That's Pretty Rich

I have a review of two "all-time rich list" books in the latest issue of the Economic Record. Parts of it are a bit wonkish, but people with an interest in inequality may find it worth skimming. Full text over the fold.

Any academic who wants to take me up on the offer of applying the estate multiplier method to work out the long-run distribution of wealth in Australia, please get in touch.

Review of:
Graeme Hunt. 2003. The Rich List: Wealth and Enterprise in New Zealand 1820-2003. Reed Books: Auckland.
William D. Rubinstein. 2004. The All-Time Australian 200 Rich List. Allen and Unwin: Sydney

F. Scott Fitzgerald once opined that the rich “are different from you and me”. Yes, replied Earnest Hemmingway, they have more money. As if that were not enough, a cottage industry has arisen in the past two decades, devoted to tracking the wealth of the richest. Since 1983, BRW magazine has published an annual “Australian rich list” (its New Zealand counterpart started in 1986), estimating the net wealth of the richest, and describing how they came by their fortunes.

In recently published books, William Rubinstein and Graeme Hunt have sought to extend these lists back to cover the past two centuries of wealthy Australians and New Zealanders. This is a novel and valuable exercise, given the paucity of long-run analyses of the wealth holdings of the rich in Australia and New Zealand. Rubinstein’s work is the more comprehensive of the two, making use of probate records from 1789 to 1939, the Australian Dictionary of Biography from 1940-80, and the BRW Rich Lists for the recent era.

But how can we compare the wealth of Samuel Terry, a former convict, who owned more than one-fifth of the value of all mortgages in New South Wales at the time of his death in 1838, with the wealth of Kerry Packer today? Rubinstein’s solution is to calculate each individual’s wealth as a fraction of contemporary GDP. Of course, this is not the ideal denominator – ideally, each individual’s net worth should have been presented as a fraction of the total private wealth in Australia at that point.

One can readily see why Rubinstein has chosen to use GDP instead of private wealth: thanks to the pioneering work of Noel Butlin, the former is available annually since 1788, while the latter is not. But this still leaves the question: how good a proxy is GDP for private wealth? Two biases are readily apparent. One bias is that over the past two centuries, the government sector has grown, so personal income as a share of GDP has generally declined. The other bias is that life expectancy has risen, so if we use the rough formula that private wealth=0.1*personal income*average age, the ratio of the stock (wealth) to the flow (income) has risen. Fortunately for Rubinstein, these two biases operate in opposite directions, but I am not convinced that GDP is the best denominator that might have been used.

Taken the GDP denominator as given, Rubinstein’s list does provide strong evidence that the gap between the super-rich and the rest of the population was very large in the nineteenth century,  with early beneficiaries of government land grants comprising many of the all-time richest Australians. By the turn of the twentieth century, merchants (eg. Samuel Hordern) and miners (eg. Walter Hall) began to replace pastoralists among the super-rich.

Then came a sharp decline. Rubinstein estimates that no Australian who died between 1940 and 1980 was rich enough to qualify for the all-time 200 rich list, a shift he attributes primarily to higher income taxation and estate duties. As he acknowledges, the changes might also be due to evasion of inheritance taxes, as the super-rich went to greater lengths to hide their assets from public view.  Yet Rubinstein’s results are consistent with other estimates that have found a substantial fall in top wealth shares between the 1915 census and the late-1960s (see Schneider 2004, 40-44), as well as with estimates that Tony Akinson and I have made of top income shares over the same period (Atkinson and Leigh 2005).

The past twenty years have seen a resurgence of the super-rich. Rubinstein calculates that six individuals and three families alive today have assets sufficient to place them in the all-time 200 rich list.  Taking only individuals currently living in Australia, the 2004 rich list contains ten people who can empathise with oilman John Paul Getty’s aphorism: “if you can count your money, you don’t have a billion dollars”. Heading the 2004 BRW rich list is Kerry Packer, whose A$6.4 billion would have placed him 36th on the US rich list.

Graeme Hunt’s analysis of the richest New Zealanders is less rigorous than Rubinstein’s tome. Prior to the 1980s, Hunt does not systematically estimate the wealth of most of his subjects. Instead, he focuses on discussing the ebbs and flows of their business ventures in a manner sometimes verging on the hagiographical. Nonetheless, the book provides useful insights into the industries in which the richest New Zealanders made their money. At various intervals, Hunt lists what he judges to be the ten richest New Zealanders. In 1840, this list is dominated by shipping magnates; in 1876 by wool; in 1906 by wool and brewing; and in 1936 by brewing and car dealing. From 1966 onwards no single industry seems to predominate. The wealthiest New Zealander in 2004 was Graeme Hart, whose NZ$1.4 billion would have placed him 7th on the Australian rich list.

Hunt’s book, however, would also have benefited from greater engagement with the literature on inequality in New Zealand. For example, he states at one point that “wealth is more evenly spread now than at any time in the history of European settlement in New Zealand” (p.277). Hunt does not present any direct evidence on this, and the claim seems improbable, given that the well-documented rise in income inequality in New Zealand during the 1980s and 1990s most likely also affected the distribution of wealth. More likely, wealth inequality on both sides of the Tasman has traced out a U-shaped pattern over the past two centuries.

Surprisingly, mainstream economists have paid little attention to rich lists as a data source. While sociologists (eg. Gilding 1999) and heterodox economists (eg. Stilwell and Ansari 2003) have used rich lists as a data source, mainstream economics has largely ignored them. In the case of Australia and New Zealand, the only exceptions seem to be Siegfried and Round (1994) and Hazledine and Siegfried (1997), who analyse the industries in which the richest made their money, and conclude that about three-quarters grew wealthy in an industry that was competitive at the time (a similar fraction to the UK and US). They also note that first-generation immigrants are heavily over-represented in the Australian rich list, but not on the New Zealand rich list. It is also worth noting that there are only a handful of women on each country’s rich list.

In the absence of regular wealth surveys, there are few ways in which we can learn about the distribution of wealth in Australasia. One option not yet pursued would be to use the estate multiplier method to estimate top wealth shares over the very long run, as has been done for the UK by Atkinson and Harrison (1978) and for the US by Kopczuk and Saez (2004) (though for Australia, this method could only take us up to 1981, when federal inheritance taxes were abolished). But more use might also be made of the data produced by Rubinstein and Hunt. Hopefully future editions of both books will make available the data in electronic form, to foster its use by antipodean researchers.

Andrew Leigh
Australian National University


Atkinson, Anthony B. and Harrison, Allan J. 1978. Distribution of Personal Wealth in Britain. Cambridge: Cambridge University Press

Atkinson, Anthony B and Leigh, Andrew. 2005. “The Distribution of Top Incomes in Australia and New Zealand”, mimeo

Gilding, Michael. 1999 “Superwealth in Australia: entrepreneurs, accumulation and the capitalist class”, Journal of Sociology, 35(2): 169

Hazledine, Tim and Siegfried, John. 1997. “How Did the Wealthiest New Zealanders Get So Rich?” New Zealand Economic Papers, 31(1): 35-47

Kopczuk, Wojciech and Saez, Emmanuel. 2004. “Top Wealth Shares in the United States, 1916-2000: Evidence from Estate Tax Returns” National Tax Journal 57:445-87

Schneider, Michael. 2004. The Distribution of Wealth. Cheltenham, UK: Edward Elgar

Siegfried, John J and Round, David K. 1994. “How Did the Wealthiest Australians Get So Rich?” Review of Income and Wealth, 40(2): 191-204

Stilwell, Frank and Ansari, Makiz. 2003. “Wealthy Australians”, Journal of Australian Political Economy 52: 143-157.


1.  The top entries on Rubinstein’s all-time rich list are Samuel Terry, whose wealth was 3.3% of GDP at the time of his death in 1838, Rowland Hassall (1.9% in 1820), Robert Jenkins (1.8% in 1822), William Clarke (1.4% in 1874), and James Tyson (1.3% in 1898).
2.  Rubinstein also shifts his main wealth source from probate records to the Australian Dictionary of Biography in 1940. However, it seems unlikely that this methodological change is the reason why no Australians who died in the period 1940-80 are in the all-time rich list. If evasion of inheritance taxes rose over this period, it would be just as likely to cause an underestimate of wealth reported in probate records, as it would be to cause an underestimate of assets reported in the Australian Dictionary of Biography.
3.  These are, in declining order of wealth: Rupert Murdoch, Kerry Packer, Richard Pratt, Frank Lowy, the Smorgon Family, Harry Triguboff, David Hains and family, the Lieberman family and John Gandel. The inclusion of Murdoch seems odd, as he is not an Australian citizen, and does not appear on the annual BRW rich list.

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1 Response to That's Pretty Rich

  1. Carol Baxter says:

    Hi there,

    Very interested in the review. I am trying to work out the value today of 14000 pounds in 1828 which was the haul from a robbery in Sydney. It is for a book that is soon to be published so I need an accurate estimate, or as close as I can get. Under Rubinstein’s equation it comes to over 2 billion, but that seems a bit far out. Any suggestions gratefully received – source references for the calculation would also help.

    Carol Baxter

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