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#australia #wealth #money
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Every year up until its collapse, Credit Suisse would prepare a report that looked at how wealthy the people of countries around the world were.
Instead of just looking at GDP per capita which calculates how much the average person in an economy produces in market output every year, this report attempted to calculate the net worth of those people to see how good they were at accumulating wealth over time.
Someone with a high income that is spending everything they make on rent and overpriced food isn’t going to grow their wealth as quickly as someone who has a more modest income, but is paying off their own home and is investing diligently into retirement accounts.
I like to call this the San Fran Tech Bro Conjecture.
But according to these annual reports the Australian people always looked like that second group of slower more deliberate wealth builders.
Their raw income isn’t as high as here in America, but they were consistently some of the wealthiest people on the planet.
UBS, which absorbed Credit Suisse following its collapse, recently released the 2024 report and once again Australians had the second highest MEDIAN net worth on the planet.
They only fell behind Luxembourg which is a European Micronation which you are probably not in the tax bracket to even be aware of.
The fact that this report tracks the MEDIAN instead of the average net worth is also really important.
This means that the Australian right in the middle of a line up from richest to poorest is more than TWICE as rich as an American in the same position…
------
Sign up for our FREE newsletter! - https://www.compoundeddaily.com/
Books we recommend - https://howmoneyworkslibrary.com/
-----
My Other Channel: @HowMoneyWorksUncut @HowHistoryWorks
Edited By: Svibe Multimedia Studio
Music Courtesy of: Epidemic Sound
Select Footage Courtesy of: Getty Images
📩 Business Inquiries ➡️ sponsors@worksmedia.group
Sign up for our newsletter https://compoundeddaily.com 👈
All materials in these videos are for educational purposes only and fall within the guidelines of fair use. No copyright infringement intended. This video does not provide investment or financial advice of any kind.
#australia #wealth #money
------
Every year up until its collapse, Credit Suisse would prepare a report that looked at how wealthy the people of countries around the world were.
Instead of just looking at GDP per capita which calculates how much the average person in an economy produces in market output every year, this report attempted to calculate the net worth of those people to see how good they were at accumulating wealth over time.
Someone with a high income that is spending everything they make on rent and overpriced food isn’t going to grow their wealth as quickly as someone who has a more modest income, but is paying off their own home and is investing diligently into retirement accounts.
I like to call this the San Fran Tech Bro Conjecture.
But according to these annual reports the Australian people always looked like that second group of slower more deliberate wealth builders.
Their raw income isn’t as high as here in America, but they were consistently some of the wealthiest people on the planet.
UBS, which absorbed Credit Suisse following its collapse, recently released the 2024 report and once again Australians had the second highest MEDIAN net worth on the planet.
They only fell behind Luxembourg which is a European Micronation which you are probably not in the tax bracket to even be aware of.
The fact that this report tracks the MEDIAN instead of the average net worth is also really important.
This means that the Australian right in the middle of a line up from richest to poorest is more than TWICE as rich as an American in the same position…
Categoría
😹
DiversiónTranscripción
00:00Staying on top of all the developments in finance, business, and economics can be exhausting.
00:06Between everything becoming an excuse to gamble, corporate consolidation of markets,
00:10and political influence driving huge asset bubbles, causing extreme wealth inequality,
00:14spiraling consumer debt, and diminishing savings, stagnating wages, unaffordable real estate,
00:20and generational wealth divides all string-tied together by questionable government programs,
00:25it's enough to get pretty depressing.
00:27But just remember, it could be worse.
00:30We could be Canada.
00:31And if that wasn't bad enough, somehow there is a country that is pushing these issues even further,
00:36and as a warning for how bad things could get, has managed to hold on for now.
00:41Let's call it Canada with snakes.
00:44Around 200,000 electronic poker machines, known as pokies, fill bars, hubs, clubs, and casinos.
00:51Capping losses at $100 a day and $5,000 a year.
00:55Australia is officially the worst on record, with the average property costing 8 times the median household income.
01:02Sydney's rental market has gone from bad to worse, with prices continuing to soar.
01:07With revelations.
01:08Taxpayer money is being used on drugs.
01:13Every year, up until its downfall, Credit Suisse would prepare a report
01:17that looked at how wealthy the people of the countries around the world were.
01:21Instead of just looking at GDP per capita,
01:23which calculates how much the average person in an economy produces in market output every year,
01:28this report attempted to calculate the net worth of those people to see how good they were at accumulating wealth over time.
01:34Someone with a high income that is spending everything they make on rent and overpriced food
01:38isn't going to grow their wealth as quickly as someone who has a more modest income,
01:41but is paying off their own home and is investing diligently into retirement accounts.
01:46I like to call this the San Fran Tech Bro conjecture.
01:49But according to these annual reports,
01:51the Australian people always looked like the second group of slower, more deliberate wealth builders.
01:56Their raw income isn't as high as here in America,
01:59but they were consistently some of the wealthiest people on the planet.
02:02UBS, which acquired Credit Suisse following its collapse,
02:06recently released the 2024 report,
02:08and once again, Australians had the second highest median net worth on the planet.
02:12They only fell behind Luxembourg,
02:14which is a European micronation, which you are probably not in the tax bracket to even be aware of.
02:19The fact that this report tracks the median instead of the average net worth is also really important.
02:25This means that the Australian right in the middle of a lineup from the richest to the poorest
02:29is more than twice as rich as an American in the same position.
02:33The report also includes a generic average where America does have a slight edge,
02:37but all that really tells us is that we have an inequality problem with a small group right at the top,
02:42massively dragging up the average at the expense of everybody else in line.
02:45Considering all of this, the title of this video might not make much sense to you.
02:50Anybody would be lucky to be Australian, right?
02:53Well, yes, and no.
02:55And lucky really is the important word here.
02:58Australia has become so wealthy by getting lucky in just a few key industries,
03:03and then by going all in on keeping those industries alive by any means necessary,
03:08including its own long-term viability.
03:10Of course, the most obvious place where this has happened is in the country's outrageous real estate market,
03:15which makes even the most overpriced cities in America look downright affordable by comparison.
03:20And of course, we will get to that.
03:22But housing is actually only just one symptom of much bigger structural problems
03:27that the country has been quietly trying to ignore.
03:30There are lots of people that look like they are happily building wealth in Australia,
03:33and there are even a lot of people becoming extremely wealthy.
03:37But the different ways to actually obtain that wealth are very narrow.
03:41The key to Australian wealth is dirt.
03:44Either digging it out of the ground to export as unimproved natural resources,
03:48or by selling it back and forth to one another.
03:51Economic complexity ranks a country's exports based on how varied they are,
03:56and how unique they are to that country.
03:58A country that exports a wide variety of highly unique products that only it produces
04:03would have high economic complexity.
04:05A country that only exports a few goods that lots of other countries also export
04:10would have low economic complexity.
04:12Australia has the lowest economic complexity of any high-income country in the world,
04:17ranking 102nd out of 146 total countries included in the survey.
04:21Data has been falling consistently since the 1950s,
04:24when it was in the top 30 thanks to a combination of manufacturing,
04:28as well as research and development coming out of the country.
04:31But today, this puts it behind places like Uganda,
04:34which have a more varied export base than Australia.
04:37It now depends almost exclusively on selling natural resources and livestock
04:41to growing economies in Asia,
04:42because it just doesn't make financial sense to focus anywhere else.
04:46Having such a resource-dependent economy means investors have to decide
04:49between funding new innovations that could improve the world,
04:52or at the very least, provide sustainable cash flows,
04:55or they could invest into developing more mines to export more resources
04:59to an existing list of willing buyers.
05:01The second option has just been a much safer bet for decades,
05:05which means that the country has some of the most advanced natural resource extraction in the world,
05:09but is severely behind in other areas of innovation like technology and advanced manufacturing.
05:14In some tragic irony, the Australian government itself
05:17has helped to fund a lot of scientific research,
05:19resulting in advancements in solar panels,
05:22the advent of Wi-Fi, modern medical tools, and even Google Maps.
05:26Any of these alone would be a major contributor to the country's relatively small population,
05:30but when it came to actually commercializing these technologies,
05:33the country lost out because its dependence on natural resources
05:36undermined its business environment.
05:38Investors would rather the safe, predictable option,
05:41and so these technologies naturally moved to where they could find funding
05:44from other sources that were willing to take a risk.
05:47Unfortunately for Australia,
05:49this actually just ended up making their investment markets even more risky.
05:53For a long time, the Australian dollar was almost perfectly correlated with natural resource prices,
05:58which meant Australian investors were resource investors whether they liked it or not.
06:02This price connection has decoupled since COVID,
06:05but that itself is probably not a good sign.
06:08It could actually be the biggest indication that Australia has dug itself into a hole,
06:13both literally and figuratively,
06:15that it's going to be almost impossible to get out of
06:17without giving up a lot of the wealth it's become accustomed to.
06:21So it's time to learn how money works to find out how long Australia can keep getting away with it.
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07:48There are dozens of serious problems just under the surface in Australia
07:51that you might not think of much by themselves.
07:54But together, they changed the optics of the country from a thriving and vibrant economy
07:58to a place living on long borrowed time.
08:00One of those issues is gambling.
08:03Sports gambling, online casinos, and market wagering
08:06has become one of the fastest-growing industries here in America
08:09since regulations were loosened in 2018.
08:11Since then, billions of dollars have been piled into carving out market share,
08:15encouraging people to bet on basically anything.
08:18The rush to acquire customers has become so extreme
08:21that a lot of these companies aren't even running their online casinos at a profit
08:25because they are reinvesting as much as they can into growing their customer base as fast as possible.
08:30The reason why investors don't mind burning billions of dollars in a highly risky industry
08:34with serious regulatory risks is because of Australia.
08:38Australia is living in the future when it comes to gambling, and that future is bleak.
08:43According to their own government inquiries,
08:45Australians lose almost $1,000 per person every year through different forms of betting.
08:50That's inclusive of a large share of the population who don't partake at all.
08:54So the losses of the average Aussie punter are statistically far worse.
08:58Australia has a deep, wide, and highly entrenched gaming industry.
09:03The average Australian pub operates like a mini casino
09:06complete with a small selection of electronic poker machines.
09:09Betting on sports is commonplace.
09:11Horse racing is a major tradition that even has its own public holiday.
09:15Novelty betting markets has been a major thing there for decades,
09:18and this is all on top of more traditional gambling like lotteries, casinos, and scratch-offs.
09:23Back here in America, the venture capitalists have done the math
09:26and have figured out if they can replicate Australian-style gambling in a market as big as ours,
09:31then they can stand to make trillions.
09:33Australia is also a great business test case against the risk of regulation.
09:38Unsurprisingly, the sheer market penetration of gambling in Australia
09:41has caused problems for at-risk individuals, largely young men.
09:45On top of the financial consequences of losing thousands of dollars every year,
09:49the country has an epidemic of related issues like fraud, petty crime,
09:52and violence stemming from unhealthy gambling.
09:55The public also largely hates how prevalent gambling is pushed on them.
09:58So you would expect it would be easy to get the political support to pass laws
10:02to moderate the reach of this industry, right?
10:05Wrong.
10:06All of these companies employ lots of people,
10:08and they spend a huge amount of money on fear-mongering the job losses that would come
10:12if a local bar couldn't have a casino floor stapled onto it.
10:15For any of you who haven't been to Australia, you might think I am joking.
10:20I am not joking.
10:22Australia has been extremely soft on regulation,
10:25and while gambling by itself is not single-handedly going to take down the country,
10:29it's emblematic of a lot of genuine issues that aren't getting addressed
10:32because nobody wants to be responsible for shaking up the delicate balance of prosperity.
10:37The same is true for the mining industry from earlier,
10:39and the real estate crisis that we still need to get to.
10:42There is nothing wrong with a country exporting its resources.
10:46The problem Australia has had is turning a revenue source that is good for Australia
10:50into money that is good for Australians.
10:53A lot of the revenue generated by mining in Australia
10:55has just been paid out to foreign mining companies
10:58in arrangements that are not that different from many exploited third-world petrostates.
11:02Australia has tried in the past to generate more government revenue from its resources,
11:07but heavy lobbying won out,
11:09and people have been too afraid to try it again since the currency has been so dependent on these exports.
11:14In fact, the government has actually gone the other way
11:16and given hundreds of obscure grants, bonuses, deferments, schemes,
11:20and incentives to mining companies to help them along.
11:23According to the government's own minerals website,
11:25the intention of these schemes is for providing both commercial and operational advantages to investors.
11:31New government initiatives support the long-term sustainability of the Australian resources sector
11:35by de-risking and encouraging mineral exploration and discovery.
11:39One of the country's biggest problems is that nobody wanted to invest anywhere else,
11:44so this does seem a bit strange.
11:47But destabilizing this source of foreign income could knock over other highly leveraged areas of the economy,
11:52so their government is trying to keep it running hot by whatever means necessary.
11:56Now, at this point you might be thinking,
11:58how the f*** did this place get so rich to begin with?
12:01Was it really just putting a bigger number on their homes and calling that wealth?
12:05Well, yes, but there actually is still one more thing.
12:09Australia has a system called superannuation,
12:11which is a special tax-advantaged investment vehicle
12:14that Australian workers can use to save and invest for their retirement.
12:17It's functionally similar to a 401k or an IRA,
12:21but the big difference is that employers must contribute a share of their employees' pay
12:25into their nominated account every year,
12:27instead of it being voluntary or offered as a part of their job package.
12:32Their current contribution requirement is 11.5%,
12:35which means every Australian worker is effectively saving more than 10% of their income for retirement.
12:41Something like that would make even a lot of disciplined financial planners blush.
12:45The hope is that this money will eventually take the strain off the public-funded pensions
12:48as the Australian population gets older,
12:51and it has built some enormous fortunes.
12:54According to JP Morgan, the average Australian household
12:56now has the equivalent of almost a quarter of a million dollars invested in just this one asset class,
13:02before including regular savings, investments, or home equity.
13:05The fact that it is mandatory and applied to all workers
13:08means that the concentration of retirement savings in the hands of already wealthy households
13:12isn't as high as it is here in America.
13:15This is genuinely an amazing financial tool,
13:18and you might be starting to notice a trend here.
13:20It is covered over a lot of other problems.
13:23Collectively, Australian superannuation is worth more than 2 trillion USD,
13:28which is only enough to buy two-thirds of Apple.
13:30But it has outgrown the Australian investment market
13:33because investment activity is just not as strong there.
13:36This means more and more of these retirement savings have been invested abroad,
13:40with the majority of that money ending up back here in the American markets.
13:44Now, that alone is not a bad way to diversify risk outside of Australia.
13:48And yes, it's all getting pumped into the Magnificent Seven,
13:52but that's all investing these days.
13:54What could possibly go wrong?
13:56The real problem is that Australia is technically taking their cash,
13:59which is propped up by a mining industry,
14:01and then giving it to us so that we can build businesses here in America.
14:05A lot of Australian companies, which are not in the gaming, mining, or real estate industry,
14:10are actually choosing to raise investments and go public here in America instead,
14:14simply because we have more investors that are willing to put money into companies
14:17that aren't in gambling, mining, or real estate.
14:20I mean, thanks, I guess.
14:22But if the country was more accommodating of other investments,
14:25it could use a lot of this savings to make its people, and itself, wealthier and more productive.
14:31The wealth invested into the Australian superannuation system may also be very impressive,
14:35but it won't actually do much unless it can keep up with how expensive it is to live in Australia.
14:41A common strategy for Australian workers is to wait until they can access their retirement savings,
14:45take all of the money they accumulated over their working career, and use it to pay off their house.
14:50So yeah, this is where we finally get to the elephant in the room, real estate.
14:55The cost of housing in Australia has made every single problem so far even worse,
15:00and it's also going to make it much harder to fix.
15:03According to a broad market survey, the average age of a first homebuyer in Australia is 36 years old,
15:09and the fastest growing group of people buying a home for the first time are those aged between 40 and 49.
15:15Homes are so expensive that they are usually taken on with a 30-year mortgage,
15:19and families will move into larger homes as they build up equity.
15:22So a lot of Australians are now getting to the age they would like to retire, still in massive debt.
15:27Using the proceeds from superannuation to pay off their mortgage doesn't technically make them any poorer.
15:32They have just transferred retirement savings into real estate equity,
15:35but it does allow them to access the government's public old-age pension,
15:38since it's not counted as an asset to assess if they have the ability to fund themselves.
15:43Since paying a mortgage or rent normally takes up so much of people's budget there,
15:47giving up retirement savings often works out to be more financially responsible,
15:51because even a modest pension income can cover everything else as long as they have a paid-off house to live in.
15:56For many households, this has made one of Australia's greatest wealth-building tools
16:00just another way to prop up a real estate market that is already so expensive
16:04that the rest of the world should be afraid of it.
16:06But how did it get this bad in the first place?
16:09There is the usual combination of investor speculation, generous financing,
16:13nimbyism, and high levels of migration into cities that couldn't expand fast enough.
16:17But on top of that, Australia has added its own special ingredients.
16:21Taxes on earned income in Australia are some of the highest in the world.
16:25Someone earning the equivalent of just $120,000 American dollars a year
16:29would pay 45% on every additional dollar they earned after that.
16:33And remember, Australia is not a cheap place to live.
16:36So even though that would be a very good salary for anybody,
16:39it's not actually going to go that far after a tax is taken out.
16:42However, one of the unique features of Australia is the fact that personal investment losses,
16:49including paper real estate losses, can be used to write off personal income to reduce their tax.
16:54This effectively makes every person in Australia their own little business
16:58that can accrue expenses to offset their tax.
17:00And the best business to get into with the most possible expenses is real estate.
17:05This tax structure has encouraged high-income earners to favor investing in a real estate
17:09that they can use to make paper losses like depreciation to offset their income
17:13and then turn highly taxed earned income into much more modestly taxed capital gains.
17:18The system called negative gearing is almost universally agreed to be broken.
17:22It would be a lot easier to tax everybody at a lower rate and get rid of these write-offs.
17:26But it's been really hard to make that happen because they can't afford this house of cards to unravel.
17:32There is now so much debt and wealth tied up in Australian housing
17:35that the Australian economy could be wiped out by even the indication that the government could rein in these incentives.
17:42The same thing is happening with other less obvious policies as well.
17:45Immigration to Australia has been some of the most intense in the world
17:49and the country has become highly dependent on low-income immigrants to do a lot of the jobs they aren't willing to
17:55and high-income immigrants to also buy into their asset market.
17:58According to Henley Partners, a law firm specializing in legal arrangements for high-net-worth immigrants,
18:03over 40% of the millionaires in Australia today were not born there.
18:08Some have, of course, gone there and made their fortunes.
18:12But most have just gone there in part to their fortunes that they already had.
18:16In all of the biggest issues in the world today, Australia is a look at what 10 years from now could mean for us.
18:22And perhaps the biggest problem is that so far they have managed to keep everything on track.
18:27But there is a difference between success and delayed consequences.
18:30Australia has some of the most valuable banking institutions in the world.
18:34But most of their books are tied up in lending to an overvalued real estate market.
18:38Workers are getting taxed heavily while dealing with declining real incomes.
18:42Businesses are finding it too expensive to operate there
18:45and all of the wealth in the world, paper or otherwise,
18:48doesn't mean anything if it can only buy you a one-bedroom apartment two hours from anywhere.
18:53Now, if you are an Australian and this was all a bit depressing for you, it could be worse.
18:59You could be from the UK.
19:01Also, go and watch this video on Canada Next
19:04to find out how they effectively made exactly the same mistakes as Australia
19:07without even accidentally making themselves rich in the process.
19:11And make sure to like and subscribe to keep on learning how money works.