Australian wealth grows, but so does inequality

Australian wealth grows, but so does inequality

Australia’s overall wealth may be growing faster than its overall debt, but this wealth is not being evenly spread among our rich and poor, or between men and women, or between country and city areas.

What is Australia worth?

Roy Morgan’s Wealth Report, which analyses Australia’s wealth and debt between 2007 and 2017, found that the nation’s average per capita net wealth, adjusted for inflation, is now 30.5% higher than it was before the onset of the global financial crisis.

What’s more, average personal assets among Australians were found to be worth 7.9 times their average debts, compared with 7.2 times debts a decade ago.

It was also indicated that Australians may be slowly shifting their wealth out of property and into superannuation, with housing going from 52.4% of personal wealth in 2007 down to 51.9% in 2017, while super assets rose over the same period from 19.6% to 21.8%.

For richer, for poorer

However, the report also recorded increasing inequality in the distribution of this wealth, with the richest 10 per cent of Australians holding 48.3% of net wealth in 2017, compared with 46.8% a decade ago, while the poorer half of the population held just 3.7% of net wealth, compared with 3.9% a decade ago.

Personal wealth was found to correlate with income level. Australians earning over $130k were found to have an average net wealth of $1.2 million – nearly five times the average net wealth of $248k among Aussies earning under $15k.

Women were found to still have less average net wealth than men, though the gap was found to be shrinking. Men now holding an average of 10.6% more than women compared to 26.5% a decade ago.

Country areas around Australia were found to have average wealth only marginally behind that of the capital cities in most states and territories, though wealth levels in regional NSW and Victoria were found to be falling behind Sydney and Melbourne, partially due to the capital gains in housing markets over the past decade. 

What can be done?

Roy Morgan CEO, Michele Levine, said that reversing the growing inequality issue will require a thorough understanding of the complexity of low-wealth groups, such as how the poorest 10% of Australians includes both young Australians with neither assets nor debts and older Australians whose large debts cancel out their net-wealth. 

“Tackling inequality is not a matter of left or right – addressing the needs of poorer groups benefits the entire community and the economy generally.”

“But that is not going to happen unless we break ‘the poor’ down into the right sub-groups and find solutions suited to their particular needs.”

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Learn more about savings accounts

How to make money with a savings account?

Savings accounts make you money by earning interest on your savings. The more money you deposit, the longer you leave it in the account, and the higher the account’s interest rate, the more interest you’ll be paid by the bank or financial institution, and the more your wealth will grow.

To make sure your savings account makes money and doesn’t lose money, it’s important to maintain a large enough minimum balance that the annual interest earned exceeds any annual fees charged on the account.

Can you set up a savings account online?

Yes. Several large and small banks offer online applications for savings accounts, and there are also online-only financial institutions to consider.

Online-only savings accounts are often less expensive than other savings accounts, though they may not offer the same flexibility, features, or face-to-face service as more traditional savings accounts.

What is the interest rate on savings accounts?

As banks frequently change their rates, the most accurate way to look at interest rates on savings accounts is to use a savings accounts comparison tool. When you look at the savings rate check what the maximum and minimum rates are. Often banks will offer you a promotional rate for the first few months which is competitive, but then revert back to a base rate which can sometimes be less than inflation. Ongoing bonus rates are often a safer bet as they will keep rewarding you with the maximum rate, provided you meet their criteria

What is a savings account?

A savings account is a type of bank account in which you earn interest on the money you deposit. This makes it one of the easiest and safest investment tools.

What is a good interest rate for a savings account?

A good rule of thumb to keep in mind with savings accounts is to look for a rate that is higher than the CPI inflation rate. This number is constantly changing, so check the Reserve Bank of Australia’s page. If you aren’t earning interest above this then the value of your money will go backwards over time.

How much money should I have in my savings account?

A good rule of thumb when working out a minimum balance for your savings account is to make sure that you’ll earn more in annual interest on your savings than what you’ll be charged in annual fees.

If you’re saving with a specific goal in mind, prepare a budget so the interest you earn on your deposits will help you efficiently reach this goal. Online financial calculators may be helpful here.

Can I overdraft my savings account?

A lot of savings accounts won’t let you overdraw. Some will allow this feature but you’ll need to apply first. It’s best to read the fine print and check with your lender whether this is a feature they offer. It can be a helpful addition, but as your lender can charge you a fee as well as interest for going into negative numbers, it’s best to avoid overdrafting when possible.

Who has the highest interest rates for savings accounts?

As banks frequently change their rates, the most accurate way to know who currently has the highest interest rate is to use a savings account comparison tool.

How to open a savings account for my child?

Some banks and financial institutions allow parents to open a bank account for their child as soon as it is born, and start depositing funds to go towards the child’s future.

Children’s savings accounts generally don’t have fees, and are structured to help develop positive financial habits by limiting withdrawals, encouraging regular deposits, and earning interest on the savings, similarly to standard savings accounts.

How does interest work on savings accounts?

The type of interest savings accounts accrues is called compound interest. Compound interest is interest paid on the initial deposit amount, as well as the accumulated interest on money you have. This is different from simple interest where interest is paid at the end of a specified term. Compound interest allows you to earn interest on interest at a higher frequency. 

Example: John deposits $10,000 into a savings account with an interest rate of 5 per cent that he leaves untouched for 10 years. At the end of the first year he will have $10,512 in savings. After ten years, he will have saved $16,470.

Can you set up direct debits from a savings account?

It’s not usually possible to set up a direct debit from your savings account to cover ongoing expenses or bills, as savings accounts are structured around growing your wealth by earning interest on regular deposits, and discouraging withdrawals.

Some transaction accounts allow you to set up direct debits and also earn interest, though you may not enjoy as much flexibility as a dedicated transaction account, or get as high an interest rate as a dedicated savings account.

How do I open a savings account?

Opening a savings account is a relatively simple process. If you’ve found an account with a suitable interest rate, you’ll just need to get in contact with your chosen lender via a branch, phone call or hop online to begin the process. 

You may be required to provide:

  • Personal details, including identification (driver’s license, passport etc.)
  • Tax file number
  • Employment details

Can you have a joint savings account?

Yes. Joint savings accounts can be useful for two or more people wanting to combine their savings to meet shared financial goals, including spouses, flatmates and business partners.

Some joint savings accounts require all parties to sign before they can access the money. While less convenient, this extra security can help encourage all parties to meet their shared financial goals.

Other joint savings accounts allow any of the account holders to access the money. These accounts can be convenient for financially responsible couples that trust one another implicitly. 

How can I get a $4000 loan approved?

While personal loans and medium amount loans don’t offer guaranteed approval, there are steps you can take to help increase the likelihood of your application being approved, including:

  • Fulfilling the eligibility criteria (providing ID, proof of residency, proof of income etc.)
  • Checking your credit history (you can order one free copy of your credit file per year, and make sure that there aren’t any errors that may be bringing down your credit score)
  • Comparing carefully before applying (making multiple loan applications can mean having your credit checked multiple times, which can look bad to some lenders and reduce your chances of being approved by them)