A 2019 Global Wealth Research Report just released by Credit Suisse has shown that due largely to falling house prices and a depreciating dollar, Australia underwent the biggest wealth decline of any country this year. As a result, Australia is $US443 billion poorer this year and this helped to de-mint some 124,000 Aussie millionaires.
Despite this, Australia has managed to retain the second-highest median wealth in the world, and the fourth-highest average wealth, well above countries like the US and China which led the world in wealth creation last year.
In an Australia that values the everyday person— it might come as a surprise to some that we’re a nation of millionaires.
A sustained property boom largely helped elevate the status of many of our countrymen and women to millionaires – on paper at least. However, as property prices have dropped over the last 18 months, so too has the net worth of Australians.
“On the downside, Australia was the biggest loser, shedding $US443 billion due to a decline in house prices combined with currency depreciation against the US dollar,” Credit Suisse said in its report, noting that Australia lost more wealth this year than any other nation.
It was led downwards by the value of the family home, the main asset for most households, which dropped as the market slumped. According to Credit Suisse data, that led to a 6.3% decline in home values across the country. Match that with a 5% decline of the Australian dollar against the US greenback and suddenly things aren’t looking so rosy.
It has led to the median wealth of Australians, once the highest in the world, to be overtaken by Switzerland, falling from $US191,453 to $US181,361. It’s also seen us drop from second to fourth place in average wealth — measured by the value of financial and real assets after subtracting debt.
“In the period since 2007 average wealth has stagnated in the world outside China and North America, although this is due in part to appreciation of the USD,” Credit Suisse said.
For Australia, this has resulted in little upward movement in the last eight years, with average wealth remaining about the same since 2011. Meanwhile, both China and the US took out the top honours throughout the list in terms of gross gains. The US, lifted by a strong performing sharemarket, managed to add an astounding $US3.8 trillion of wealth, with China lagging behind in second with a gain of $US1.9 trillion.
Despite this, Australia still lays claim to 1.1 million millionaires, the ninth most in the world. This places it in the same company as Spain (0.9m), Canada (1.3m) and Italy (1.5m) but behind the US (18.6m) and China (4.4m).
While a somewhat muted property rebound now appears to be underway in Australia, gains in prices still have a long way to go to return the market to its 2017 peak. The Australian dollar also seems to have stabilised and found a floor for now at around the 69 US cents level.
Conclusion
From Calibre’s perspective the report raises a couple of thoughts:
- Australians needs to further diversify their investments
The report demonstrates the danger Australia faces with all its eggs in one basket. Earlier this month, analysis by Harvard showed that our economy is absurdly dependent on the mining economy at the cost of all other sectors. So too, have economists of all stripes expressed concern that Australia has bet the house — excuse the pun — on a property market susceptible to a housing bubble. Perhaps it’s finally time more Australians began properly diversifying their investments. - Money as a measure of wealth
As we pointed out in an article we wrote in last month’s Calibre Client Newsletter entitled, “Different Ways to be Rich in 2019”, whilst millionaire status is a common method people use to gauge wealth in this country, there are plenty of other ways to live a wealthy life that extend beyond how much money you have in the bank or your portfolio. And even those with a lot of money may not be considered rich when you look at other areas of their life.
It might sound strange coming from a financial adviser but in our view, in the grand scheme of things money is not that important. It’s significant only to the extent that it allows you to enjoy what is most important to you, so you get the best Return on your Life.
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