Daily Bulletin


The Conversation

  • Written by Warren Hogan, Industry Professor, University of Technology Sydney

The latest data from the Australian Bureau of Statistics confirms household wealth has fallen, on the back of falling house prices, in the past year.

But it’s not all bad news. There are signs of hope in the portents for the next six months.

During the first quarter of this year, the net worth of all Australian households rose 0.2% to A$10.2 trillion. Total household net worth in March 2019 was 0.7% lower than in March 2018, largely because of steep falls over the final six months of 2018.

The per capita annual decline was larger, falling by about 2.4%, because of population growth. This means the average wealth of Australians dropped by about A$9,500, from A$414,400 to A$404,900.

Australian household wealth has taken its biggest dive since the GFC, but things are looking up ABS This household “balance sheet event” – defined as an annual decline in household sector net wealth – is the third in the past 30 years. The other two were through the Global Financial Crisis of 2008 and immediately after. Housing (land and dwellings) comprises 52% of household-sector assets. Superannuation comprises 24%. Property values fluctuate with real estate prices, while superannuation is highly exposed to volatility within the financial markets. Consumer spending The next chart highlights the relationship between changes in household net worth and spending on discretionary items and durable goods. Australian household wealth has taken its biggest dive since the GFC, but things are looking up ABS But what is interesting is that consumer sentiment has not been significantly affected. The following chart shows household net worth vs Westpac’s consumer sentiment data. This is the first major downturn in household net wealth in 30 years that has not coincided with weaker consumer sentiment. Australian household wealth has taken its biggest dive since the GFC, but things are looking up ABS & Westpac It’s hard to know for certain why consumer confidence has remained relatively steady, but two things stand out. First, the consumer financial adjustment has been orderly and deliberate as opposed to rapid and forced. It appears people have consciously adjusted spending and savings patterns to achieve long-term savings goals. Second, there has been ongoing strength in the labour market. Despite falling wealth, people still have jobs and this reinforces confidence. Shares and housing stocks It is safe to say consumers will start spending more once they feel their asset position has stabilised. Strong equity markets have played a big role in shoring up household wealth since the start of this year. As the next chart demonstrates, they could continue to do so over the period ahead. Australian household wealth has taken its biggest dive since the GFC, but things are looking up ABS & Bllomberg But the big swing factor is house prices – specifically land values. The Reserve Bank’s interest rate cuts should help stabilise house prices over the second half of 2019. Our last chart suggests this appears to have started, with auction clearance rates improving in recent months. Australian household wealth has taken its biggest dive since the GFC, but things are looking up ABS, CoreLogic & Bloomberg This all suggests household wealth could start growing again in the second half of the year. That should go a long way to stabilising the economy.

Authors: Warren Hogan, Industry Professor, University of Technology Sydney

Read more http://theconversation.com/australian-household-wealth-has-taken-its-biggest-dive-since-the-gfc-but-things-are-looking-up-119001

Writers Wanted

We need a code to protect our online privacy and wipe out 'dark patterns' in digital design

arrow_forward

Australia's plants and animals have long been used without Indigenous consent. Now Queensland has taken a stand

arrow_forward

Online Gambling: Free Bets Cut Costs in an Industry Where There’s Plenty at Stake

arrow_forward

The Conversation
INTERWEBS DIGITAL AGENCY

Politics

Did BLM Really Change the US Police Work?

The Black Lives Matter (BLM) movement has proven that the power of the state rests in the hands of the people it governs. Following the death of 46-year-old black American George Floyd in a case of ...

a Guest Writer - avatar a Guest Writer

Scott Morrison: the right man at the right time

Australia is not at war with another nation or ideology in August 2020 but the nation is in conflict. There are serious threats from China and there are many challenges flowing from the pandemic tha...

Greg Rogers - avatar Greg Rogers

Prime Minister National Cabinet Statement

The National Cabinet met today to discuss Australia’s COVID-19 response, the Victoria outbreak, easing restrictions, helping Australians prepare to go back to work in a COVID-safe environment an...

Scott Morrison - avatar Scott Morrison

Business News

How To Create A Better Impression With Your Business Card

There’s no doubt that done well, business cards can deliver a lot for a brand. The problem, then, is that there aren’t very many good business cards out there! This is hardly the fault of the bu...

News Company - avatar News Company

Key Strategies to Effectively (and legally) Monetize your Intellectual Property

Let’s be frank: Your intellectual property can potentially make you a lot of money. What is intellectual property? Well, there isn’t necessarily a single definition for this important term but a...

Anton Quintos - avatar Anton Quintos

6 Ways to Help Your Home Based Business Join the Big League

Most of us dream of leaving our tired 9 to 5 jobs, taking ownership over our careers, and starting our own gigs. Up until now, small home-based businesses have proved to be a perfect launching p...

Diana Smith - avatar Diana Smith



News Company Media Core

Content & Technology Connecting Global Audiences

More Information - Less Opinion