Australians are the Richest People in the World?

welcome to the land down under the land that the wealthiest citizens in the world call home that's right as of 2019 these guys the residents of Australia are the wealthiest in the world when disregarding micro nations like Monaco or let's--can Stein the average net worth of an Australian adult is 411 thousand US dollars but what is more impressive is that the median net worth meaning the middle person from a lineup of richest to poorest of people in Australia is 191 thousand US dollars which means that this wealth is actually spread pretty evenly and that a regular Australian has a net worth more than three times that of a regular US citizen to top this all off these wealthy Australians have also gone over 27 years without falling into a recession avoiding even the global financial crisis of 2008 relatively unscathed so what is the story here Australia has always been a very well developed country but there must be more to this astronomical private wealth than just that the first place that most people go to and explaining this is the Australian mining industry Australia has been blessed with huge deposits of iron ore coal natural gas and other valuable resources on its huge continent beyond this its geographical location made it a perfect trading partner for exploding Asian economies in the region with most of these materials been exported in raw form to countries like India Japan South Korea and of course China this was a huge driver of exports in the Australian economy and in 2018 Australia exported over 270 billion dollars worth of raw materials to fuel the growth of these Asian economies mining in Australia has also meant opportunities for phenomenally high incomes for workers an unskilled laborer are working in the United States has an average income of about 47 thousand US dollars on the other hand an unskilled laborer are working in the mining industry in Australia can be paid as much as one hundred and fifty thousand US dollars and that's before considering the skilled trades workers and engineers who are also being paid very generously to work in these mines so this kind of sounds like we have answered the question then Australians have been blessed with a treasure chest of natural resources and that has made them very rich well no that's actually not it despite what most people will tell you mining in Australia doesn't actually make that much of an impact on the economy at all it has definitely helped please don't get me wrong but it has not been the golden ticket to Australia's success these amazing jobs are actually very rare and the mining sector in Australia only makes up about 3 percent of Australia's total workforce beyond that mining is not that big of a deal in relation to the whole Australian economy it only makes up about 7 percent of Australia's GDP falling will behind bigger industries like services construction finance and education beyond this there was an attempt made by the left-wing party in Australia to tax these mining companies for the extraction of these resources unfortunately it went up against fierce lobbying from the mining industry and was ultimately never passed meaning that Australia lost a big opportunity to benefit further from their treasure chest of resources okay so mining has helped but it really hasn't fully explained how Australians got so rich so the next place that we should look is housing if we ignore the spiders and the snakes and whatever this monstrosity is Australia is a very safe very clean country with great schools great hospitals and fantastic opportunities this makes Australia and its major cities like Sydney and Melbourne very popular for wealthy migrants the Australian government even has a very open immigration policy for migrants have skills like medical practitioners or engineers for migrants that are independently wealthy and a student visa program for foreign students looking to study in Australian schools or universities the rationale behind this is that when migrants are already wealthy and skilled they will come to the country and boost the economy and this is true having foreign money spent in your country does boost the economy but there is one big side effect demand for housing to accommodate all of these new arrivals has skyrocketed the surgeon demand is compounded by a policy that the Australian government has called negative gearing this is a policy that makes investing in real estate very tax efficient and has meant that investors would rather put their money into rental properties than the stock market all of these housing issues can pound to make the Australian property market one of the most expensive in the world an average 4-bedroom family home in the Sydney metropolitan region will sulfa will over 1.5 million US dollars and in fact all of these very average looking homes that you are seeing here have sold for over two million dollars within the last year this has caused some major issues with younger generations effectively been locked out at the property market because of the astronomically high prices it has also meant that there have been serious issues in recent years with unscrupulous builders putting together very cheap apartment buildings to cash in on this property boom as quickly as possible despite these negative side effects what this has meant for the average Australian is that if they had purchased a home for their family at any point in the last 40 years and just paid off their mortgage without making any other investments whatsoever they would most likely have a million dollar plus net worth today this is not the only piece of the puzzle though soaring property prices and an economy that has been in the right place at the right time for the past 27 years is great but the real secret to these Australians hidden fortunes is the way that they save for retirement in 1991 the Australian Government introduced the superannuation gap this was a new law that mandated that employees had to contribute a certain percentage of their incomes to a retirement savings account these accounts would be invested into the market similar to pension funds in other countries but the difference here was that it applied to all workers in Australia with very very few exceptions this contribution is taken before taxes meaning that most Australians are actually pretty happy with this arrangement because it's a tax efficient way to save for retirement and for the most part they don't really see it impacting their paycheck because everybody else is paying the same amount today the contribution amount is a mandatory 9.5 percent of an employee's wage it has been lower in the past and there are plans to continue increasing it to as high as a 15 percent contribution but that hasn't been formalized yet on top of this employees have the option to contribute more to their superannuation accounts to take advantage of these very very robust tax benefits but let's imagine we take the average Australian worker today with an average income of eighty-two thousand and four hundred and thirty six Australian dollars now this is already very high but more importantly what that means is straightaway this person is contributing 7 thousand eight hundred and thirty one dollars to a retirement account tax-free every year now if we assume that this person never gets a raise not even to keep up with inflation they are going to keep on contributing this seven thousand eight hundred dollars every year this contribution over a 40-year career when invested into an average superannuation fund generating 7% a year will mean that these investments will be worth 1.7 million dollars at the age of retirement now accounting for projected inflation this would only actually be worth about 1 million Australian dollars but this is still a huge boost considering that a lot of workers would not find the self-discipline to save and invest this money if it were completely up to them now the superannuation guarantee has been almost universally acclaimed as a great piece of national policy but as with everything it is not without fault big piles of money like the 2.8 trillion dollars that Australians have invested in their superannuation funds attract certain unscrupulous business practices in fact the entire superannuation industry has been under a Royal Commission which is the Commonwealth equivalent of a congressional inquiry overcharging their customers too much for fees and services associated with their superannuation funds since most Australians don't pay too much attention to their superannuation accounts until they approach a time and age these charges were more or less going unnoticed and making these companies very very rich in the meantime another downside is that these super accounts are locked away from Australians until they are 60 years old so while a middle-aged Australian might have a net worth of a few million dollars on paper most of that could be inaccessible to them to improve their quality of life in any way at all until they turn 60 despite all of these concerns Australia really has earned its title as the lucky country Australians are the wealthiest people on the planet because of good policy which has forced them into doing what every personal finance book ever has told people to do their beautiful country continues to attract people and businesses from across the planet boosting their local economy so much on your beautiful Australians enjoy your giant piles of money and we will call it even for you having to deal with all of those snakes and spiders thanks for watching guys I hope you enjoyed the video as always I have left the references and my email in the video description if you have any specific questions for me or if you would rather please leave a comment and I do my very best to reply to everyone there also please considering liking and subscribing I would really appreciate it thanks you

Channel: Economics Explained

Views: 709,264

Rating: 4.8202143 out of 5

Keywords: the economy of australia, the economics of australia, the economy of australia explained, the economics of australia explained, australia economics explained, economics explained australia, australia economy explained, australia economy, australia economy economics explained, australia economics, how the australian economy works, australian economics, australian economy, australian economy explained, australian economics explained, economics explained

Id: INQQdY0SzW4

Length: 11min 4sec (664 seconds)

Published: Wed Jul 03 2019

Reddit Comments

[u/jdevers]

One error in the video. Contributions to super are not tax free.

[u/insane9001]

I know from my own inquiry that the median wage is significantly lower than the average wage that he touts in this video, I can't speak to anything else but I trust that this is to be taken with a grain of salt as the video must lean towards entertainment.

[u/Gman777]

We also have the second highest level of personal debt in the world, and like he alluded to, entire generation/s locked out of property ownership.

The lack of proper taxation for our natural resources is a disgrace. That money could have been put into a sovereign wealth fund, similar to Norway.

Looking back, it looks rosy.

Looking forward when considering the above (and the lazy, irresponsible and unsustainable immigration numbers)- not so much.

[u/ferdyberdy]

Actually in terms of gross national income by purchasing power parity in international dollars (to correct for cost of living and exchange rates) Australia is only ranked 19th in the world. https://en.m.wikipedia.org/wiki/List_of_countries_by_GNI_(PPP)_per_capita

But its not only about wealth and income. Australia ranks 3rd highest on the human development index rankings. http://hdr.undp.org/en/composite/HDI well within the top 200 million people out of 7700 in the world.

Take a look at this report on global multi-dimensional poverty. More than 1200 million people (>40X Australia) live in multidimensional poverty. Contributors to this poverty index includes but is not limited to needing to collect fuel for cooking, lacking improved sanitation (no flush toilet or even a ventilated pit), no electricity and/or high child mortality.

http://hdr.undp.org/en/2019-MPI

[u/Fatesurge]

Is mining really 7% of gdp? And what, like 30% of the stock market? Seems a bit overvalued...

[u/iolex]

Go to /r/Australia and you would think we're a war torn African country.

[u/maclarenf1]

We are....

[u/[deleted]]

You can nitpick at averages and medians, or house prices and job rates, but the reality is we are lucky as fuck to live in Australia. That doesn't mean it wasn't better in the past, or we can't do better going forward, but we still need to keep a little perspective.

[u/inconsequentialist]

This guy's channel has some great content. I really enjoyed his series on the economies of online games EVE Online and Star Citizen and his latest video about Monaco.