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Do you feel rich?

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Do you feel rich?

Do you feel rich? If you’re an Australian reader, then you might, at least when compared to your fellow citizens around the world. Last week Credit Suisse, released its annual report on global wealth for 2018 and Australia is leading the field.

When it came to overall wealth levels, Australia placed first for median household wealth (beating out Switzerland) and second to Switzerland for average wealth per adult. In US dollar terms, the middle household in Australia lays claim to almost US$200,000 of net assets. That’s about A$270,000 in local terms. The wealth of the average Australian exceeded US$400,000 or well clear of half a million Australian dollars.

The table below shows the full top ten on both measures, and you will likely be surprised by just how much Australia beat out the competition. Would you ever imagine that the median household in the US doesn’t even make the top ten? Or that the median Aussie household has more than double the wealth of the median UK household? Or that outside of Switzerland, the US and Belgium, no other country has even three quarters of the average Australian’s wealth?

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Australians should also be proud of the wealth distribution in their country. Only 6 per cent of Australians have net worth below US$10,000 according to the report. This compares to 18 per cent in the UK, a staggering 28 per cent in the US, and more than 60 per cent on a global basis.

A full two thirds of Australians have wealth of US$100,000 or more, which ranks fourth in the world, and is about seven times the world average.

Lastly a point on composition, and perhaps a sobering note. Average household wealth in Australia of just over US$400,000 is made up of:

  • US$200,000 in financial assets – likely the result of the robust mandatory superannuation system
  • US$300,000 in non-financial assets – likely reflective of very high property prices
  • Offset by around US$100,000 of borrowings.

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While Australians should feel good about their level of wealth on the global stage today, it is not without some risk. Sure, the superannuation system provides wonderful support for around 40 per cent of gross assets, but the other 60 per cent could be at the mercy of declining residential property prices that have been experienced for around 12 months now, and look set to continue. A falling Aussie dollar also creates some risk to Australia’s league table standings going forward.

Australians have a right to feel good about their position in the world’s wealth rankings. But caution should prevail. After all, it may not be so easy to repeat the feat next year.

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Christopher is a Portfolio Manager at Montgomery Global Investment Management. Christopher joined Montgomery in January 2015 after spending more than four years at LFG, the private investment group of the Lowy family, where he was most recently a senior member of the research team based in New York. Prior to this Christopher worked as a research analyst at One East Partners, a hedge fund based in New York, and as an investment banker at Goldman Sachs in Sydney.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.

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3 Comments

  1. Every week that house prices drop another $1000 that median wealth will drop. 2 years at this rate would take us below the UK. Three years and we would be below Spain. The point I am making is that median wealth is very much based on what we think things are worth.

  2. It’s all subjective. It depends what they call an asset, because does that include cars, jewellery, furniture etc. ? Debt is easy to identify, but assets are somewhat rubbery.

    One bank lists it as “An asset is something you own of value that can be converted into cash (assuming it isn’t cash already). Common examples can include: Savings / Property / Superannuation / Investments (e.g. shares) / Vehicles / Jewellery / Furnishings”

    Kiyosaki is very clear on his definition of what an ‘asset’ is, it puts money in your pocket . Therefore, your house is not (unless you rent it out), it keeps requiring money as an upkeep and you’re not going to sell it any time soon, so therefore, it is a liability. So is a car. It depreciates and takes money out of your pocket to run it, unless you can use it to make an income (e.g. a taxi).

    • One definition of an asset is anything that is income producing. Under that definition ‘landbanking’ would not be considered the act of building an asset. Clearly that’s a pretty narrow definition. Having said that it could be a very useful definition at the peak of the bubble for non-income producing items such as wine, art, collectible cars etc.

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