Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 216

Where do our wealth and jobs come from?

The wealth of Australia in the last official estimate by the ABS for FY2016 was $14.4 trillion, and net of foreign liabilities (equity and debt) was just over $11 trillion. This net wealth is split 83% household and 17% government.

Residential land and dwellings dominate wealth

It is our developed resources of land used for dwellings and commercial buildings, and the buildings and infrastructure on that land, that dominate with almost two-thirds of wealth. Interestingly, our natural resources of mining and timber account for a small 7% of the total wealth. Equipment and inventories add another 9% and intellectual property 2%. The balance of 15% is in the form of financial assets. The exhibits below tease out the composition.

Australian wealth

Australian wealth

For households, average net worth sat at just under $1 million in FY2016, and will average $1 million by the end of 2017 calendar year. Thanks mainly to the rapid growth in superannuation, households are on the cusp of having financial assets at over half this average net worth, which is already a reality in the USA. Superannuation has accelerated the displacement of hard assets such as land, buildings, equipment and household durables such as vehicles, appliances and furniture.

The new wealth created every year is termed our gross domestic product (GDP), and it reached $1.7 trillion in calendar 2016, although we consume most of it in the form of consumable goods and services. We export around a fifth of it to balance our imports and invest around a quarter of the GDP in dwellings, buildings, equipment and intellectual property. Depreciation eats into such investment, new and old, but asset appreciation also takes place via land values and the growing value of businesses.

The exhibit below shows this new wealth creation in the year to March 2017.

Touring the land beats the land itself

Gone are the days when most of our wealth was created on the land. Agriculture and Mining now account for less than 10% of our wealth each year. The value-added via processing is rightly credited to Manufacturing industry.

Ironically, more wealth is created these days by touring on the land (tourism by Australians and inbound tourists) at nearly $100 billion compared with Agriculture at a little over $70 billion.

Our secondary (industrial age) industries are a shadow of their former dominance. It has fallen from about 40% of GDP in the 1960s to 18% now. It is the quaternary (fourth) and quinary (fifth) service industries that are creating most of the wealth in our current Infotronics Age (1965-2040s). Health is now the nation’s largest industry when the health services, medical insurance, pharmaceutical manufacturing and pharmacists are taken into account.

Only manufacturing - under blow-torch pressure from mass-producers such as China, and a lack of uniqueness or economies-of-scale - has fallen in net new wealth creation. It is the service industries creating the vast bulk of new wealth.

How do the changes translate into jobs?

This is even more the case when it comes to jobs, as seen below. The goods sector (via only Construction) created 1 in 8 of the new jobs, but the goods sectors accounted for nearly all the jobs lost over the past 5 years.

We are still creating new wealth, our net worth continues to grow and will pass $1 million per household as we enter 2018, and we are creating six times more jobs than we are losing over a 5-year period.

For all of the political shambles we put up with - worse in most other countries - our business sector continues to create this new wealth and jobs. Let’s thank the business sector for that.

 

Phil Ruthven is Founder of IBISWorld and is recognised as one of Australia’s foremost business strategists and futurists.

RELATED ARTICLES

Still, very much, the Lucky Country

banner

Most viewed in recent weeks

2024/25 super thresholds – key changes and implications

The ATO has released all the superannuation rates and thresholds that will apply from 1 July 2024. Here's what’s changing and what’s not, and some key considerations and opportunities in the lead up to 30 June and beyond.

Five months on from cancer diagnosis

Life has radically shifted with my brain cancer, and I don’t know if it will ever be the same again. After decades of writing and a dozen years with Firstlinks, I still want to contribute, but exactly how and when I do that is unclear.

Is Australia ready for its population growth over the next decade?

Australia will have 3.7 million more people in a decade's time, though the growth won't be evenly distributed. Over 85s will see the fastest growth, while the number of younger people will barely rise. 

Welcome to Firstlinks Edition 552 with weekend update

Being rich is having a high-paying job and accumulating fancy houses and cars, while being wealthy is owning assets that provide passive income, as well as freedom and flexibility. Knowing the difference can reframe your life.

  • 21 March 2024

Why LICs may be close to bottoming

Investor disgust, consolidation, de-listings, price discounts, activist investors entering - it’s what typically happens at business cycle troughs, and it’s happening to LICs now. That may present a potential opportunity.

The public servants demanding $3m super tax exemption

The $3 million super tax will capture retired, and soon to retire, public servants and politicians who are members of defined benefit superannuation schemes. Lobbying efforts for exemptions to the tax are intensifying.

Latest Updates

Shares

20 US stocks to buy and hold forever

Recently, I compiled a list of ASX stocks that you could buy and hold forever. Here’s a follow-up list of US stocks that you could own indefinitely, including well-known names like Microsoft, as well as lesser-known gems.

The public servants demanding $3m super tax exemption

The $3 million super tax will capture retired, and soon to retire, public servants and politicians who are members of defined benefit superannuation schemes. Lobbying efforts for exemptions to the tax are intensifying.

Property

Baby Boomer housing needs

Baby boomers will account for a third of population growth between 2024 and 2029, making this generation the biggest age-related growth sector over this period. They will shape the housing market with their unique preferences.

SMSF strategies

Meg on SMSFs: When the first member of a couple dies

The surviving spouse has a lot to think about when a member of an SMSF dies. While it pays to understand the options quickly, often they’re best served by moving a little more slowly before making final decisions.

Shares

Small caps are compelling but not for the reasons you might think...

Your author prematurely advocated investing in small caps almost 12 months ago. Since then, the investment landscape has changed, and there are even more reasons to believe small caps are likely to outperform going forward.

Taxation

The mixed fortunes of tax reform in Australia, part 2

Since Federation, reforms to our tax system have proven difficult. Yet they're too important to leave in the too-hard basket, and here's a look at the key ingredients that make a tax reform exercise work, or not.

Investment strategies

8 ways that AI will impact how we invest

AI is affecting ever expanding fields of human activity, and the way we invest is no exception. Here's how investors, advisors and investment managers can better prepare to manage the opportunities and risks that come with AI.

Sponsors

Alliances

© 2024 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.