-designed website a...

September Sunset Polo

International Polo Tour To Bridge Historic Sport, Life-Changing Philanthropy, and Breath-Taking Beauty On Saturday, September 6th, history will be made as the International Polo Tour (IPT), a sports leader headquartered here in South Florida...

5 Ways Microsoft Fabric Simplifies Your Data Analytics Workflow

In today's data-driven world, businesses are constantly seeking ways to streamline their data analytics processes. The sheer volume and complexity of data can be overwhelming, often leading to bottlenecks and inefficiencies. Enter the innovative da...

7 Questions to Ask Before You Sign IT Support Companies in Sydney

Choosing an IT partner can feel like buying an insurance policy you hope you never need. The right choice keeps your team productive, your data safe, and your budget predictable. The wrong choice shows up as slow tickets, surprise bills, and risky sh...

Choosing the Right Legal Aid Lawyer in Sutherland Shire: Key Considerations

Legal aid services play an essential role in ensuring access to justice for all. For people in the Sutherland Shire who may not have the financial means to pay for private legal assistance, legal aid ensures that everyone has access to representa...

Watercolor vs. Oil vs. Digital: Which Medium Fits Your Pet's Personality?

When it comes to immortalizing your pet’s unique personality in art, choosing the right medium is essential. Each artistic medium, whether watercolor, oil, or digital, has distinct qualities that can bring out the spirit of your furry friend in dif...

The Times Features

How much money do you need to be happy? Here’s what the research says

Over the next decade, Elon Musk could become the world’s first trillionaire[1]. The Tesla board recently proposed a US$1 trillion (A$1.5 trillion) compensation plan, if Musk ca...

NSW has a new fashion sector strategy – but a sustainable industry needs a federally legislated response

The New South Wales government recently announced the launch of the NSW Fashion Sector Strategy, 2025–28[1]. The strategy, developed in partnership with the Australian Fashion ...

From Garden to Gift: Why Roses Make the Perfect Present

Think back to the last time you gave or received flowers. Chances are, roses were part of the bunch, or maybe they were the whole bunch.   Roses tend to leave an impression. Even ...

Do I have insomnia? 5 reasons why you might not

Even a single night of sleep trouble can feel distressing and lonely. You toss and turn, stare at the ceiling, and wonder how you’ll cope tomorrow. No wonder many people star...

Wedding Photography Trends You Need to Know (Before You Regret Your Album)

Your wedding album should be a timeless keepsake, not something you cringe at years later. Trends may come and go, but choosing the right wedding photography approach ensures your ...

Can you say no to your doctor using an AI scribe?

Doctors’ offices were once private. But increasingly, artificial intelligence (AI) scribes (also known as digital scribes) are listening in. These tools can record and trans...