Big divide on wealth widening
INCOMES have been rising for the nation’s richest households while Middle Australia has stagnated.
New figures from the Australian Bureau of Statistics show the average income for the top 20 per cent of households has climbed 7 per cent in two years to $2037 a week.
However, earnings for the middle 20 per cent of households were up just 1.3 per cent to $843 a week.
The ABS Household Income and Wealth data shows the average income for all households was $998 per week in 2013-14, while their average net worth was $809,900, up from $764,500 two years before and driven by rising house prices and superannuation.
Social researcher Mark McCrindle said the gap between high-income households and the rest had been widening for 20 years.
“And that’s after the tax system has done its best to even the score,” he said.
The wealthiest households now earn more than five times as much as the bottom 20 per cent, and their average net worth is 70 times higher – $2.5 million versus $35,500.
ONE of Australia’s biggest corporate fundraising programs — the Commonwealth Bank’s $5 billion cash call — risks becoming a fizzer, analysts say, as global sharemarkets deteriorate.
Shares in the bank yesterday fell below the price of new stock being offered to retail investors in its rights issue, the second biggest in Australian history.
CBA shares hit an intraday low of $71.26, below the $71.50 offer price announced last month, before rebounding in line with the broader market to close at $72.15. It means Australia’s biggest bank is just a bad trading day away from a scenario where investors can buy existing shares more cheaply on the open market than the new share on offer.
That leaves investment banks Morgan Stanley and UBS facing a potentially hefty bill after they committed to underwrite the program, committing to soak up any shortfall when the offer closes at 5pm next Tuesday.
The CBA has already raised $2.1 billion from institutional investors but is seeking another $2.9 billion from retail or “mum and dad” investors.
Goldman Sachs is in the same boat as UBS and Morgan Stanley, albeit to a much smaller degree, as underwriter to Myer’s poorly received $221 million raising announced earlier this week.
The struggling retailer has offered investors two new shares for everyy five they own at 94 each after r this week tabling a 70 per er cent slide in net profit for the year to June. Its shares plunged to an all-time low of 90 on Thursday before lifting to 93 yesterday. Analysts said that for the CBA, such a slump in its share price would have seemed unthinkable when it launched its bumper cash call on August 12. That offer, of one share for each 23, was priced at an attractive discount to its then share price (the equivalent of $81.77 allowing for recent adjustments).
Since then, investors have been swamped by a tidal wave of bad news, spooked mostly by signs that China’s slowdown could prove long-lasting and its government has run out of ideas on how to arrest its share market rout.
Domestic figures have done little to restore confidence this week, with the latest growth and consumer spending figures both undershooting expectations. The benchmark ASX 200 fell 8.6 per cent in August and is off to a rocky start in September. The Australian dollar fell to a fresh sixyear low of US69.82 yesterday. The nation’s biggest lenders have been hit with the challenge of finding more funds to meet stricter capital reserve rules after the banking regulator, the Australian Prudential Regulation Authority, said in July an additional $28 billion would likely need to be sourced. OptionsXpress analyst Ben le Brun said the CBA had consistently traded at a premium to other international banks but was now being dragged back to the pack.
“It’s potentially also at the bottom of the cycle for bad and doubtful debts,” he said.
“I’d be shocked if it didn’t find plenty of support at these prices,” he said.