The latest Credit Suisse world wealth report released last week showed that, like last year, Australians are the richest people in the world. With a median wealth of US$219,500 per adult, we sit comfortably ahead of Luxembourg on $182,768. The US, with a median adult wealth of only $44,911, doesn't even make the top 25.



When counting by average wealth per adult, we drop to second behind Switzerland. Significantly, however, Australia is more equitable than most wealthy nations. Of the top 50 biggest economies, only Belgium, Italy and Finland have less of a difference between median and average wealth.

The greater the difference, the more wealth is in the hands of the richest.

Australia's average wealth is just 1.8 times our median wealth; by contrast the UK's is 2.2 times greater, while the US is second worst out of the top 50, at 6.7 times. Russia is the most inequitable, with its average wealth 12.6 times that of the median wealth.

So shall we break out the champers and order some extra large lobsters for Christmas lunch this year?

Well maybe ... but maybe not.

The Credit Suisse report is always a nice one for Australia. We certainly punch above our weight when it comes to wealth. But a closer inspection reveals that part of our high national wealth is due to the very measure used – US dollars.

The large appreciation in the value of Australia's currency in the past three years has meant that converting Australian dollars into US currency sees Australia rather wealthier than we once were in US dollars.

The average wealth of Australian adults is just over US$402,000, but if we measure it using a constant exchange rate that negates the improvement in our currency in the past three years, the average is only $328,900.

That we are this wealthy should not come as too much of a surprise. We have long been near the top of charts when comparing GDP per capita using US dollars. Currently of the IMF's top 34 advanced nations only Luxembourg, Norway and Switzerland sit above Australia using that measure.

But again if we look at the growth in Australia's GDP per capita, the big boost since 2009 occurs only if you measure in US dollars. Using nominal Australian dollars our growth since 2007 has increased by 24%, compared to 42% using American currency. If we account for inflation and look at the growth in real terms – the measure often used to define increase in standard of living – Australia has only increased by 5% since 2007.



So does this mean all this wealth is a fib?

Well, not really.

While a 5% increase in the standard of living since 2007 sounds pretty poor, in the context of the world economy during that time Australia is well above average.

Of the 34 advanced economies, Australia has the 8th best growth. And when compared to the 6% decline in the UK's living standard since 2007, 5% looks fairly impressive.



Moreover, even when accounting for a constant exchange rate, Australia has the third highest average wealth in the world, behind Switzerland and Norway. So it is not all about the exchange rate; the reality is, Australians are, in a global context, stinking rich.

How rich? Well, we are a mere 0.36% of the world's adult population but we account for 3.78% of the world's top 1% wealthiest. The only nation with a more lopsided share of the top 1% is Switzerland, whose 0.13% of the world's population still sees them with 1.63% of the richest 1%.

How did we earn such wealth? Mostly it has come about through home ownership. Credit Suisse notes that our wealth is "heavily skewed towards real assets", which amount on average to US$294,100 or about 59% of total assets. This average level of real assets is second only to Norway.

It suggests a situation open to risks of inequality, as those on poorer incomes are shut out of the wealth-generating housing market, and a danger that our wealth could collapse if house prices fall.

When the American housing market collapsed in 2007-08, its average wealth fell such that it took five years to get back to 2007 levels. And with only about 32% of American wealth in non-financial assets, it is much less exposed to the housing market than Australia.



At this point the question turns to how well this wealth is spread around Australia. As we noted in August inequality in the first part of this century increased significantly, but the GFC actually reduced inequality. ANU professor Peter Whiteford notes this came about through the increase in the pension in 2009 and also because the incomes of higher earners did not increase by as much.

But one group left out were those on Newstart. Since the mid 1990s Newstart has gone from just below 50% of the median household income to now around 30% – well below poverty level.

The Credit Suisse report should give Australians some sense of pride at how their country weathered the great recession. But while most of our issues are decidedly "first world problems", let us not think that everyone is enjoying this great increase in wealth, and neither should we think it is built on foundations that will never crack.