Being a millionaire isn't as glamorous as it sounds. Photo / Getty Images
Being a millionaire isn't as glamorous as it sounds. Photo / Getty Images
Australia is home to an astonishing 1.8 million millionaires after 392,000 people joined their ranks in the past 12 months, according to a report by global investment bank Credit Suisse.
The rise is thanks to surging house prices – the Credit Suisse survey includes home ownership– and strongly rising equitymarkets, and most importantly, the strong rise in the Australian dollar against its US counterpart over the past 12 months.
What Credit Suisse calls "the millionaire density" in Australia has increased from 0.8 per cent in 2000 to 9.4 per cent in 2020.
There's a lower proportion of millionaires in New Zealand, with 6.3 per cent of the adult population having seven-figure wealth.
Pleasingly, Australia's wealth is more evenly spread among the population than in many other developed nations, although of course large inequalities still exist.
We have one of the lowest Gini numbers – a measure of wealth inequality across society – of any developed nations. Australia comes in at 65.6, while New Zealand has a slightly higher rating of 69.9, making it slightly less inequal.
The wealthiest 1 per cent of the population in both Australia and New Zealand have a little over 20 per cent of the nation's total wealth. In the US, with its Gini rating of 85, the wealthiest 1 per cent own 35 per cent of the nation's wealth.
Australia ranks ahead of all nations for median wealth – that is, the point at which 50 per cent of the population have less and 50 per cent of the population have more. Median wealth was US$238,070, ahead of Belgium (US$230,550), Hong Kong (US$173,770) and New Zealand (US$171,620).
In terms of mean wealth per adult, Australia ranked fourth, with US$483,760 in 2020, behind Switzerland (US$673,960), the USA (US$505,420) and Hong Kong (US$503,340). New Zealand ranked eighth, with mean wealth per adult of US$348,200.
We can't take this relative equality for granted. Credit Suisse expects the number of millionaires in Australia to increase by 70 per cent to over three million in the next five years. Once again, wealth will be boosted by rising values of houses and financial assets.
For this reason, wealth inequality is likely to grow. Those who own houses will grow richer, while property will grow further and further out of reach for those who haven't got a foot on the property ladder. Likewise, those with stocks, bonds and investment funds will watch their wealth grow, while the less well-off will sit on the sidelines, struggling to meet accommodation costs.
LIAR, LIAR
The stratospheric rise in house prices in the past two decades and over the past year, despite the pandemic, has done little to deter Australians from wanting to enter the property market.
But at the same time as property prices have risen, the banks have toughened requirements for home loans, making finance harder to obtain.
Australians have responded by lying about their finances in their home loan applications. One in five homebuyers has told a lie when they fill out their loan application forms to avoid being knocked back by the bank, according to a survey by Experian, the world's largest consumer credit reporting agency.
Rising house prices have resulted in more millionaires - on paper. Photo / Getty Images
Slightly more than 40 per cent of lies when applying for home loans involved understating living costs; 28 per cent of consumers who lied underreported their living costs when applying for a loan. About a fifth of untruths involved overestimating income.
Close to one in five lies involved hiding a pregnancy, while a quarter of applicants who misled the bank withheld information about an upcoming change of job. It's easy to understand why people do this.
Australians have no love of banks, so getting one over these institutions is always satisfying.
But more significantly, it's a measure of the desperation – and even despair – people feel about being left out of the property market.
In that context, what does a little white lie on a mortgage application form matter? For the individual, not much at all. Banks are increasingly conservative in how much they're prepared to lend and to whom, so even with a few fudged figures, most people should be able to service their loans, at least in the foreseeable future.
But for the financial system and financial stability, it matters a lot more. Interest rates are hovering at record lows and will stay there until next year at least. But they will rise at some point in the next few years and, if inflation picks up, they will rise steeply.
The big question is how many of these liar loans will end up in default, with their owners not having sufficient fat in their budgets to meet the higher repayments.
It's a bigger threat to Australia's economy than anything the pandemic might do to us.
