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6554.0 - Household Wealth and Wealth Distribution, Australia, 2005-06  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 09/11/2007   
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SUMMARY OF FINDINGS


INTRODUCTION

The economic wellbeing of individuals is largely determined by their command over economic resources. People's income and reserves of wealth provide access to many of the goods and services consumed in daily life. This publication provides details of the components and distribution of household net worth, or wealth.

The estimates of net worth in this publication are derived from the value of households' assets less their liabilities, as collected in the 2005-06 Survey of Income and Housing (SIH). Household assets and liabilities information were collected for the first time in the 2003-04 SIH. A number of tables in this publication show data for both reference periods.

While there may be individual ownership of assets, the benefits of asset ownership are shared at least to some extent between members of the household. Therefore this publication presents estimates of household wealth along with estimates of household income and other characteristics of households.

Further information on household income is available from the publication Household Income and Income Distribution, Australia, 2005-06 (cat. no. 6523.0).

COMPOSITION OF WEALTH

Wealth is a net concept and measures the extent to which the value of household assets exceeds the value of their liabilities. In 2005-06, the mean value of household assets was $655,000. The corresponding value of mean household liabilities was $92,000, resulting in mean household net worth of $563,000 (see table 6).

Assets

Sixty-nine percent of households own their own home either outright or with a mortgage, and for many of them the dwelling in which they live is their main asset. Owner occupiers' average home value was $412,500. This represented an average value of $286,000 when averaged across all households, that is, across both owner occupiers and non-owner occupiers (see table 16). Owner occupied dwellings accounted for 44% of total average household assets for all households. The average value of household contents was $51,000.

Nearly 20% of households owned property other than the dwelling in which they lived, including residential and non-residential property for rent and holiday homes. The value of this property averaged $91,000 across all households and accounted for 14% of total household assets.

Balances in superannuation funds were the largest financial asset held by households, averaging $85,000 per household across all households. 76% of households had some superannuation assets, but the distribution was very asymmetrical. While the average (mean) value of superannuation for those households was $111,000, half had superannuation assets under $44,000.

In the SIH, the value of own unincorporated and incorporated businesses is measured on a net basis, that is, the value of assets less the value of liabilities. The net value of own unincorporated businesses averaged $14,000 across all households and the net value of own incorporated businesses averaged $45,000 across all households.


Liabilities

Loans outstanding on owner occupied dwellings were the largest household liability. They averaged $142,000 for owner occupier households with a mortgage, giving them a net value in their dwellings of $275,000. Across all households, the average value of loans outstanding on owner occupied dwellings was $50,000, or 54% of average household liabilities. Loans outstanding for other property averaged $29,000. The principal outstanding on vehicle loans averaged $2,850 per household and the average household credit card debt was $2,200.


DISTRIBUTION OF WEALTH

While the mean household net worth of all households in Australia in 2005-06 was $563,000, the median (i.e. the mid-point when all households are ranked in ascending order of net worth) was substantially lower at $340,000. This difference reflects the asymmetric distribution of wealth between households, where a relatively small proportion of households had high net worth and a relatively large number of households had low net worth.


As can be seen from table 2, 16% of households had net worth falling between -$150,000 and $50,000. 1% had negative net worth.

1 DISTRIBUTION OF HOUSEHOLD NET WORTH, 2005-06
Diagram: 1 Distribution of household net worth, 2005-06



Changes in net worth distribution from 2003-04 to 2005-06

In real terms, mean household net worth in 2005-06 ($563,000) was 14% higher than in 2003-04 ($494,000).

For low net worth households (represented by the lowest quintile), median net worth increased by 5% from 2003-04 to 2005-06. For households with middle net worth (represented by the third quintile), there was a 9% increase in the median value and for the highest net worth households (represented by the top quintile) there was an 11% increase.

In both 2003-04 and 2005-06 only 1% of total household net worth went to households in lowest net worth quintile, whereas the share of households in the highest net worth quintile increased from 59% in 2003-04 to 61% in 2005-06.

2 CHANGES IN REAL NET WORTH DISTRIBUTION, 2003-04 to 2005-06

2003-04(a)
2005-06
Percent change

Mean household net worth
Low net worth $
25 711
27 368
6
Middle net worth $
312 717
341 745
9
High net worth $
1 458 002
1 720 680
18
All households $
494 346
562 859
14
Median household net worth
Low net worth $
23 235
24 505
5
Middle net worth $
311 520
339 765
9
High net worth $
1 046 853
1 159 969
11
All households $
311 520
339 765
9
Percentage share received by households
Low net worth   %
1.0
1.0
-
Middle net worth   %
12.7
12.1
-
High net worth %
59.0
61.1
-

(a) In 2005-06 dollars, adjusted using changes in the Consumer Price Index

Wealth and income

The range of wealth levels is wider than the range of income levels, as can be seen by analysing percentile ratios. For example, the value of P80 for household net worth (i.e. the level of net worth dividing the bottom 80% of all households from the top 20%) was 10.6 times higher than the P20 for household net worth (i.e. dividing the bottom 20% from the rest). The corresponding P80/P20 ratio for gross household income was 4.3. Similarly, the 20% of households comprising the lowest net worth quintile accounted for only 1.0% of total household wealth, while the 20% of households comprising the lowest gross income quintile accounted for 4.3% of total income.

3 SELECTED DISTRIBUTION INDICATORS, Household net worth and gross household income - 2005-06

Household net worth(a)
Gross household income(a)

Ratio of values at top of selected percentiles
P90/P10
ratio
47.34
8.99
P80/P20
ratio
10.62
4.30
P80/P50
ratio
2.20
1.86
P20/P50
ratio
0.21
0.43
Percentage share received by households in
Lowest net worth quintile
%
1.0
11.8
Middle net worth quintile
%
12.1
17.2
Highest net worth quintile 
%
61.1
32.2
Percentage share received by households in
Lowest gross income quintile
%
11.1
4.3
Middle gross income quintile
%
14.6
16.1
Highest gross income quintile 
%
40.0
45.6

(a) Quintile and percentile boundaries are derived separately for household net worth and gross household income. For information about the derivation of quintiles, percentiles and mean values for these data items, see Appendix 1

Wealth is distributed between households somewhat differently to income. While the 20% of households comprising the lowest net worth quintile accounted for only 1% of total household net worth, they accounted for 12% of total gross household income. The 20% of households comprising the lowest gross household income quintile accounted for 4% of total gross household income but 11% of total net worth.

The differences in the distribution of wealth and income partly reflect the common pattern of wealth being accumulated during a person's working life and then being utilised during retirement. Therefore many households with relatively low wealth have relatively high income, especially if they are younger households. Conversely older households may have accumulated relatively high net worth over their lifetimes, but have relatively low income in their retirement.

In addition, some households had low or even negative incomes due to business or investment losses, but still had relatively high levels of net worth.

Household characteristics

Households with different characteristics tend to have different levels of net worth, as shown in table 7 of the publication, and summarised in the following table. Low net worth households had lower equivalised disposable household income compared to middle and high net worth households ($445 per week, compared with $556 and $908 per week respectively).

High net worth households had the highest incidence of full ownership of their home, whereas 92% of the households in the lowest net worth quintile were renters. High net worth households contained more people on average (2.8) than the low and middle net worth groups (2.2 and 2.5) and more employed persons on average (1.6) compared with low and middle net worth households (0.9 and 1.2, respectively).

The household reference person in the high net worth group is older, on average, than the reference person in low and middle net worth households, reflecting that wealth generally accumulates with age.

4 HOUSEHOLD CHARACTERISTICS, Net worth groups-2005-06

Low net
worth
Middle net
worth
High net
worth

Mean net worth $
27 368
341 745
1 720 680
Mean gross income per week $
769
1 122
2 098
Mean equivalised disposable household income per week $
445
566
908
Owns home without a mortgage %
*0.8
40.6
61.0
Owns home with a mortgage %
3.3
50.1
35.4
Rents from a private landlord %
65.9
7.1
2.8
Rents from state/territory housing authority %
20.4
**0.1
-
Average number of persons in the household no.
2.2
2.5
2.8
Average number of employed persons in the household no.
0.9
1.2
1.6
Average age of reference person in the household years
40
52
55

* estimate has a relative standard error of 25% to 50% and should be used with caution
** estimate has a relative standard error greater than 50% and is considered too unreliable for general use

Life cycle stages

A typical life cycle includes childhood, early adulthood and the forming and maturing of families, as illustrated in tables 20 and 21 of the publication. Other family situations and compositions are shown in tables 18 and 19. The following table compares households in different life cycle stages.

5 NET WORTH AND HOUSEHOLD CHARACTERISTICS, For selected life cycle groups-2005-06

Number of households
Average
number
of persons
Mean
household
net worth
Mean gross
household
income
per week
Proportion
owning home
without a
mortgage
Proportion
owning home
with a
mortgage
'000
no.
$'000
$
%
%

Lone person aged under 35
369.3
1.0
115
845
*3.5
28.3
Couple only, reference person aged under 35
423.5
2.0
239
1 689
*2.7
46.3
Couple with dependent children only
Eldest child aged under 5
429.9
3.4
512
1 687
6.0
63.0
Eldest child aged 5 to 14
859.4
4.1
595
1 764
13.0
63.7
Eldest child aged 15 to 24
469.3
4.2
872
2 056
29.5
58.9
Couple with
Dependent and non-dependent children only
264.4
4.7
808
2 378
25.3
60.3
Non-dependent children only
449.3
3.3
838
1 906
50.2
39.8
Couple only, reference person aged 55 to 64
506.8
2.0
977
1 285
61.1
28.2
Couple only, reference person aged 65 and over
678.8
2.0
868
749
86.4
5.9
Lone person aged 65 and over
744.3
1.0
468
383
74.0
3.5
One parent, one family households with dependent children
538.6
3.0
228
898
12.8
27.0

* estimate has a relative standard error of 25% to 50% and should be used with caution

Of the selected life cycle groups, the group with the highest mean household net worth was couple only, reference person aged 55 to 64, with a value of $977,000. Many of these people are either nearing the end of their time in the labour force or have recently retired, that is, they are at the end of the main wealth accumulation period. People over 65 had less net worth on average ($868,000 for couples and $468,000 for lone persons), at least partly reflecting a run-down of assets to support consumption in retirement. These older cohorts may also have had less opportunity for capital accumulation in earlier decades, for example, because women had lower participation rates in the paid work force.

Lone persons aged under 35 had the lowest mean household net worth, at $115,000. At $239,000, the net worth of couple households with a reference person aged under 35 was somewhat more than twice the net worth of single persons in the same age group. The couple households also had twice the level of mean gross household income of the young lone person household ($1689 per week compared to $845 per week). The mean age of persons in both household types was 28, that is, they had had the same amount of time on average to accumulate wealth.

One parent, one family households with dependent children had a mean net worth of $228,000, compared to $667,000 for couple family households with dependent children (table 19). Differences in relative age did not contribute significantly to this substantial difference in net worth, since the average age of parent was 39 years for the one parent families and 41 years for couple families. Home ownership for the one parent family households was only about half that for the couple family households (40% and 79% respectively).


Tenure and landlord type

There is a strong correlation between net worth and home ownership, as for many households, their dwelling is their main asset (see table 16 of this publication).

Owners without a mortgage had the highest mean net worth ($924,000) which is 64% higher than the mean net worth of all households ($563,000). The mean net value of owner occupied dwelling for this group is $407,000 or 44% of their total mean net worth.

Owners with a mortgage also had higher mean net worth ($591,000) than the average for all households. However, this group also had higher liabilities ($208,000) than the average for all households ($92,000). 68% of their liabilities are from the principal outstanding on loans for owner occupied dwellings.

Renters had lower mean net worth ($118,000) which is just 21% of the average for all households. Private renters averaged net worth of $126,000, while renters from state/territory housing authorities averaged net worth of $41,000.


States and territories

Household net worth varies between states and territories and between capital cities and elsewhere. In 2005-06, Northern Territory households recorded the lowest mean net worth at $392,000, or 30% below the average for all Australian households. Sydney households had a mean net worth of $697,000, 18% above the capital city average of $591,000 and 24% above the average for all Australian households of $563,000. The mean net worth of $591,000 for capital city households was 15% above the mean for households in the remainder of Australia of $514,000.


In nearly all capital cities, over half the value of average household net worth was accounted for by the value of owner occupied dwellings, as shown in the following graph. There was considerably greater variation between capital cities in dwelling values than in other net worth components.

6 MEAN NET WORTH, By capital city, 2005-06
Graph: 6 Mean net worth, by capital city, 2005-06


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