Do your neighbours have a nice new Mercedes in the driveway and you have a second-hand Corolla?
In some parts of Australia, what you earn and what your neighbour earns are likely to be similar and, as a result, there’s a good chance you’ll have houses and cars that are of a similar value.
But in other places, the very rich and the very poor live in the same neighbourhood and, quite possibly, side by side. While these areas can benefit from a diverse population in some ways, research has shown that those with less money can be tempted to spend beyond their means.
Also by Jason Murphy:
The disparity of wealth in some areas of Australia is stark - and can be surprising too, with virtual clifftop castles just blocks away from public housing.
I measured the difference between average local income and actual incomes of local people for every area in Australia based on 2021 census data. Here’s what I found.
One of the most unequal parts of the country is Coogee South, located in the eastern suburbs of Sydney. One of the most equal is Clyde, in Melbourne’s east. While Clyde and Coogee are both at the eastern edge of their cities, that’s where the similarities end.
Clyde is on the edge of farmland. It has a Bunnings, a big Christian College and a sales office for brand-new houses. You can pay $650,000 for a single storey, 3-bedroom home on 313 square metres of land in Clyde. They'll even build it for you.
Coogee South doesn’t have much space for new homes, perched right on the edge of the Pacific Ocean. It has no Bunnings. It does, however, have a clifftop mansion that a techbro spent $17 million on and named Crypto Castle. But if he walks inland for 10 minutes, he'll find himself surrounded by a lot of public housing.
Coogee has a lot of contrasts. On the beach side of the road, you can go to the Lion and Buffalo and pay $24 for miso mushrooms. On the other side of the road is the Bakehouse, where you can buy a humble sausage roll.
In South Coogee, the income distribution looks like the next chart. A cluster of people at the bottom, not many in the middle, and a lot at the top.
In Clyde it looks like the next chart. Not many at the bottom, most in the middle, a few at the top:
These are just two of the different suburbs in Australia. I’ve put almost all of them in the next series of charts. It shows that suburbs that are richer on average are also more unequal (being above or below the local average contributes equally). But there are plenty of examples of rich places that are actually surprisingly equal - like the NSW town of Googong - and poorer places that are surprisingly unequal - like Adelaide.
On balance, the capital cities are more unequal than the rest of the state.
Some of the locations where the residents are on an equal financial footing (and pretty rich) are mining towns. Because the residents are mainly mine workers, everyone who lives there makes lots of money.
Some of the most unequal places are universities and their surroundings – students don’t make much money, although that’s usually temporary.
It is worth pointing out that the above analysis depends on income only. There are plenty of places where incomes may be equal but assets are not – assets aren’t part of the analysis. That means places with lots of retirees could show up as more unequal.
Where would you rather live? Equality utopia or melting pot?
An interesting aspect of this data is that many of the unequal suburbs iare well known, near the city centre or a beach, and places that perhaps a young, less-well-off person might want to move to, even if they can barely afford it.
The more equal locations aren’t as well known, are less dynamic, less attractive, and mostly offer just a house and land.
The absolute most unequal places are usually like that because of social housing, like South Coogee where rich and poor residents live across the street from one another. If you think it’s good that Australia doesn’t place its rich in wealthy enclaves where they might never encounter a poor person, then having social housing in Coogee South or Carlton is probably appealing.
On the downside, when rich and poor live together, it’s hard not to compare yourself to others. The house next door to Crypto Castle is very nice, but it’s not $17 million nice, because there’s an enormous ‘castle’ between it and the sea! It must be hard not to be jealous.
This wealth chasm goes beyond the green-eyed monster too. People who live in more unequal areas borrow more to buy more expensive cars, research finds - the classic “keeping up with the Joneses” theory.
RBA research shows the more unequal the area people live in, the more likely some residents (those aged 40-64) are to go into debt for something other than a house. They borrow to invest in shares or bonds and they borrow money to buy cars. People who consider themselves “prosperous”, and are more likely to go into debt to get a nice car, are the ones who tend to live in those unequal areas.
The RBA calls it “conspicuous consumption”. I suppose if you live in an equal area, everyone knows what that says about your status. But if you live in an unequal area, you want to create the impression you’re part of the wealthier end of the distribution by buying some nice German wheels.
So, if you discover that your neighbour has a fancy new Mercedes parked in the drive with no kilometres on the clock, no scratches on the paint, don’t be jealous. Just try to remember this: they possibly also have a huge loan to pay off.