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Feature Article - New Experimental Estimates of the Distribution of Australian Household Wealth (Oct, 2002)
MEDIAN HOUSEHOLD NET WORTH,
BY THE AGE OF THE HOUSEHOLD REFERENCE PERSON-
As at 30 June 2000
The distribution of wealth in all dimensions is closely related to the distribution of major household assets such as owner-occupied dwellings and superannuation. Growth in the value of these assets between 1994 and 2000 has led to strong increases in the average wealth of households in middle and older age groups (i.e. those where the age of the reference person is over 44).
The distribution of wealth is also related to income levels. Mean and median wealth rises across most income deciles. Mean wealth for the highest income decile is more than double that of the ninth decile.
AVERAGE HOUSEHOLD NET WORTH BY ANNUAL INCOME DECILE,
As at 30 June 2000
The distribution of wealth between different types of households is closely linked to the effects of age and income level on wealth accumulation. Couple households had higher average net worth than lone parent or lone person households with reference people of a similar age. This is to be expected, as couples may have had access to two incomes with which to accumulate assets.
TABLE 1. MEAN AND MEDIAN HOUSEHOLD NET WORTH BY SELECTED HOUSEHOLD TYPES, CURRENT PRICES, AS AT 30 JUNE 2000
Mean net worth grew in all states and territories between 1994 and 2000. In 2000, mean net worth was highest in NSW, where average owner-occupied dwelling values were considerably higher than those in other states. The distribution of wealth between states and territories was different from the distribution of mean annual income, as the territories had higher mean and median household incomes than the states.
MEAN HOUSEHOLD NET WORTH BY STATE (a), As at 30 June 2000
The percentage of total wealth owned by households in a particular wealth decile is a statistic which is commonly used to examine the concentration of wealth across households. From 1995 to 2000, the amount of wealth held by the top wealth decile appears to have been quite stable - either 43% or 44% in each year, after falling from 49% in 1994. The percentage of total household wealth owned by other wealth deciles has also remained stable over this period.
The distributional patterns outlined above are in broad agreement with data from other sources and the findings of previous studies. However, mean household net worth estimates from the new experimental model are higher than some estimates which have been reported in the past. When interpreting these types of differences it should be remembered that these new experimental estimates incorporate some assets and liabilities which have not often been included in past analyses, the estimates have been benchmarked to National Accounts aggregates, and they have been based on more detailed survey information.
CONTENTS OF THE WORKING PAPER
Tabulations of mean and median household net worth dissected by a range of characteristics (age of reference person, household type, state and income and wealth deciles) are presented in the appendices of the working paper. However, the main focus of the publication is to document, in some detail, the data and methods used to construct the wealth model, and provide:
POSSIBLE FUTURE WORK
There are a number of ways in which the experimental estimates could be refined in the future. For example, work is underway to increase the comparability of income statistics which were collected in the SIHC and HES across the 1990s, and this may lead to revised income data to which the model can be applied. (For further details of this work, see the feature article ‘Upgrading Household Income Distribution Statistics’ in the April 2002 edition of this publication).
The ABS is investigating the feasibility of compiling standard errors or alternative deviation measures, using statistical modelling techniques, to enhance the suite of quality indicators which has been provided in the working paper.
After considering feedback on the methods and experimental results reported in the working paper (and subject to further investigation of the feasibility of refinements to the model) the ABS may make more detailed disaggregations of the estimates available. In addition, the descriptive analysis conducted to date is only a fraction of that which could be undertaken using the estimates compiled in this study. Other analyses are being considered for incorporation into the ABS’ analytical work program.
Using the model which has been developed in this study, the ABS may compile distributional wealth data in years when a SIHC or equivalent survey is run, i.e. biennially, from 2003-2004. Information on wealth is planned to be directly collected every sixth year, commencing with the 2003-2004 Household Income and Expenditure Survey (a combined SIHC and HES).
‘Experimental Estimates of The Distribution of Household Wealth, Australia, 1994-2000’, can be found on the ABS web site, and downloaded free of charge. For further information about the methods used to model the distribution of wealth, please contact Kristen Northwood on (02) 9268 4238, email firstname.lastname@example.org, or contact Ken Tallis on (02) 6252 7290, email email@example.com. For further information about ABS income distribution statistics and plans to directly survey household wealth in the future, please contact Leon Pietsch on (02) 6252 6098 or email firstname.lastname@example.org.
Bacon, B. R., 1996, Pensioner’s Share of Wealth: An Income Distribution Survey Analysis, Treasury, Canberra.
Bękgaard, H. and King, A., 1996, Modelling the Accumulation and Distribution of Australian Household Assets, paper presented to the 24th General Conference of the International Association for Research in Income and Wealth, Lillehammer, 18-24 August 1996.
Dilnot, A.W., 1990, ‘The Distribution and Composition of Personal Sector Wealth in Australia’, The Australian Economic Review, 1st Quarter 1990, pp 33-40.
Kelly, S., 2001, Trends in Australian Wealth - New Estimates for the 1990s, paper presented to the 30th Annual Conference of Economists, University of Western Australia, 26 September 2001.
Robertson, G., Grandy, F. and McEwin, M., 2000, Use of Social Accounting Techniques to Estimate the Distribution of Household Wealth, paper presented to the Siena Group Meeting, Maastricht, The Netherlands, 23-26 May, 2000.
1 The reference person is selected from the adults in the household’s primary family, using data on relationships, gender, income and age. Further details of the rules by which this person is selected are provided in the working paper.
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