06 Dec If I Were A Rich Man

“Dear God, you made many, many poor people.
I realize, of course, that it’s no shame to be poor.
But it’s no great honour either!
So, what would have been so terrible if I had a small fortune?”

Lyrics – If I Were A Rich Man – Fiddler On The Roof

Credit Suisse have recently released their “Global Wealth Report 2015” and it makes for some interesting reading. Please note all figures used are measured in $US Dollars

In keeping with “If I Were A Rich Man” first of all, everyone who reads this is rich, yes you read this right you are rich. Australia has one of the richest middle classes in the whole world, with net assets per adult of approx. $365,000. Our median wealth is $168,300 per adult which is second highest in the world after New Zealand. Our wealth has actually declined in the last 12 months but only as a measure of the $AUD falling against the $USD (or the $USD increasing against the value of virtually all currencies).

Australia’s wealth is tied up in real estate with real assets comprising approx. 60% of our net wealth. This puts us 3rd in the world after Norway & Iceland in holding our wealth in such assets, which has been boosted up by high urban (read – capital city) real estate prices.

Not only that but if you have > $3,200 in net assets it means that you are in the richest 50% of people in the world (so my kids Jarrod & Lauren are rich as well – not that they will have any idea about that)

Australia has the highest percentage of its population, 66%, which was defined by Credit Suisse as having more than $US100,000 in wealth classified as middle class, followed by Belgium and Singapore, both on 60%. Italy, Japan, Spain, Taiwan, the United Arab Emirates and the UK have 55%. In New Zealand, it’s more than 50%.

Additional key findings of the report include:

• Global wealth fell by USD 13 trillion from mid-2014 to mid-2015, due to $US dollar appreciation. If measured at constant exchange rates, global wealth would have risen by USD 13 trillion since last year.
• The USA again led the world with a substantial rise in household wealth of USD 4.6 trillion. China also posted a large annual rise of USD 1.5 trillion.
• China now has the largest numbers of middle class people with 109 million members, surpassing the USA with 92 million.
• The top 1% of wealth holders now own half of all household wealth.

What Does This Mean To Us Though As Australians ?

Firstly Government Policy. The Turnbull government has recently been making noises about trying to look at ways to encourage the older generation to access the equity in their homes – trade down their homes and move into smaller accommodation. This is seen as ways to: –

• Free up capital for retirees to use to support their lifestyles (and over time) take some pressure off the Age Pension system
• Alternatively look at ways retirees can access equity in their homes to fund lifestyle expenditures. This also currently extends to Aged Care where the home is already considered an assessable asset for a person requiring Aged Care (different rules apply to couples & single persons).
• Provide more housing stock to enable younger persons to enter the home market.
• Alternatively to look at ways to include the family home as an assessable asset for means testing for Age Pensions (nothing is on the drawing board per say at present, but this point is raised by main stream press from time to time – The Lefty Bolsheviks & Right Wing Drys keep “banging the drum” on this, but thankfully neither are in charge of economic policy).

Any such move in these areas is likely to have political overtones (“That is a brave decision Prime Minister – Sir Humphrey Appleby”) & any government will tread very lightly in this area.

Secondly Economic Growth. China in now having the worlds second largest middle class population has the ability to certainly impact positively on Australia. Tourism is one of our largest export earners & increasing level of people are coming to Australia. Approx. 1m Australians are employed either directly or indirectly via Tourism.

Sydney airport is the gateway for our national tourism. Sydney Airport international passenger grew during October 2015 by 5.1% compared to the prior corresponding period (pcp). Foreign nationality demand (+6.8%) contributed to the international passenger growth, with Chinese (+23.6%), Hong Kong (+32.4%), Philippine (+43.6%), Indian (+11.9%) and Korean (+9.5%) nationalities performing well.

Sydney Airport also announced a sixth new international airline commencing services in 2015. Hainan Airlines will serve Xi’an-Sydney twice weekly commencing 24 December until late March, subject to government approval. The route will be operated by an A330-200 aircraft with 222 seats and contribute approximately 11,500 seats. Hainan Airlines will be Sydney Airport’s sixth Chinese mainland airline serving 8 destinations across mainland China, making Sydney Airport the world’s leading airport for long haul Chinese airlines.

Summary

So being “wealthy” is not a sin but a necessity in this country where we enjoy a high standard but also a high cost of living. Continuing to grow our economy whilst also acknowledging the ageing of our population and the issues it brings with it is one of the key challenges facing governments over the next 30+ years.

The same way that Tevye in Fiddler On The Roof wanted to provide for his 5 daughters & for them to have prosperous futures, so do I want for my children and also the nation, as the stronger and more resourceful our country is, so to are it’s citizens

We have been the lucky country till now, but watch this space as I will talk more about in 2016 about opportunities that present themselves to us.

In the meantime I wish you & all your family a Safe & Merry Xmas and to all of us I trust that we will enjoy a prosperous 2016