Second richest country on earth feels poor – Exploring the paradox

Would you believe me if I tell you that Australia is the second richest nation on earth?

That’s exactly what the cold hard numbers tell us, according to the UBS Global Wealth Report. Our median wealth is US$268,424 (~AU$413,000), placing us behind Luxembourg. Meanwhile, our average wealth is US$516,640 (~AU$795,000), which places us in fifth place.

These figures reflect the net worth of individuals including the value of property, asset investments, superannuation, and insurance, adjusted for debt and inflation.

Numbers aside, to what extent does the average Australian actually agree with this assessment, let alone feel it?

I, for one, don’t think the numbers tell the full story. Not when I see the many signs showing how our economy is quietly sliding into dire straits. Also look at the spending behaviour of the ordinary Australian. They aren’t behaving like they’re rich.

I’ll start with the health of our economy. There has been news earlier last month of the Big 4 banks slashing thousands of jobs. In the mining sector, BHP and Anglo American have also cut hundreds of jobs. These are on top of job cuts made earlier this year.

You can be sure that small businesses are not able to fill these job losses as they feel the squeeze in their bottom line. Walking in your local shopping centres and streets, you might notice that businesses are quietly shutting shop.

Go into a local restaurant and the prices on the menu have increased, sometimes by as much as 15%. Owners sometimes post notes on the counter explaining why they have raised prices. Meanwhile, there are less people dining in and restaurants close earlier on weeknights.

The real estate market is looking a little shaky too, at least in regional centres. In the Southern Highlands where I live, more houses have been put up for sale. Some have sat on the market for months. The indicative price range has dropped markedly in some cases.

I’ve asked around and people have told me this is a buyer’s market. However, the sentiment among buyers is still as cool as the winter we experienced up here.

Why Australians don’t feel rich

How do rich people live?

Before Crazy Rich Asians and the barrage of reality TV shows like The Rich Housewives of *insert locality here*, rich people would live a carefree and extravagant lifestyle. Sprawling mansions, shiny luxury cars, exotic holidays, feasting on fine foods, and so on.

These days you have social media. Many post their indulgences on their accounts, trying to emulate the lives of the rich.

However, the problem is that this is superficial. The availability of debt masks the truth. Behind the glimmering façade of luxuries and pampering, people are struggling with home loans, credit card bills, and personal loans.

Though the net household debt relative to the country’s GDP has fallen from pre-2020 levels, this ratio has slowly crept up as you can see below:

Australian Household Net Debt to GDP

Putting these numbers into real-life context, Australians are living the high life on the back of borrowings. They are bridging the gap between now and the future on the prospect of rising property prices and their compulsory retirement savings.

That’s quite risky. Their fate hangs on the balance of policymakers in the Federal and state parliaments and economists sitting on the RBA Board of Governors. How these people make their decisions should make your shudder.

How the official data lulls us into complacency

When you listen to politicians and financial commentators discuss the state of our economy, you feel that they don’t resonate with us. They usually hide behind official economic headline figures, rosy forecasts, and fair-weather words to soothe anxiety.

The most recent figures paint a picture of Goldilocks (it’s just right). Year-on-year inflation for the 2025 June quarter was 2.1%, unemployment sits at 4.2% and GDP growth is between 2.5-3% p.a.

The experts have spoken, who are we to question them? Their doctorate degrees in economics, statistics, or other titles, are supposed to lend them credibility. Case closed.

Occasionally a dissenting politician or commentator will stand up and call things out for what it is. However, they’re usually portrayed to be on the fringe because they don’t know how to interpret the nuances of the data.

And for this, our economy continues to stumble into disastrous territory.

Up is down, good is bad – The tell-tale sign of an economy gone wrong

On Tuesday, the Reserve Bank of Australia (RBA) announced it would hold the interest rate steady at 3.6%.

This decision was expected beforehand. The RBA has been slow in cutting the 24 Hour Cash Rate to provide relief to many Australian households wanting lower interest rates.

Hang on…

Yes, the general consensus is that most Australian households want interest rates to be lower.

Let’s wind back the clock to 40 years ago when the interest rate was at double digit levels.

While some claim that those days were rough because they have to pay almost 20% p.a. on a mortgage, the average household debt was much lower. Moreover, people were earning double digit interest rate on their savings accounts.

As you’re aware of the power of compound interest, higher interest rates on a savings account were a good thing. That’s because the household net debt to GDP ratio was much lower:

Today, the ordinary Australian household’s loans dwarf their savings accounts. The aspiration of home ownership turned into a blind mission. It’s an expensive burden for those under the age of 50 to bear. They joined the party just as house prices started to soar.

The fact that Australians are hanging onto the next rate cut by the RBA for relief shows how far things have gone downhill in our country.

We live in a perverse world. Australians are wealthier based on the numbers, but they’re locked up in properties and the markets. Meanwhile, a formidable debt hangs over them.

They’re rich but feel poorer than ever.

As the economy buckles under the pressure of debt, inflation and weak growth, one wonders what is really breaking.

Is it our dollar or the valuation of assets in the market, or both?

That’s the mystery.

What do you think? Please share your thoughts and comments below.