SMSFundamentals | Jul 22 2019
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Australians’ Net Wealth Nearly Double Since Before The GFC
- National net wealth nearly doubles in 12 years
- Even after inflation, the average Australian is 28% richer
- Home ownership and superannuation are key stores of wealth
- Inequality has widened, with the rich growing their wealth faster than the poor
By Nicki Bourlioufas
Australians’ total net wealth has nearly doubled since just before the global financial crisis, with home ownership and superannuation being the key ways that individuals have increased their wealth.
However, inequality has widened as the rich grow their assets much faster than the poor, reflected in median net wealth per capita of just $134,900 in 2019.
The new Roy Morgan Wealth Report, now in its second edition, shows that the total value of assets in the hands of individual Australians has grown by 96% since 2007, while total debt has grown by only 78.6%.
As a result, national net wealth is now 98.7% higher now than it was in 2007. This highlights how well Australia as a whole has fared since the crash, particularly compared to some European countries.
Michelle Levine, chief executive officer of Roy Morgan, said the figures show “a very positive long term trend” that provides some balance to “the daily headlines about risks posed by high levels of debt and falling property values”.
Assets have grown faster than debt
The average figures paint an encouraging picture. In 2007, Australians’ average assets per head were $298,000 while average debt per head was $40,500, so average assets were worth 7.4 times average debt.
In the past 12 years, average assets per capita has grown to a $484,000 while debt has grown more slowly to $60,000, so average assets are now worth 8.1 times average debt.
This means net wealth per head has grown by 65.1% over the 12-year period, or 28% in real terms, after adjusting for inflation.
Home ownership and superannuation are the key stores of wealth
About half of Australia’s personal wealth is still held in the form of owner-occupied housing, which accounts for 49.8% of the total in 2019, down slightly from 51.6% in 2007. Meanwhile, the proportion of wealth held in superannuation has jumped to 24.4% from 19.2%.
The effects of the housing boom show up in the differences between the states, with both NSW and Victoria well ahead of the others in terms of both housing values and growth rates. NSW has the highest average net wealth with $503,000, up 91% since 2007, while Victoria is second with $465,000, up 89%.
Ms Levine said housing debt has grown considerably since 2007, but Roy Morgan’s data show “wealthier cohorts have shown a much greater propensity to take on debt and those investors have more ability to handle downturns than more marginal borrowers in lower-wealth segments”.
Not surprisingly, time is a major factor in building wealth. People aged 65 and over have the highest average net wealth of $759,000, up 95% since 2007. This puts them well ahead of the 25-34 age group, who are just starting their wealth-building journey with an average of $111,000, up 6%.
The good news is that women have improved their average net wealth position compared to men. In 2019, men hold 12.3% more wealth than women, while back in 2007 they held 27.4% more.
Inequality rises as the rich get richer and the poor struggle with chronic debt
A more challenging picture emerges when the analysis focuses on the median figure rather than the average. The median shows the net wealth of people who are at the midpoint of the population, with half of all Australians sitting above their level and half below.
The median net wealth of that “middle Australian” is just $134,900 in 2019 compared with $124,000 in 2007, a rise of 8.8% after inflation. According to Roy Morgan, the median value is a more representative metric “in such a highly skewed market” where just a few people hold the bulk of the nation’s wealth.
Reflecting the widening gap between the rich and the poor, in 2019, the top 10% of the population hold net wealth of $2.034m, up 66% from $1.233m in 2007. That represents nearly 48% of total net wealth, while the 50% of Australians who sit below the halfway mark hold only 3.7% of the total.
The new Roy Morgan Wealth Report covers the period from 2007 to 2019. The data and analysis are drawn from more than half a million in-depth face-to-face interviews conducted in Australians’ homes over the 12-year period.
Wellbeing is higher too
According to a separate report, Australian wellbeing sits at a six-year high. NAB’s Wellbeing Index increased 0.5 points over the second quarter of 2019 to a six-year high of 65.7 and tracked above average (64.5). The NAB Australian Wellbeing Index is derived from questions relating to how people think and feel about their lives in regards to their life satisfaction, life worth, happiness and anxiety.
We were also noticeably less anxious. NAB’s Financial Anxiety Index, based on concern over future spending and savings plans arising from our current financial position, moderated to 56.3 points and likely played a key role supporting lower overall anxiety.
The key drivers underpinning our financial anxiety continue to reflect our fear of not having enough to finance our retirement, being unable to provide for our family’s future and not being able to meet medical costs.
Credit card debt is still the most commonly held debt by almost one in two Australians, followed by home loans (30%), personal loans (19%), loans from family or friends (15%), investment loans (8%) and payday loans (7%).
SMSFundamentals is an ongoing feature series dedicated to providing SMSF trustees with valuable news, investment ideas and services, in line with SMSF requirements and obligations.
For an introduction and story archive please visit FNArena's SMSFundamentals website.
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