Good news on wealth

Here’s the good news. Australians are getting richer. Total household wealth (net worth) stood at a record $7531.8 billion at the end of December, up $253.7 billion over the quarter – the biggest quarterly rise in four years. In per capita terms, wealth rose to a record $322,757 in the December quarter, up $9529 over the quarter.

Households held a record $830.9 billion in cash and deposits at the end of December. Cash and deposit holdings represented 22.1 per cent of financial assets, above the decade average of 20 per cent. Pension funds held 14.5 per cent of assets in cash and deposits, above the long-term average of 8.8 per cent.

Here’s how the economics team at Commsec summarised the data, “Contrary to what most people believe Aussies have never had it so good – at least that’s what the data shows. The latest data on financial wealth certainly suggest that Aussie households are sitting pretty. 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. The global financial crisis caused the biggest ever drop in wealth for Australian households; however wealth levels have been repaired over past couple of years and have hit new highs.”

Commsec also draws a few positive highlights from the data including:

1) The improvement in household balance sheets bodes well for future spending. It expects that low interest rates will continue for the rest of the year and it is likely households will continue to invest in other asset classes and spend a little bit more freely.

2)  The strength in sharemarkets has been the key driver of the turnaround in wealth and the pickup in wealth is expected to continue. Over the coming year CommSec expects Aussie businesses (outside of mining) to feel more confident to ramp up investment plans.

3) Superannuation funds are holding well over 1½-times the ‘normal’ proportion of money in defensive assets like cash and bank deposit. With term deposit rates offering less return than growth assets it is likely pension funds will allocate a larger proportion of inflows to listed property funds and equity markets.

4)  At the end of the December quarter, foreigners owned around 43 per cent of Australian listed companies, easing further from the 20 year highs reached in the June quarter 2012.

Editor’s update

And it’s till going up -

Total household wealth (net worth) stood at a record $7,670 billion at the end of March, up $137.9 billion over the quarter – the biggest quarterly rise in four years. In per capita terms, wealth rose to a record $327,263 in the March quarter, up $4,248 over the quarter.

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