Australian Household Wealth Hit a Record $14.9 Trillion in Q1 2022 Rising 15.3 per cent Over the Year

Australia’s total household wealth hit a record $14.9 trillion at the end of March, the Australian Bureau of Statistics said Thursday. Australian household wealth increased by 15.3 per cent in the year to March 31, it grew by another 1.2 per cent in the first quarter of the year and surged 35.5 per cent since the beginning of the COVID-19 pandemic. In comparison Americans’ household wealth took a hit in the first quarter of 2022, it fell to $149.3T.

Sydney Homes Hit Records

Both countries saw stock prices fell sharply off record highs after the Federal Reserve began talking of QT and raising rates to combat inflation. Global economy slackness from the Russian invasion of Ukraine and Chinese Covid lockdowns also impacted asset prices negatively.

The record wealth figure ABS attributed mainly to rising house prices and superannuation balances is threatened by inflation hitting housing and financial markets. A contrast of different cultures, Australians added $40 billion to savings in the March quarter while the savings pool of the rest of the world declined by about $8 billion. $200 billion was saved in calendar 2021, with about $25 billion added to household savings in the month of July alone. Households have accumulated $305 billion in currency and deposits in the past two years.

“Acquisition of net equity in pension funds reflected continued growth in employment. Decreased activity in the property market in the early months of the new year and repayments made on outstanding credit card balances following the holiday spending period contributed to lower demand for loan borrowings by households this quarter.”

Australian Wealth Highlights

  • The ABS attributed the rise in household wealth to March to asset price appreciation.
  • The value of residential real estate has surged 40 per cent since the onset of the COVID-19 pandemic and superannuation fund balances increased by 22.5 per cent.
  • Deposit assets continued to grow, though at a reduced pace as spending continued to increase following the easing of COVID-19 restrictions.
  • Households acquired financial assets worth $52.4 billion over the quarter, including both deposits and equity in super and pension funds. Those assets were offset, however, by $44.5 billion of liabilities, of which almost $42 billion was attributed to loans.
  • Demand for credit hit a record $218.8 billion, driven by private non-financial corporations, which borrowed $153.2 billion.
  • National investment fell $14.9 billion to $125.2 billion, with household investment sliding $6.1 billion to $44.3 billion.
  • Non-financial corporations’ investment decreased $8.3 billion to $55.5 billion and general government investment fell by $0.2 billion to $22.4 billion.
  • Capital investment fell to 22.7 per cent as a proportion of net GDP, with household and general government investment flat at 8.3 per cent and 4 per cent respectively.
  • Non-financial corporations’ investment fell to 9.9 per cent, while financial corporations’ investment remained steady at 0.5 per cent.

Analysts expect these March quarter results to be a peak, at least in the next 12 to 18 months. Economic forecasters expect sharp downturns in the housing and stock markets. Modelling by fund manager Coolabah Capital suggests house prices nationally could fall by 30 per cent or more if the RBA continues to raise interest rates.

The Reserve Bank of Australia’s conclusion of its Bond Purchasing Program in February marked the end of its extraordinary pandemic monetary policy measures, with the deposit assets of banks with the RBA reaching an “unprecedented” $439.3 billion.

Australians are Saving Their Money

The National Australia Bank’s second-quarter consumer sentiment survey, also released on Thursday, found a spike in consumer stress from the high cost of living despite falling job pressures and high levels of savings.

The NAB report stated;

“As COVID restrictions relaxed, some analysts had predicted consumers would go on shopping sprees, so-called revenge spending,”

“Certainly, many households (particularly those on higher incomes) have the money to do so, having banked extra savings during the pandemic. And for a while it looked like they might be right. However, consumer expectations in regard to major household purchases over the next 12 months fell sharply in Q2 in all spending categories.”

Importantly consumer stress is still lower than mid-2021 the NAB survey found.

Former Treasury official and director of Outlook Economics Peter Downes said the March quarter figures are “tremendously positive numbers”. “When you think about it, to be on the other side of COVID and everything else that’s going on in the world, and having wealth improving through the year compared to pre-COVID is a tremendous outcome.”


HIGHLIGHTS OF US HOUSEHOLD WEALTH REPORT (1Q22)

Household Assets contracted $260 billion during Q1 to $167.917 TN, though one-year growth was still 9.1% ($14.025 TN). With Household Liabilities increasing $284 billion to $18.638 TN, Household Net Worth declined $544 billion to $149, 279 TN.

Household Net Worth-to-GDP declined to 612% (from 624%). But this compares to 491% at cycle peak Q1 2007, and 445% during peak Q1 2000. Years of asset inflation have fueled a consumer spending boom. The downside of the cycle will see sinking asset prices and tightened Credit conditions significantly restrain household spending.

From the Federal Reserve’s financial accounts report, previously known as the flow of funds survey

The Q1 US household net worth fell to US$149.3 trillion.

Balance Sheet of Households and Nonprofit Organizations, 1952 – 2022

US Assets, Liabilities, and Net Worth

The solid job market has sustained Americans purchasing power, sustaining household spending which is the largest component of the U.S. economy despite rising inflation.

The S&P 500, Nasdaq and Dow Jones Industrial indices all hit record highs after the stock swoon in December. Property prices have also risen in this period. From there we have stock markets pullback sharply.

  • Stock market values fell by $3.0 trillion in Q1.
  • Real estate added about $1.7 trillion
  • Household debt grew by 8.3% annualized in Q1
  • Business debt rose by 8% annualized
  • Federal government debt rose by 14.9% annualized
  • State and local debt contracted by 3% annualized

Source: Federal Reserve ABS AFR

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