The distribution of income and the distribution of wealth has been of a trajectory now towards the disaster we now face
even ABS statistics show the true level of what is really wrong with this country and what wealth will quietly, and aggressively fight against, from the shadows, no matter what anyone, or any political party or individual attempts to propose in terms of reform.
this elephant of a problem has implications for inflation as well in the following regards .. when you have 'asset' inflation fuelled by cheap money, wealth capitalises on this from the already significant base.. the percentages are irrelevant it is what 'base' the percentage is applied to that makes the difference.. 10% on 150k is a trifle.. 10% on 2.5M is four times the average salary
so what are the statistics ?
the wealthiest quintile in 2020 ( pre pandemic ) had 39% of Australian income.. now that's not too distorted, it makes sense but wait for it, this is the kicker.. the wealthiest quintile had 62% of Australian wealth.. in 2020 .. that's a decade of LNP inaction on reform
now it doesn't take a genius to imagine how much further that 62% has developed after the covid real estate boom.. after all, the major contributing factor to the highest quintile's wealth accumulation is property.
by the way, the lowest quintile are going backwards in terms of wealth. while the middle are still, well, the middle.. it is the top quintile that are literally hoarding and ringfencing, wealth in this country.
it is indeed scary, for the ordinary Australian should be very concerned because we are funding this gross distortion..
now, onto our favourite subject.. price inflation ( not asset inflation ) and why wealth is fuelling price inflation and there is nothing we can do about it
you see, ABS figures also show that during the pandemic, savings for the lowest quintile went into negative effectively ( indicating a net loss of capital (expenses outweighing income - but where do they get the money to fund that loss ? )) and a fair indicator for what we are now seeing in the form of severe financial hardship, even for working Australians )
the middle showed a slight reduction in savings rate but low and behold the top quintile were untouched, still able to save an eye watering $111k per annum.. in other words, despite the gnashing of teeth and cries of pain and hardship, the pandemic did not affect the top quintile's ability to save .. how interesting
so what does that mean for price inflation.. it means that this 'cost of living crisis' has actually been party time for the rich.. they have seen eyewatering asset gains and have not been forced to reduce savings in order to meet the cost of living.. the top quintile have been spending like there is no tomorrow on renovations, holidays, vehicles, primary residential, etc etc.. during the pandemic and post pandemic we only need to look at the travel industry to see that it doesn't match with the supposed 'cost of living crisis' that this country is facing
and what is more disturbing is that the top quintile can absorb the supply side input volatility in just about everything..
the RBA's attempts to curtail price inflation are being laughed at by the top quintile because it doesn't stop them spending..
furthermore, whilst the RBA's attempts will definately put brakes on spending in the middle to lower quintile's it does nothing to address supply side input.. whilst the top quintile absorb supply side inputs and just keep on spending, undermining the monetary policy strategies being inflicted upon ordinary Australians ( and justifying to companies that price gauging is sustainable )
ABS statistics clearly show that the distortions in our wealth ( not income so much ) have created a monster that neither monetary policy, nor government of any persuasion can address..
now, if wealth used their assets to create productivity in the economy or to provide tax effective housing, or to produce goods and services, even offshore, that increase competition in markets and drive prices down, that would be all good.
but they don't..
so what's the answer.. a combination of two things .. reform and incentive.. it sounds counterproductive but in fact it is about re directing wealth and capital towards productivity rather than towards property.. simple as that
if we don't, ordinary Australians are going to keep funding the excesses of the top quintile and it's only going to get worse...
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