Most of us seem to know next to nothing about how we are really doing compared with everyone else. Here is a test. What do you think was the average income reported to the Tax Office in 2010-11? I'll make it easier. You can exclude all the (mainly) low earners who don't pay tax. The average income earned by those who did pay tax was $66,720. If it seems as if almost everyone you know earns more than that, it could be because you don't get out enough. Labor MP for the Hunter, Joel Fitzgibbon, doesn't get out enough. He infamously claimed a few weeks ago that families on $250,000 were ''struggling'': ''Coal miners in my electorate earning $100,000, $120,000, $130,000, $140,000 a year are not wealthy.'' In fact, the same Tax Office statistics show the average income for the postcodes in his electorate is about $60,000 - way less than that of those people with whom he mixes.

And those averages overstate what most people actually earn. Astoundingly, roughly three-quarters of Australian taxpayers earn less than the average. That's less than the average. Only one quarter earns more. The true mid-point - the income above which half of us make more and below which half make less - is $45,212. Why do most people take home so much less than the average? Because the average is pushed up by a few enormous incomes at the very top. Think for a minute about Gina Rinehart, Australia's richest person. Her income boosts our average income but not our typical income. If she moved overseas, our recorded average income would slide but our typical income would not. It's actually not fair to single out Joel. None of us get out enough. We tend to live near people who earn something near what we earn. If they earn slightly more than us, we think we're behind. If they earn slightly less, we think we're ahead. But we don't look far beyond them.

It's not only that we live in suburbs where people tend to earn the same as each other. The average income in Rushcutters Bay is $203,270. The average at Ruse in Campbelltown is $46,700. It's also that Sydney's high-income suburbs are clustered together, near the city and harbour. Further away in the south and west are the low-income ones. In the US, it is often the other way around. The low-income suburbs are near the city, meaning high-income Americans at least need to drive past them as they go into town. At work, we are also likely to be closest to people who earn the sort of wage we do. Surgeons earn an average of $341,600, according to the Tax Office. They associate with surgeons. Hairdressers earn an average of $27,600 (many work part-time). They hang around with hairdressers. People are also increasingly likely to marry within their income group. The Productivity Commission reported this year that two-thirds of Australia's high earners were married to other high earners. A decade earlier the proportion was only 50 per cent. Our aspirations further cloud our thinking. Believing we might one day move up a notch or two, we are keen to defend the interests of those above us.

Shadow treasurer Joe Hockey nailed it two years ago when he attacked a budget measure with the potential to hurt very high earners. ''$150,000 a year for a family is certainly not rich Australia,'' he said. ''Besides, I want people to aspire to earn $150,000 or more.'' Loading That's the problem. We think others earn more than they do, we aspire to earn more than we do, and many of us have no idea how well off we are. Twitter: @1petermartin