Aussies world’s wealthiest

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By Leith van Onselen

Credit Suisse has today released its 2014 Global Wealth Report, which reveals that Australian households are the wealthiest in the world when measured by median wealth. From The AFR:

The fifth annual study by the Swiss bank of global wealth trends found the median Australian adult was worth more than $US225,000 ($258,000) in June, well ahead of the second wealthiest population on this measure, the ­Belgians, at $US173,000…

Only 6 per cent of Australians have wealth below $US10,000, compared with 29 per cent in the United States and 70 per cent for the world as a whole.

Household wealth in Australia is heavily skewed to “real assets” – essentially property – which average $US319,700 per household, or 60 per cent of gross assets. This is the second highest in the world after Norway…

Since 2000, the net wealth of the average, or mean (as opposed to median), adult Australian has more than quadrupled, from $US103,151 to $US431,000. That makes us the second richest population on this measure, behind the Swiss at $US581,000.

There are a few important caveats to this result.

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First, one of the “benefits” of having one of the most expensive housing markets in the world is that it inflates the value of household wealth. Australians along with their Kiwi cousins also have a particularly high exposures to property and a low share of wealth stored in liquid financial assets (see below IMF charts).

Housing Wealth
Household Financial Wealth
Household Net Wealth
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However, is having the lion’s share of one’s wealth stored in illiquid housing really all that beneficial? We all need somewhere to live and higher home values serves little purpose to the vast majority of owner-occupiers, who typically must sell and buy into the same market. Expensive housing also punishes those who have recently entered, or are yet to enter, the housing market, who are required to either take-out mega-mortgages and have a life of debt slavery, or miss-out altogether.

Second, Australia’s wealth is measured in US dollars, which has obviously been biased upwards by the big surge in the Australian dollar over the past 15 years (see next chart).

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However, even in constant currency terms, average wealth has grown 145% over the past 13 years to $US369,000 from $US151,000, according to the report, most of which has come from house price inflation.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.