Transcript Household Wealth

Household Wealth
Leanne Johnson
Regional Research Leader
BITRE
Outline
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Background and objectives
Methodology
National overview
Small area estimates of wealth for 2003-04
Recent changes
Wealth and income
Wealth and consumption
Outputs
Background
• Net worth = value of household assets minus liabilities
– Assets: housing, vehicles, bank accounts, superannuation,
shares, businesses, dwelling contents etc
– Liabilities: property loans, HECS debt, credit card debt etc
• Why is household wealth of interest?
– Wealth contributes to economic wellbeing by
• Generating income
• Supporting consumption
• Providing economic security
Objectives
• Develop & analyse new measures of household wealth for
Australia’s regions
• Improve understanding of household wealth & its relevance
to regional wellbeing
• Explore relationship between regional wealth & regional
income
Methodology
• Small area estimation
• ABS Survey of Income and Housing 2003-04
– Provides capital city/state balance benchmarks
• Small area data sources:
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Valuer General’s data on property sales
ATO Taxation Statistics
Census data
Other ABS data
• Estimates produced for 1135 Statistical Local Areas
– Exclusions: very remote, indigenous & less than 500 households
National overview
Composition of household wealth, 2003-04 (ABS SIH)
Asset
Owner occupied dwellings
Other property
Total property assets
Mean Liability
$249 000 Loans on owner occ.dwellings
$70 800 Loans on other property
Mean
$40 000
$19 900
$319 800 Total property loans
$59 900
Superannuation
$63 500 All other liabilities
$9 500
Dwelling contents
$47 400 Total liabilities
Net business assets
$38 400
Bank accounts
$21 100
Shares
$18 200
Vehicles
$17 200
Other assets
$10 700
Total assets
$537 100 Net worth
$69 400
$467 600
Composition of household wealth, 2003-04 (ABS SIH)
Asset
Owner occupied dwellings
Other property
Total property assets
Mean Liability
$249 000 Loans on owner occ.dwellings
$70 800 Loans on other property
Mean
$40 000
$19 900
$319 800 Total property loans
$59 900
Superannuation
$63 500 All other liabilities
$9 500
Dwelling contents
$47 400 Total liabilities
Net business assets
$38 400
Bank accounts
$21 100
Shares
$18 200
Vehicles
$17 200
Other assets
$10 700
Total assets
$537 100 Net worth
$69 400
$467 600
Composition of household wealth, 2003-04 (ABS SIH)
Asset
Owner occupied dwellings
Other property
Total property assets
Mean Liability
$249 000 Loans on owner occ.dwellings
$70 800 Loans on other property
Mean
$40 000
$19 900
$319 800 Total property loans
$59 900
Superannuation
$63 500 All other liabilities
$9 500
Dwelling contents
$47 400 Total liabilities
Net business assets
$38 400
Bank accounts
$21 100
Shares
$18 200
Vehicles
$17 200
Other assets
$10 700
Total assets
$537 100 Net worth
$69 400
$467 600
Key messages from wealth literature
• Wealth is very dependent on age
– Peaks for 55-64 age groups
• Wealth is unequally distributed compared to income
– Wealthiest 10% own more than 40% of wealth
– But wealth inequality is not increasing
Average wealth, capital cities & state balances, 2003-04
Capital cities
Rest of State
600
500
400
300
200
100
States and Territories
Total
ACT
NT
TAS
WA
SA
QLD
VIC
0
NSW
Average household wealth ($'000)
700
BITRE’s small area
estimates of wealth
BITRE’s small area estimates of wealth, 2003-04
Highest wealth
$’000
Lowest wealth
$’000
Peppermint Grove WA
Hunter’s Hill NSW
Woollahra NSW
Mosman NSW
Ku-ring-gai NSW
Bayside: Brighton VIC
Pittwater NSW
Manly NSW
Nedlands WA
Willoughby NSW
1926.8
1530.1
1388.4
1386.5
1370.1
1187.2
1178.0
1024.6
1021.8
1000.6
Mount Morgan QLD
Playford West Central SA
Elizabeth SA
Woodridge QLD
Kingston QLD
Wacol QLD
Inala QLD
Marsden QLD
Palmerston Balance NT
Moulden NT
154.3
157.2
157.7
160.1
175.6
179.7
193.6
196.2
198.3
201.1
Average household wealth, Australia, 2003-04
Average household wealth, Sydney, 2003-04
Average household wealth, Melbourne, 2003-04
Average household wealth, Central QLD, 2003-04
Household indebtedness
Debt to
asset ratio
Debt to asset
ratio for owner
occupied property
Median
age,
2001
SLA Name
State/
Territory
Palmerston Balance
NT
41.3%
81.8%
28
Bakewell
NT
36.3%
61.9%
26
Durack
NT
32.0%
59.6%
28
Woodroffe
NT
30.8%
57.6%
28
Melton East
VIC
30.4%
39.9%
28
Moulden
NT
28.5%
54.2%
25
Gray
NT
27.7%
48.2%
28
Kelso
QLD
26.6%
48.9%
28
Thuringowa Part A Balance
QLD
25.6%
46.5%
29
Alice Springs – Larapinta
NT
24.6%
42.6%
30
Debt to asset ratio, Sydney, 2003-04
Debt to asset ratio, Townsville, 2003-04
Changes in wealth, 2003-04 to 2005-06
• Liabilities grew more rapidly than assets
• Net business assets grew vary rapidly in cities
• Regional areas experienced greater growth than capital
cities in all states but WA
• Sydney experienced the lowest growth in wealth
• Property values:
– Declined in Sydney’s south and west
– Grew very strongly in QLD mining towns & around Bunbury
Wealth and income
Relationship between wealth and income
100
80
60
40
20
Correlation = 0.64
Net worth per household ($'000)
2000
1800
1600
1400
1200
1000
800
600
400
200
0
0
• Excluding top
wealth decile
reduces
correlation to
0.26
Average income per taxpayer ($'000)
• Compared to
2003-04 RIPT
120
How often do the regional wealth &
income estimates differ markedly?
Gap between the wealth and income rankings
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exceeds 500 places for 19% of SLAs
exceeds 250 places for 45% of SLAs
20 SLAs are in highest wealth quintile & lowest income quintile
16 SLAs are in lowest wealth quintile & highest income quintile
In what circumstances do regional wealth &
income data provide contrasting messages?
• Wealth outperforms income:
– Agriculturally-based SLAs
– Sea-change communities
• Income outperforms wealth:
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Mining communities
Apartment dwelling SLAs
Mortgage-belt SLAs
Most SLAs in Darwin, Townsville & Cairns
• When region has a particularly old or young age structure
Other findings on wealth-income relationship
• Regional differences in age structure explain 47% of gap
between regional wealth & income rankings
• Wealth displays more spatial variation than income
– Regional wealth: CV=34%
– Regional income: CV=19%
– Reliance on regional income data may understate the extent of
regional disparities
Wealth and
consumption
Wealth supports consumption
• Through running down cash reserves, selling assets or using
assets as collateral to borrow funds
• House price growth supported particularly strong consumption
growth between 2003 and 2005
• Increased housing equity withdrawal financed consumption
• Marginal propensity to consume out of wealth: 0.02 to 0.06
Low income & low wealth
Australia
ACT
NT
TAS Bal
Hobart
WA Bal
Perth
SA Bal
Adelaide
QLD Bal
Brisbane
VIC Bal
Melbourne
NSW Bal
Sydney
Mean equivalised weekly consumption ($)
Wealth boosts consumption for low income
households
600
500
400
300
200
100
0
Low income & medium or high wealth
Outputs
• Measuring the economic wellbeing of Australia’s regions
conference paper – late August
• Focus on Regions 5: Household Wealth information paper
• Household Wealth Database
<www.bitre.gov.au>