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SUMMARY OF FINDINGS
Another measure of wealth distribution is provided by the net worth shares of groups of households at different points in the wealth distribution. The following graph (S2) shows that, in 2009-10, households in the highest net worth quintile held 62% of the total net worth of all households, while a further 20% was held by households in the 4th quintile. By comparison, the lowest three quintiles held, in total, 18% of total net worth.
Changes in net worth distribution from 2003-04 to 2009-10
In real terms, mean household net worth in 2009-10 ($720,000) was 14% higher than in 2005-06 ($632,000) and 30% higher than in 2003-04 ($555,000) (table S3).
For low net worth households (represented by the lowest quintile), median net worth increased by 9% from 2005-06 to 2009-10. For households with middle net worth (represented by the third quintile), there was a 12% increase in the median value and for the highest net worth households (represented by the top quintile) there was a 13% increase (table S3).
The share of total household net worth owned by households in the lowest net worth quintile has remained at around 1%. In contrast the share of households in the highest net worth quintile has slightly increased, from 59% in 2003-04, to 61% in 2005-06 and 62% in 2009-10 (table S3).
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 10.9 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 4.4 (table S4).
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 13% of total net worth (table S4).
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 have low or even negative incomes due to business or investment losses, but still have relatively high levels of net worth.
Graph S5 below shows the relationship between equivalised (i.e. standardised with respect to household size and composition) disposable household income and equivalised net worth deciles. The lowest equivalised income decile had a higher mean equivalised net worth ($309,000) than the second to fifth equivalised income deciles. Average equivalised net worth of households in the highest (tenth) income decile was more than double that of households in the ninth income decile ($1,158,000 and $477,000 respectively).
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 (S6). Low net worth households had lower equivalised disposable household income compared to middle and high net worth households ($579 per week, compared with $752 and $1215 per week, respectively).
High net worth households had the highest incidence of full ownership of their home (61%), whereas 91% 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 (2.4 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) (table 7).
The household reference person in the high net worth group was older, on average, than the reference person in low net worth households (57 years and 41 years respectively), reflecting that wealth generally accumulates with age.
Life cycle stages
A typical life cycle includes childhood, early adulthood and the forming and maturing of families, as illustrated in tables 22 and 23 of the publication. Other family situations and compositions are shown in tables 20 and 21. The following table compares households in different life cycle stages (S7).
Of the selected life cycle groups, the group with the highest mean household net worth was couple only, reference person aged 55 to 64 ($1,317,000). 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 lower net worth on average ($1,111,000 for couples and $572,000 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 (table S7).
Lone persons aged under 35 had the lowest mean household net worth, at $151,000. The mean household net worth of couple only households with a reference person aged under 35 was $237,000 (or $119,000 per person) (table 22). These couple only households had almost twice the level of mean gross household income of the young lone person household ($2,128 per week compared with $1,152 per week). The mean age of the household reference person in both household types was 28, that is, they had had the same amount of time on average to accumulate wealth (table 23).
One parent, one family households with dependent children had a mean net worth of $276,000, compared to $827,000 for couple family households with dependent children (table 20). Differences in relative age did not contribute significantly to this substantial difference in net worth, since the average age of parent was 41 years for the one parent families and 42 years for couple families. Home ownership for the one parent family households was about half that of the couple family households (40% and 77% respectively) (table 21).
Tenure and landlord type
There is a strong correlation between net worth and home ownership, and for many households, their dwelling is their main asset.
Owners without a mortgage had the highest mean net worth ($1,179,000) which is 64% higher than the mean net worth of all households ($720,000). The mean net value of owner occupied dwellings for this group was $541,000 or 46% of their total mean net worth (table 18).
Owners with a mortgage also had higher mean net worth ($770,000) than the average for all households. This group also had higher liabilities than the average for all households ($263,000 compared with $120,000). Almost three-quarters (72%) of their liabilities were from the principal outstanding on loans for owner occupied dwellings (table 18).
Renters had lower mean net worth ($158,000) which is 22% of the average for all households. Private renters averaged net worth of $176,000, while renters from state/territory housing authorities averaged net worth of $42,000 (table 18).
States and territories
Household net worth varies between states and territories and between capital cities and elsewhere. In 2009-10, South Australian households recorded the lowest mean net worth at $585,000, or 23% below the average for all Australian households (table 30). Melbourne households had a mean net worth of $866,000, 12% above the capital city average of $772,000 (table 26) and 20% above the average for all Australian households of $720,000 (table 30). The mean net worth of $772,000 for capital city households (table 26) was 23% above the mean for households in the remainder of Australia of $629,000 (table 28).
In nearly all capital cities, over half of the value of average household net worth was accounted for by the value of owner occupied dwellings (table 26), as shown in the following graph (S8).
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