Australia world’s richest country but global economy could bite back

Central banks around the world are struggling with the beast named inflation, and Australia's position atop the global wealth rankings will be sorely tested as international economic policies unfold.

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Can Australia can insulate itself from recessionary pressures with the world's central banks locked in a lengthy fight with inflation? (Image source:

Years of rampaging property prices have made Australians the richest country in the world, but a world of pain could also be in store if global economics take a turn for the worse.

As the nation and the rest of the world learnt more than a decade ago to its horror, when a butterfly in the United States flapped its wings and a Global Financial Crisis erupted, events offshore can have massive ramifications in Australia.

Credit Suisse’s annual global wealth report lists Australians as having the highest median net worth of just over A$413,000 per adult.

Net worth, or “wealth”, is defined by Credit Suisse as the value of financial assets plus real estate, including the family home, and includes retirement savings – from which debts are subtracted.

Thanks to soaring property prices, the median wealth per Australian adult by rose by A$43,000 in 2021.

Despite having less than half a per cent of the world’s population, Australia is now home to 3.5 per cent of its millionaires.

When measured by average wealth, Australia is fourth behind Switzerland, the United States and Hong Kong, indicating wealth is more evenly distributed in Australia.

Nothing taken for granted

Australia’s exalted position is a luxury that can only make its population grateful for their position in an often-troubled world.

The median annual income globally — the amount that is dead middle between the least and the highest amounts — is a paltry A$1,280 dollars. The average Australian earns that yearly sum in just a week and a half.

So while it’s a worth reflecting on the country’s collective wealth and comfort, at least one eye must be kept on international forces that could make life more difficult and send the nation slipping down the wealth rankings.

As Reserve Bank of Australia (RBA) Governor Philip Lowe said in his Opening Statement to the House of Representatives Standing Committee on Economics, the global economy is a source of uncertainty, where the outlook has deteriorated.

“The situation in Europe is very troubling, not least because of the extraordinary increases in energy prices and in the United States, the Federal Reserve has indicated that monetary policy will need to become restrictive to lower inflation,” he said.

“The Chinese economy is also facing major challenges due to the combination of COVID, a severe drought and very weak conditions in the property sector.

“It will be difficult for Australia to stay on that narrow path to a soft landing if there is further material bad news on the global economy.”

Even if Australia can repair its fractured relationship with China that has dented exports in so many industry sectors, except resource, the country’s biggest trading partner has its own issues. China has been pursuing a zero-covid strategy that has choked its economy, while it is also contending with the damage wrought by the financial excesses of its property developers.

But despite, not because of, a war in Ukraine, China’s fading economic growth and a growing inequality of wealth, there another elephant in the room that threatens to throw Australia into recession for the second time in three years (having previously avoided one for 30 years).

Planetary price pressures

An international fight against inflation is sending shockwaves through financial markets and the economy.

With the notable exceptions of China and Japan, almost every industrialised top-tier economy is battling with runaway inflation, from Canada’s 7 per cent, to the United Kingdom’s 9.9 and Spain’s 10.5 per cent.

Global central banks are responding by rapidly raising interest rates.

The US Federal Reserve (their equivalent of the RBA) on Thursday hit American borrowers with a triple-whammy 0.75 per cent rate hike, pushing interest rates to the highest level in almost 15 years in the world's largest economy.

The era of cheap liquidity is over.

Goldman Sachs’ economic team noted that they expect the world’s central bankers to be in the trenches in a war of attrition against inflation “over the next two years”.

Federal Reserve Chairman Jerome Powell said the rate rises were necessary to slow demand, easing the pressures putting up prices and avoiding long-term damage to the economy. But he conceded they will take a toll.

“We have got to get inflation behind us,” he said.

“I wish there were a painless way to do that. There isn’t.”

With interest rates chasing out of control inflation around the world, it’s not just Australia facing the prospect of recession.

In just the last week, the World Bank has warned of “devastating” consequences “as more countries fall into recession. Forbes reported that transport business FedEx has slashed its forecasts for growth, with the CEO saying he “sees the start of a global recession”.

So in the process of rescuing the economy, central banks are hitting people’s disposal income, housing security and confidence.

ANZ Roy Morgan consumer confidence data shows Australians are feeling less like the richest people in the world and more like they did when a little understood virus with no vaccine first emerged and took lives.

Confidence in the country’s economic situation is at just 75, on a scale where 100 is neutral. Their family’s financial situation has touched on 100, down in three years from above 125.

While global drums are beating loudly, the resultant outcomes in Australia are becoming clearer.

Australian residential property prices rose 23.7 per cent during 2021 but from their highs earlier this year, prices are down nationally about 3.5 per cent and more than double that in Sydney.

The property market that giveth the wealth has now begun to taketh away.

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