Household Wealth Reaches All-Time High

July 11th, 2014
Individual household wealth in Australia is at an all-time high, despite high levels of household debt and unaffordable property by global standards. In fact, the surging property market is the main factor behind the new wealth figures, with Australian property recently listed among the most expensive in the world by the IMF. While high property prices continue to cause problems for first home buyers, it seems the combination of a strong share market together with rising house prices is making us richer than ever before.

In recent figures from the Australian Bureau of Statistics (ABS), individual household wealth rose to $327,263 at the end of March, up $4,248 from the previous quarter in December 2013. ; Total household wealth stood at $7.767 billion at the end of March after rising $138 billion in the first three months of the year. ; However, Australian household debt is still high by global standards and consumer confidence continues to suffer as a direct result of recent tough budget measures.

According to CommSec economist Savanth Sebastian, the record jump in household wealth is down to rising housing values and healthy share prices, both of which are expected to climb even higher. ; “Not only has household wealth levels lifted to fresh record highs but generational-low interest rates are also reducing borrowing costs across an array of sectors,” said Sebastian, adding “The global financial crisis caused the biggest ever drop in wealth for Australian households, however wealth levels have been repaired over the past couple of years and have hit new highs.”

While consumer confidence figures were low in April and May, Mr Sebastian and other analysts are confident they will recover in coming months to match household wealth figures. ; While the miss-match between strong household wealth from the share and housing markets and low consumer confidence is partly down to a strong budget reaction, high levels of household debt remain a big concern. ;

Official figures released in May show Australians owe $1.8 trillion to banks and other lenders, the equivalent of $80,000 per person and the highest level since 1988. ; According to David Skutenko from the Australian Bureau of Statistics, this figure is not just high in historical terms, but also by global standards: ; "We often compare household debt with household disposable income and, at the moment in Australia in 2013, it was 1.8 times household disposable income... In comparison to the G7 countries such as the United States - 1.1 times household disposable income. The UK - 1.5 times disposable income."

Despite high levels of household debt, however, disposable income in the form of cash and deposits represented 22 percent of net household wealth at the end of March, a level above the decade average of 20 percent. ; While the federal budget has obviously put a hold on confidence, these figures suggest it won’t be down for long. ; According to Mr Sebastian, “the improvement in wealth levels and [the] low interest rate environment over the past year has supported a modest lift in consumer activity... ; Higher wealth and firmer confidence should boost consumer spending in the months ahead.”