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WEALTH OR NET WORTH
A liability is established when one unit (the debtor) is obliged, under specific circumstances, to provide a payment or series of payments to another unit (the creditor). All liabilities are financial in nature, and for all financial assets held by a household there is a corresponding liability held by another party.
Liabilities are primarily the value of loans outstanding including:
While some assets, e.g. bank accounts, are collected from each person in households selected in the SIH, other assets and liabilities are collected from the household in total, including property and loans. Therefore, it is not possible to produce person level estimates of the total assets and liabilities owned by households.
Mean values of the detailed assets and liabilities collected in the SIH are available in the publication Household Income and Wealth, Australia, 2013–14 (cat. no. 6523.0).
DERIVATION OF WEALTH/NET WORTH
Household wealth is represented by the household's net worth. Net worth is calculated as the difference between the stock of household assets and the stock of household liabilities. Net worth is positive when the value of household assets is more than the value of household liabilities. Likewise, net worth is negative when household liabilities exceed household assets.
While there may be individual ownership of assets, the benefit of asset ownership is shared at least to some extent between members of the household. Therefore, for analysis of the economic wellbeing of both individuals and households, net worth of households is most appropriate.
EQUIVALISED NET WORTH
Wealth is often built up during a person's working life and then used during retirement when the composition of the household might be quite different. Therefore, unlike income, the main measure of household wealth, or net worth, is unequivalised. For more information see the 'Income' section of this publication.
However, when wealth is being used to support current consumption, or to identify households at risk of economic hardship, household wealth should be equivalised with the same scale used to equivalise household income and consumption. Equivalised household net worth is used in the ABS low economic resource measure and, for comparison purposes, is included in a small number of tables in output from the SIH.
Debt to income ratios focus on the ability of households to meet their ongoing obligations to service their debts, such as mortgage payments, student or car loan repayments or credit card repayments.
In the 2013–14 SIH, debt to income ratios have been calculated as: total household debt divided by annualised disposable household income. Debt to income ratios can also be calculated using gross household income.
The ABS has chosen disposable income for use in debt ratios as it is the income available to households to meet their expenditure needs after paying their tax obligations, and therefore the income available to service their debt. Households with nil and negative income are included in the ratios. For this purpose they are allocated a nominal annualised disposable income of 10 cents. Households with zero or negative debt are not included in the calculation.
Consistent with the Organisation for Economic Cooperation and Development (OECD) definition of over-indebted households, estimates have also been provided of the proportion of households with debt three or more times their income.
Debt to asset ratios
Debt to asset ratios show the proportion of a household's debt compared to the value of their assets. Households with high debts compared to their assets are considered at higher risk of financial hardship if there was a sudden change in asset values, e.g. if house prices were to fall substantially.
The debt to asset ratio has been calculated as: household total debt divided by household total assets. Households with nil or negative total assets, such as those with a business that has liabilities greater than the value of its assets, are included in the ratios. For this purpose they are allocated a nominal total asset value of 10 cents. Households with zero or negative debt are not included in the calculation.
Consistent with the OECD definition of over-indebted households, estimates have also been provided of the proportion of households with debt worth 75% or more of the value of their assets.
CHANGES ACROSS SIH CYCLES
The value and detailed composition of the wealth of households has been collected in the SIH since 2003–04, in all survey cycles except for 2007–08.
There have been some changes between surveys to improve measures of household wealth, in particular:
Prior to 2013–14, household wealth estimates were published in the publication Household Wealth and Wealth Distribution, Australia (cat. no. 6554.0). In 2013–14, detailed wealth data from the SIH has been published in the publication Household Income and Wealth, Australia, 2013–14 (cat. no. 6523.0).
COMPARISON OF WEALTH BETWEEN SIH AND THE AUSTRALIAN SYSTEM OF NATIONAL ACCOUNTS
While the concepts of net worth used in the SIH have many similarities to the household net worth definition used in the Australian System of National Accounts (ASNA), they also differ in many respects.
The SIH wealth data are collected from households and can be used to analyse the distribution of wealth across the population and to compare levels of wealth between various population subgroups. The ASNA estimates net worth by using many different data sources and provides a comprehensive picture of the household sector as a whole, presented within a national accounting framework.
A comparison of wealth data in the SIH and the ASNA has been published since the 2005–06 SIH. A detailed comparison of 2003–04, 2005–06, 2009–10 and 2011–12, SIH and ASNA net worth estimates is available in the publication Household Wealth and Wealth Distribution, Australia, 2011–12 (cat. no. 6554.0). This analysis will be updated in relation to 2013–14 SIH data and will be available as a supplementary release to this User Guide later in 2015, in the section 'Comparison with Australian System of National Accounts'.
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