The basic relationship between wealth, power, economic growth - globally and in Australia

It is no secret that the world is an unequal place when it comes to the distribution of wealth and the free exercise of political power.

This month Oxfam International released its Oxfam Briefing Paper January 2017, AN ECONOMY FOR THE 99%: It‟s time to build a human economy that benefits everyone, not just the privileged few.

This paper pointed out that new estimates show that just eight men own the same wealth as the poorest half of the world.

That’s eight men in a global population of over 7 billion people.

The briefing paper went on to say:

By any measure, we are living in the age of the super-rich, a second "gilded age" in which a glittering surface masks social problems and corruption. Oxfam's analysis of the super-rich includes all those individuals with a net worth of at least $1bn. The 1,810 dollar billionaires on the 2016 Forbes list, 89% of whom are men, own $6.5 trillion – as much wealth as the bottom 70% of humanity. While some billionaires owe their fortunes predominantly to hard work and talent, Oxfam's analysis of this group finds that one-third of the world’s billionaire wealth is derived from inherited wealth, while 43% can be linked to cronyism.

On 16 January 2017 BizNews reported that:

The world’s 8 richest people are, in order of net worth:

1.    Bill Gates: America founder of Microsoft (net worth $75 billion)

2.    Amancio Ortega: Spanish founder of Inditex which owns the Zara fashion chain (net worth $67 billion)

3.    Warren Buffett: American CEO and largest shareholder in Berkshire Hathaway (net worth $60.8 billion)

4.    Carlos Slim Helu: Mexican owner of Grupo Carso (net worth: $50 billion)

5.    Jeff Bezos: American founder, chairman and chief executive of Amazon (net worth: $45.2 billion)

6.    Mark Zuckerberg: American chairman, chief executive officer, and co-founder of Facebook (net worth $44.6 billion)

7.    Larry Ellison: American co-founder and CEO of Oracle  (net worth $43.6 billion)

8.    Michael Bloomberg: American founder, owner and CEO of Bloomberg LP (net worth: $40 billion)

Oxfam’s calculations are based on global wealth distribution data provided by the Credit Suisse Global Wealth Data book 2016.

The wealth of the world’s richest people was calculated using Forbes’ billionaires list last published in March 2016.

According to the Credit Suisse Research Institute in November 2016:

For financial wealth at least, direct estimates for the first quarter of 2016 were available for 27 countries: Australia, Austria, Belgium, Canada, Chile, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Italy, Japan, Korea, Latvia, Lithuania, New Zealand, Poland, Portugal, Singapore, Slovakia, Spain, Sweden, the United Kingdom and the United States. These countries account for 76% of global wealth in 2016.

Australia’s percentage share of global wealth was 2.5% in First quarter 2016, with 1.06 million individuals in a population of almost 23 million holding most of that wealth.

The wealth spread in Australia last year was calculated as:

§  20 individuals holding over US$1 billion each

§  39 individuals holding US$500 million-1 billion each

§  685 individuals holding US$100-500 million each

§  1,476 individuals holding US$50-100 million each

§  25,924 individuals holding US$10-50 million each

§  55,812 individuals holding US$5-10 million each

§  976,193 individuals holding US$1-5 million each

In Australia household gross wealth was estimated to be composed of 60.6% non-financial wealth and 39.4% financial wealth.

Forbes Media listed Australia's top eight richest people in 2016 as:

Blair Parry-Oakden - heiress to Cox Enterprises fortune ($8.8 billion)
Gina Rinehart - mining magnate ($8.5 billion)
Harry Triguboff - property developer ($6.9 billion)
Frank Lowy - co-founder Westfield Group ($5 billion)
Anthony Pratt - CEO Pratt Industries & global chair Visy Industries ($3.6 billion)
James Packer - media mogul ($3.5 billion)
John Gandel - property developer ($3.2 billion)
Lindsay Fox - trucking magnate ($2.8 billion)

On 20 August 2015 The Washington Post reported a new study (based on Does Wealth Inequality Matter for Growth? The Effect of Billionaire Wealth, Income Distribution, and Poverty, IZA DP No. 7733 November 2013 and later reworked as Billionaires and Growth by Sutirtha Bagchi and Jan Svejnar).

This study reportedly found that 65% of all billionaire wealth in Australia is based on political connections rather than on business innovation and, In sum, wealth inequality that comes from political connections is responsible for nearly all the negative effect on economic growth that we had observed from wealth inequality overall.

Or to put it another way, wealth amassed by certain billionaires world-wide, through the giving of political donations, public and private lobbying of politicians and/or the exchange of political favours, was responsible for nearly all declining economic growth this century. 

Australian Federal Election 2016: spot Amanda Vanstone's attempts at political deception in The Age newspaper

This was former Liberal Senator for South Australia and former minister in the Howard Government, Amanda Vanstone writing in The Age on 9 May 2016 in an article titled Turnbull or Shorten? The choice seems clear:

Let’s break that down a little.

Schooling

Yes, Malcolm Turnbull went to a public primary school at Vaucluse in Sydney’s affluent Eastern Suburbs for about three years and, yes he went to Sydney Grammar School from the age of eight with the assistance of a scholarship for at least part of that period. He graduated from university during the years when undergraduate and post-graduate tertiary education was free of course fees in Australia. He was the child of divorced parents. All this is on the public record.

Bill Shorten went to a local Catholic primary school before attending Xavier College’s junior & senior schools in the Eastern Suburbs of Melbourne – his mother taught at Xavier and presumably there was some degree of discount on his school fees. So yes, he also had a private education in affluent suburbs. He graduated from university during the years when tertiary education was free of course fees and undertook a post-graduate degree during a period when course fees were re-instituted. His parents divorced when he was about 20 years of age. All of which is also on the public record.

Wealth

Malcolm Turnbull inherited assets worth an est. $2 million from his hotel-broker father before he turned 29 years of age according to one of his biographers Paddy Manning and, he and his wife independently and jointly went on to garner considerably greater wealth which was last estimated to be in the vicinity of $200 million. His last Statement of Registrable Interests lists a veritable slew of financial investments and an expensive property portfolio shared between he and his wife. It is not known if he inherited any money from his mother.

It is not known to the writer if Bill Shorten inherited any money to speak of from his dry-dock manager father or his mother, however his last Statement of Registrable Interests lists very little in assets held by either he or his wife beyond their mortgaged family home.

What essentially separates these two men are the differences in their personal and political philosophies and the wide gap between their different levels of personal wealth.

Although this is something Amanda Vanstone is trying hard to distort in this federal election campaign and something The Age appears to be so indifferent to that its editor is not reigning in her excesses.  

Federal Election 2016: Malcolm Bligh Turnbull and housing affordability

On 4 May 2016 this on-air exchange occurred between ABC 774 Radio presenter Jon Faine and Prime Minister Malcolm Bligh Turnbull:

JON FAINE: " Yeh but my question was specifically about the intergenerational aspects of it. It’s  [negative gearing] creating conflict with effectively the kids of your and my generation, who can't get into the market and they're saying oh for goodness sake you baby boomers, you just want everything and you're locking us out.”

MALCOLM TURNBULL: "Are your kids locked out of the housing market?"

JON FAINE: "Yes"

MALCOLM TRUNBULL: "Well you should shell out for them, you should support them, a wealthy man like you"

JON FAINE: "That's what they say" [laughing]

MALCOLM TURNBULL: "Exactly. There you go. See you've got the solution in your own hands”

JON FAINE: “That’s hardly national policy”

MALCOLM TURNBULL: You can provide a bit of inter-generational equity in the Faine family"

There is a reason why Turnbull can be so casually dismissive of concerns about home ownership and housing affordability and, it can be found in his privileged background.

Domain.com.au:

Title records show that Mr Turnbull was a law student at Sydney University when he spent $17,000 on a worker’s semi on Newtown’s Wells Street. At the time he was far from a struggling student kicking around the backstreets of the inner west. He was already a Point Piper resident, with corporate records showing he lived in the Longworth Avenue apartment owned by his late father, hotel broker Bruce Turnbull.

That Newtown investment property was likely Mr Turnbull’s first windfall from the Sydney property market. He sold it in 1981 for $68,000, quadrupling in value over the three years.

The year after his Newtown purchase title records show the Rhodes scholar (or “student” according to the property transfer) bought a terrace on Redfern’s Great

Long before Malcolm Turnbull ascended to the highest political office in the country and took the keys to his official Sydney residence Kirribilli House, he had already amassed a fortune – much of it from Sydney’s property market.

The 29th prime minister has come a long way from his 1978 first-home purchase in Newtown, to his $50 million-plus trophy waterfront home in Point Piper.

Privately educated Malcolm Turnbull was 23 or 24 years old, son of a successful property speculator and a recent university graduate, when he purchased his first property in 1978.

By the end of 1982 this now married practicing lawyer was a member of the Liberal Party, had inherited an est. $2 million in assets, become a grazier and acquired a second investment property – all the while residing in a Point Piper flat owned by his father.

Five years later he was an investment banker at Whitlam Turnbull & Co. Ltd.

By the time he entered parliament as the Member for Wentworth in 2004 he was reputedly worth $133 million.

Turnbull’s fortune continues to grow.

This is a man who has never known Struggle Street. 

So you think Australia is an egalitarian society? Think again.

Based on the World Population Clock as of 16 April 2016, a total of 74 million people (The 1 Per Cent) are said to own approximately 48 per cent of the entire world’s wealth.

In 2015 the Credit Suisse Group calculated total global wealth at US$250 trillion. 

An est. US$7.6 trillion of this was held offshore in low taxing jurisdictions (tax havens) and the majority of offshore wealth is managed by just 50 big banks, with the 10 busiest banks managing 40 percent of these offshore assets, according to Oxfam Briefing Paper 210. 

How much this represents in lost tax revenue to the countries in which profits were generated is unknown.

However, there is some indication that despite many of the extremely rich having residences in more than one country and often living in constant movement between these homes, they are not above seeking political influence in those countries in which they may not be citizens.

In countries in which they conduct business they are also politically active. In Britain the Sunday Times Rich List for 2015 revealed that: In total, 197 people who have featured in Rich Lists between 2011 and 2015 contributed £82.4m, just under half of the £174.7m donated in private and corporate cash. 25 gave more than £1m. Seven donors gave more than £2m.

What this all means is that by 2015 The 1 Per Cent had amassed US$120 trillion for their own exclusive advantage and use and, of these an est. 7.4 million individuals have the biggest share of that very large slice of the global riches pie.

In that 7.4 million strong group there is old money and new money - heads of royal houses, heirs of fortunes established in previous generations, hedge fund billionaires, investment bankers, oil barons, mining tycoons, industrialists, shipping magnates, the odd digital genius or two, oligarchs, financiers and other disreputable individuals.

Oxfam pointed out in that in 2015, 53 men and 9 women out of these 7.4 million rich individuals had a total combined wealth of $1.76 trillion.

According to the Institute for Policy Studies, by 2015 in America the 20 wealthiest people owned more wealth than the bottom half of the American population combined - that is more wealth than a total of 152 million people in 57 million households.

For the same year, Forbes listed Australia’s 50 richest residents (our very own 0.00020 per cent) as having a combined personal wealth of $85.41 billion - which would roughly equate to 5% of this country’s gross domestic product for 2015.

Also in 2015 news.com.au reported that the chief executive officers of Australia’s biggest corporations earned more than 100 times the annual salary/wage of the average worker - in some cases earning as much as $367,000 a week.

Going into 2015 Westpac Banking Corporation's CEO was already receiving an annual remuneration package worth an est. $13 million.

The gap between the very rich and the rest of Australia continues to grow.

In November 2015 Australian Bureau of Statistics reported that between 2003-04 and 2014-15 the 20% of individuals in the highest income quintile received 42 per cent or nearly half of the total growth in wages and salaries.

In September 2015 The Guardian reported that: The latest figures for Australian household incomes and wealth released last week showed that income inequality has risen in the past two years. The average annual income of the richest 20% rose by 7%, while median households saw their income rise by just 1.3% in the same period.

When one looks for evidence of political influence - it was not unknown for very large political donations from billionaires and millionaires to occur in years past, such as those from Lord Ashcroft and Reg Grundy. While in 2014-15 at least five of the first ten Australian billionaires included on the Forbes Rich List made more modest political donations - between $10,000- $100,000 and predominately to the Liberal-Nationals.

The rich tend to cluster together in life as well as politics. In 2015 Business Insider reported suburban clusters with the highest taxable incomes, of which the following are examples:

* Claremont-Claremont North-Karrakatta-Mount Claremont-Swanbourne, Western Australia, with 10,885 residents having a total combined average taxable income of est. $1.16 billion pa.

* Balmain-Birchgrove-Balmain East, New South Wales, where 10,515 have residents have a total combined average taxable income of est. $1.14 billion pa.
* Middle Cove-Castlecrag-Willoughby-North Willoughby-Willoughby East, NSW, with 10, 295 residents having a total combined average taxable income of est. $1.09 billion pa.

* Darling Point- Edgecliff-Point Piper, NSW, where 5,980 residents have a total combined average taxable income of est. $1.06 billion pa.

* Castle Cove, Roseville, Roseville Chase, NSW, with 8,985 residents having a total combined average taxable income of est. $976.68 million pa.

* Kooyong-Malvern-Malvern North, Victoria. where 7,755 residents have a total combined average taxable income of est. $817.36 million pa.

With all this conspicuous wealth in the top tier of a supposedly egalitarian society, one would expect that any journey towards the bottom of the pile would be more a gentle downward slope rather than a high drop from a cliff. 

However, in January 2015 there were 795,000 ordinary people at the bottom of that proverbial cliff, without a job and living on about $140 per week, and on any given night an est. 1 in every 200 men, women and children were without a permanent roof over their heads.

So when multi-millionaire Prime Minister Malcolm Bligh Turnbull and Treasurer Scott John Morrison begin to explain on 3 May this year how the approximately 90 per cent of Australian households (who don’t have net worths calculated in double digit millions or billions) should start to live on less or expect diminished public health and education provisions in order ’to assist' the national balance sheet, I strongly suggest that every low-income household in this group consider giving both these gentlemen the raised middle finger.

For the last three years it has been those on the bottom tiers of the wealth pyramid who have borne the brunt of punitive federal budget measures and it is time to say “No more!”.

via GIPHY

A profile of personal incomes in the Northern Rivers region is a lesson in the unequal distribution of wealth

On 28 January 2016 the Australian Bureau of Statistics released its Estimates of Personal Income for Small Areas, 2012-13.

These estimates show that for Australia, the median total personal income in 2012-13 for people lodging tax returns was $44,940. The top 10 per cent of earners received 33.7 per cent of the total income and the median age of an earner was 42 years of age. Also, 77.9 per cent of earners reported employee income as their main source of income.

In NSW the per cent of total income (from wages/investments) held by the top 1% of earners  is 10.5% - with the top 10% having 34.9% of total income.

In NSW the median total income from all sources for individuals was $44,780 (excluding government pensions/allowances), in Greater Sydney it was $47,281 and in the rest of NSW it was $40,702, both with the same exclusions.

In the Northern Rivers region the median total income from all sources for individuals was less than $39,000 (excluding government pensions/allowances).

This is a basic profile of wage and investment earners in all seven local government areas within the NSW Northern Rivers region:

BALLINA LOCAL GOVERNMENT AREA

* number of employees earning a wage – 16,348

* median age of employee – 44

* percentage of employees whose wage is main source of income – 67.3%

* average wage – $48,595 (half of those earning a wage receive $40,617pa or less)

* number of people with investment income – 17,131

* percentage of people whose main source of income was investments – 18.6%

* average investment income – $9,005 (half of those with investment income receive $573pa or less)
* Total income of all earners living in this local government area (excluding govt pensions/allowances): $1.07 billion with the top 10% sharing 33.2% of this billion

BYRON LOCAL GOVERNMENT AREA

* number of employees earning a wage – 12,300

* median age of employee – 41

* percentage of employees whose wage is main source of income – 61.4%

* average wage – $43,947 (half of those earning a wage receive $33,634pa or less)

* number of people with investment income –  13,332

* percentage of people whose main source of income was investments – 18.1%

* average investment income – $12,365 (half of those with investment income receive $624pa or less)

* Total income of all earners living in this local government area (excluding govt pensions/allowances): $823.5 million with the top 10% of the population sharing 38.5% of these millions

CLARENCE VALLEY LOCAL GOVERNMENT AREA

* number of employees earning a wage - 16,945

* median age of employee – 44 years

* percentage of employees whose wage is main source of income – 70.9%

* average wage – $45,005 (half of those earning a wage receive $38,958pa or less)

* number of people with investment income – 16,468

* percentage of people whose main source of income was investments – 15.7%

* average investment income – $4,880 (half of those with investment income receive $378pa or less)
* Total income of all earners living in this local government area (excluding govt pensions/allowances): $915.5 million with the top 10% sharing 31.1% of these millions

KYOGLE LOCAL GOVERNMENT AREA

* number of employees earning a wage – 2,777

* median age of employee – 45

* percentage of employees whose wage is main source of income – 68.7%

* average wage –  $43,789 (half of those earning a wage receive $38,678pa or less)

* number of people with investment income – 2,841

* percentage of people whose main source of income was investments – 14.0%

* average investment income – $5,366 (half of those with investment income receive $473pa or less)
* Total income of all earners living in this local government area (excluding govt pensions/allowances): $143.4 million with the top 10% sharing 33.9% of these millions

LISMORE LOCAL GOVERNMENT AREA

* number of employees earning a wage – 16,972

* median age of employee – 43

* percentage of employees whose wage is main source of income – 74.8%

* average wage – $45,989 (half of those earning a wage receive $40,751pa or less)

* number of people with investment income – 15,629

* percentage of people whose main source of income was investments – 12.8%

* average investment income – $5,289 (half of those with investment income receive $343pa or less)
* Total income of all earners living in this local government area (excluding govt pensions/allowances): $946.7 million with the top 10% sharing 29.7% of these millions

RICHMOND VALLEY LOCAL GOVERNMENT AREA

* number of employees earning a wage – 7,587

* median age of employee – 42

* percentage of employees whose wage is main source of income – 76.4%

* average wage – $44,229 (half of those earning a wage receive $40,880pa or less)

* number of people with investment income – 6,617

* percentage of people whose main source of income was investments – 13.6%

* average investment income – $3,988 (half of those with investment income receive $271pa or less
* Total income of all earners living in this local government area (excluding govt pensions/allowances): $388.7 million with the top 10% sharing 28.1% of these millions

TWEED LOCAL GOVERNMENT AREA

* number of employees earning a wage – 32,066

* median age of employee – 43

* percentage of employees whose wage is main source of income –  69.7%

* average wage – $49,061 (half of those earning a wage receive $41,592pa or less)

* number of people with investment income – 30,587

* percentage of people whose main source of income was investments – 16.7%

* average investment income – $7,320 (half of those with investment income receive $396pa or less)
* Total income of all earners living in this local government area (excluding govt pensions/allowances): $2.00 billion with the top 10% sharing 31.7% of these billions

Fairfax Manoeuvrings: Whose over-inflated sense of entitlement is operating here?

According to that Clayton’s journalist Andrew Bolt; THE hysteria over billionaire Gina Rinehart is not just funny. Have you ever seen so many hypocrites, wasters and self-servers pretending to be principled?.... We hear instead a lot of people with an outsized sense of entitlement, presuming a right to have property they do not own be run to suit them and their interests.

A statement which makes me wonder whose sense of entitlement has led to Ms. Rinehart’s demand for three board seats and a degree of editorial control.

It would seem that her personal sense of entitlement is based on the immense wealth she garners from family mining interests which makes her the country’s richest person.

However, it is less clear what she actually contributes to either the common good or national life.

According to Australian Tax Office Taxation Statistics 2009-10 there were 5,395 individuals, 4,285 companies, 518 partnerships and 931 trusts involved in the mining industry.

The mining industry had a combined tax liability in that financial year of a mere $4,168 million on a total assessable income of $139,593 million. Companies in this sector represented 6.3 per cent of the tax liabilities of all corporations operating in Australia.

To put that into perspective, in 2009-10 manufacturing companies had a tax liability of $23,235 million on a total assessable income of $265,687 million. Companies in this sector represented 12 per cent of the tax liabilities of all corporations operating in Australia.

Even our Northern Rivers retailers belong to a national industry group which has a taxation burden which is more than double that of the mining sector.

Finally, in the 2009-10 financial year 3,138 out of the 4,285 companies in the mining industry paid no tax at all.

So the mining industry remains the national industry sector with the highest percentage of tax exempt companies. A feat it manages due to the high number of tax deductions, rebates, concessions, exemptions, offsets etc. available to mining interests – including tax deductions available on any state royalties payable.

Whilst, as ever, the vast majority of taxation being paid to the Commonwealth still comes from the pockets of salary and wage earners.

Playing the politics of envy with a fixed smile.........

Left to Right: Clive Palmer, Gina Rinehart and Andrew Twiggy Forrest

Last week one North Coast Voices reader sent me a link to the Fair Go For Billionaires’ Wealth Calculator. Unfortunately my annual income just wouldn’t register, so I went to the mainstream media for some examples.

The Central Telegraph reported on 3 May 2012:

It would take a person earning $70,000 a year - which is roughly the average salary in Australia - 56,000 years to earn Mr Palmer's net worth.

No, that's not a misprint - 56,000 years.

Conversely, it takes Mr Palmer, the man who plans to bring you Titanic 2, just 70.8 minutes to earn $70,000…..

Ms Rinehart? Well, it takes her just 28.8 minutes to rake in $70,000.

And if you've got a spare 67,857 years you too could earn her net wealth…….

Mr Forrest needs only 20 minutes to make a measly $70k, but the average Australian worker earning the same amount would need 6,057 decades to match his net worth.

Of course the lower your annual salary, the more depressing it gets.

Australian Opposition Leader Tony Abbott and Gina Rinehart

Photos from the ABC website and Google Images

Australia's Great Divide

Source: The Readers Panel, SMH, 23/10/10