Andrew Heathcote Rich Lists editor

Andrew is BRW's Rich lists editor and is responsible for the Rich 200 and Young Rich flagship issues. He also reports on matters relating to wealth and investment for BRW and The Australian Financial Review.

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Best year yet

Published 25 May 2011 17:09, Updated 16 December 2011 10:44

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She’s done it. Gina Rinehart is the first person to break the $10 billion mark on the BRW Rich 200 and the first woman to top the list. It is a remarkable achievement and made more so by her enigmatic standing within business circles and the broader community.

Rinehart’s wealth has grown by a staggering $5.55 billion over the past 12 months. This alone would have been enough for her to take out the top spot on the 2010 edition of BRW Rich 200(Frank Lowy was the only person to have a net wealth of more than $5 billion last year; he was worth $5.04 billion.)

The ascension of Rinehart and other resources magnates says much about the shifting power balance in the economy. Politicians selectively claim that the burgeoning demand for natural resources has been good for all Australians. This may be true but it has been much more fortuitous for the richest people.

Clive Palmer ($5.05 billion, up from $3.92 billion) is one of the big beneficiaries and, like Rinehart, has coal projects in Queensland’s Galilee Basin. The reclusive Rinehart has little time for contemporaries and even less for Palmer. “She’s all right,” Palmer reluctantly concedes when asked what he thinks of Rinehart, but quickly adds: “She’s out to sell projects rather than develop them.”

To many, Rinehart’s success is a product of luck and privilege. She inherited half her father Lang Hancock’s fortune when the iron ore baron died in 1992. But dismissing Rinehart as an heiress is overly simplistic.

Consider the following graph. It shows the growth in Rinehart’s net worth from 1992 when she joined the Rich 200with $75 million. At the time, many of today’s best known billionaires were worth much more.

Since 1992, it has been a case of disparate decades for Rinehart. The first led to minimal growth (by today’s standards). By her own admission, she spent much of this period eliminating the debt that encumbered her father’s legacy.

The second has coincided with the China-driven resources boom and she has capitalised better than most. Iron ore royalties from Rio Tinto are an increasingly lucrative source of income and her access to Queensland coal has been game-changing.

Over the past 12 months, strong growth in iron ore and coal prices has boosted the wealth of many Rich 200members. This includes Ivan Glasenberg , who debuts in second spot (click here to read full story).

This time last year, few Australians would have ever heard of Glasenberg. The South African-born chief executive of commodities trading firm Glencore has lived in Switzerland for the past 20 years.

Glasenberg is fiercely private and the extent of his wealth has emerged only as a result of Glencore’s imminent capital raising on the London and Hong Kong stock exchanges. He qualifies for inclusion because he took out Australian citizenship during the two years he spent in Sydney in the late 1980s.

One person who remembers Glasenberg well is the man he pushes out of second spot on the list – Andrew Forrest. Forrest’s $6.18 billion fortune is a product of his shareholding in listed iron ore producer Fortescue Metals Group. But before he founded Fortescue, Forrest was chief executive of Anaconda Nickel and Glasenberg’s Glencore had a big presence on its share register.

Forrest’s decision to try a questionable mining method led to a dispute between the two. Forrest lost and he left Anaconda soon after.

Anthony Pratt takes out fourth spot on the list ($5.18 billion, up from $4.60 billion) after a successful but unassuming year at the family-owned cardboard packaging group Visy.

Palmer rises to fifth position from seventh.

On May 17, after several false starts, Palmer announced plans to float most of his coal and iron ore assets on the Hong Kong Stock Exchange. If the float goes ahead as planned on June 9, it will represent a significant victory for the Queensland billionaire. Palmer’s enthusiastic predictions have not always met with favour from market watchers and rivals.

Last year’s number one, Frank Lowy, is pushed down to sixth ($4.98 billion). It has not been a bad year for Lowy but the growth in the resources sector has managed to outstrip what his Westfield retail property group has been able to achieve. Residential property king Harry Triguboff has been able to cast off difficult conditions to increase his wealth by $100 million this year ($4.30 billion).

Another to have enjoyed a relatively steady 12 months is James Packer (seventh position with $4.16 billion, up from $4.10 billion). This year, Packer is joined on the list by his friend, business partner and fellow son of a gun, Lachlan Murdoch. As interim chief executive of Ten Network Holdings, Murdoch has assumed more prominence over the past 12 months.

Murdoch is one of 28 newcomers on this year’s list. Four of them (Angus Grinham, Richard Grinham, Tom Misner and Lewis Saragossi) are re-entries (they were not on the 2010 list but made it in earlier years) and the three Wilson brothers, John, Alan and Bruce, have been included on the individuals list after previously being listed as a family.

Two people debut in the billion-dollar bracket (there are 35 billionaires in total). Glasenberg and London-based investor Frank Timis. Romanian-born Timis is a controversial figure in business circles but his success at taking opportunistic stakes in oil and gas plays in emerging markets has rocketed him onto the list.

A man who may soon join Timis in the billionaire ranks is another Romanian-born Australian, Silviu Itescu (see story, page 68).

Itescu is a doctor and scientist who has ridden the massive growth in the market capitalisation of the company he founded, Mesoblast. The company is developing off-the-shelf regenerative medicines from adult stem cells. His company has breathed new life into the biotechnology sector, which has delivered some disappointing performances over the past decade.

The company is yet to generate sales revenue but it has been heavily backed by a US pharmaceutical giant to gain all regulatory approvals and start making money. Expect to hear much more of it.

Although the resources barons have had favourable conditions, not everyone has had a good time. It has been tough in some markets and retail has been one of the worst performers. The number of retailers on the list has risen to 21 from 16 last year but this is deceptive and partially attributable to the reclassification of the Wilson brothers.

Some of the retailers to have taken a hit over the past 12 months include Harvey Norman frontman Gerry Harvey ($1.41 billion, down from $1.69 billion) and Solomon Lew ($1.33 billion, down from $1.49 billion).

The property market has also slowed after a sustained period of growth but it remains the best supported asset class for our nation’s richest people. Almost one-quarter (49) of the list have most of their money in the property market. This is down from 59 last year and may fall further next year; the ongoing slowdown in calendar 2011 has not been fully felt in the accounts of some list members. Much depends on their exposure to sub-sectors (such as commercial or residential.) Residential property developers on the Gold Coast are among those worst hit.

Although four of the top 10 on the list (Gina Rinehart, Anthony Pratt, James Packer and John Gandel) inherited sizeable business interests from their fathers, most of their Rich 200 peers did not. Of the 2011 Rich 200class, only 18 per cent got their start through inheritance. This should give encouragement to those entrepreneurs who dream of forcing their way onto the list through perspiration rather than generational wealth transfer.

The bad news for budding list members is that the cut-off is the most elusive it has ever been. It has grown by 16 per cent this year. To make it onto the Rich 200 you needed $215 million, up from $185 million in 2010. This is the highest cut off ever, as per the table below.

Entry levels to the BRW 200 list

1984$10 million
1985 $15 million
1986 $29 million
1987 $30 million
1988 $35 million
1989 $35 million
1990 $30 million
1991 $25 million
1992 $27 million
1993 $30 million
1994 $37 million

Are the rich getting richer? Absolutely.

Of the 200 who reached the $215 million threshold, only 15 were women and some of them generated wealth through marriage.

The paucity of women on the BRW Rich 200adds to the intrigue surrounding its new number one. Now that Rinehart has broken the 28-year-old glass ceiling, it remains to be seen how she inspires the next generation of female entrepreneurs, if at all.

Like her father, she is not known for her altruistic pursuits. In the words of her father: “The best way to help the poor is to make sure you are not one of them.”