Back to Research Insights >> How do the rich keep getting richer…

Yesterday some of you might have read the article by Peter Martin on the SMH website stating that to be considered uber-rich you need to earn in excess of $688,700 in Australia. Earning this much places you in the top 0.1% of the population, while earning over $1,000,000 placed you in the top 0.05%. The article also found that since the 1980s in about almost every English-speaking country the inequality between the rich widened each and every year. The recent GFC wiped out the wealth of many people and even bankrupted many rich people in the upper income brackets. Under normal circumstances income inequality should shrink, not expand. How are the rich getting richer?

Looking at the US, the number of people on food stamps increased by 44% between 2009 and 2012. The US has been in recovery mode but income inequality is growing at rapid rate as the poor get poorer and the rich get richer. This inequality can be attributed to the Federal Reserve keeping interest rates low and its direct intervention into the market via money printing. What this tells us is that even though the rich took a massive loss they are using the current circumstances to their benefit to build wealth via investing. Low interest rates and money printing means that if you are sitting on your money you are losing money.

Australia is currently heading towards a low interest rate policy just like in the US. People who are not investing and only working their day jobs are having their savings eroded even though they work just as hard as the rich. If you go back and read the Inflation’s 13 article you can see how inflation has operated in Australia’s past, and that if you are not investing in the low interest rate environment you will end up on the wrong side of the income inequality ladder. Things in Australia won’t be as extreme as they are in the US, with almost 15% of the population on food stamps, however, it should be noted that America has operated a low interest rate and low inflation policy yet the poor are getting poorer.

Australia’s economic policy is following America’s policy, and if America is a precursor to what will happen to income inequality now is the time to take action and build wealth so that you are part of the small percentage in the higher income brackets.

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