A new report from Credit Suisse estimates as many as 1.8 million Australians are millionaires today based on net household wealth (defined as the value of financial and real assets minus debts).
And over 3 million Australian adults could soon be millionaires, according to the report.
Higher stock prices, a booming housing market and an appreciation in the Australian dollar fuelled a $US66,000 increase in the average Australian’s wealth in 2020, with residents of Switzerland being the only group who saw a larger increase in their balance sheets.
The median Australian adult finished 2020 with a net worth of $US238,000, making them richer than the comparable resident of any other country.
This means that 50 per cent of Australians were worth less than this amount, while 50 per cent of Australians were worth even more.
The next wealthiest jurisdictions were Belgium, Hong Kong, and New Zealand.
The reason for Australia’s position at the top of the global wealth league table is the combination of the country’s high rate of private home ownership and soaring house prices, which have increased by more than 400 per cent over the past 25 years, according to CoreLogic.
The report noted that “the overall composition of assets or wealth has changed little in Australia since 2000”, with Australians displaying a relatively large preference for housing assets relative to their global peers.
In fact, more than 95 per cent of the country’s housing is owned by households, according to research by the Reserve Bank of Australia, compared to about 80 per cent in the United States and 70 per cent in Germany.
Financial assets such as shares comprised about 42 per cent of Australians’ gross assets in 2020, said the report, which was below the typical level for a high-income country of 55 per cent.
Another unusual feature of Australian households, said Mr Marr, was their tendency to hold a large proportion of their share portfolio in Australian equities, which he said was due to franking credits.
The fact that Australians’ wealth increased in the midst of the country’s first recession in nearly three decades may seem remarkable, but Credit Suisse economist Anthony Shorrocks said the short-term economic impact of the COVID-19 pandemic was largely reversed by the end of June.
“Global wealth not only held steady in the face of such turmoil but in fact rapidly increased in the second half of the year,” he said.
However, he warned the boom in wealth experienced over 2020 could be short-lived.
“For example, interest rates will begin to rise again at some point, and this will dampen asset prices,” he said.
Source: Australian Financial Review