Saving boosts Australians’ wealth

Published 27 December 2012 05:22, Updated 04 January 2013 14:53

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Saving boosts Australians’ wealth

It estimates the wealth of the average Australian family, including their home, superannuation and other financial assets, climbed by 6.6 per cent in 2012, the best annual increase since 2009. Photo: istock

Average household wealth rose to a record $868,000 in 2012, driven by solid house prices and a sharemarket recovery, forecaster Outlook Economics says.

It estimates the wealth of the average Australian family, including their home, superannuation and other financial assets, climbed by 6.6 per cent in 2012, the best annual increase since 2009, when the stimulus after the global financial crisis pushed up house prices.

Outlook Economics director Peter Downes said one of the interesting aspects of the rise in wealth was that it was driven not so much by rising asset prices as by people saving more.

“House prices have bottomed, the stockmarket is picking up and you have this big increment from saving,” he said.

Household wealth fell 4 per cent in 2011 as high interest rates and the end of the stimulus reduced house prices.

In 2012 across Australia, house prices in capital cities and regional areas edged up 1.4 per cent, Mr Downes estimates. The stockmarket also rose strongly.

He said that with low interest rates his model projected wealth would continue to rise. Eventually, the boost in wealth should translate into more spending as people felt more confident.

Separately, the Reserve Bank of Australia concluded that a measure of household net debt fell significantly over the past five years.

A paper by RBA economists Ellis Connolly, Fiona Fleming and Jarkko Jääskelä says total debt as a share of household disposable income stayed roughly flat in the past five years after growing sharply in the early 2000s.

But they found that this was increasingly balanced by holdings of interest-bearing assets such as term deposits at banks.

Net debt measured by total debt minus these assets fell from 42 per cent in 2006 to 35 per cent in 2012.

Much of this wealth is held in superannuation accounts.

This article first appeared on afr.com

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