Real national net worth per capita(a)
National wealth and national income are very closely related.
Along with the skills of the work force, a nation's wealth has a major effect on its capacity to generate income. Some produced assets (such as machinery and equipment) are used in income-generating economic activity. Some natural assets (such as minerals and native timber) generate income at the time of their extraction or harvest. Holdings of financial assets with the rest of the world (such as foreign shares, deposits and loans) return income flows to Australia. Other assets, such as owner- occupied dwellings, provide consumption services direct to their owners.
Income that is saved rather than spent on current consumption allows the accumulation of wealth that will generate income and support higher levels of consumption in the future.
There are many different ways of measuring wealth. The headline measure - real national net worth per capita - exhibits features that make it an informative indicator of national progress.
|Between June 1992 and June 2001, Australia's real net worth per capita rose at an average annual rate of 0.9%. Real assets per capita grew by 2.2% a year, but this was largely offset by the 7.6% annual growth in real per capita liabilities to the rest of the world. Nevertheless, in June 2001 the value of assets was more than four times the value of liabilities. (SEE FOOTNOTE 1)|
- It is a net measure - it shows the amount by which Australia's assets exceed its liabilities to the rest of the world.
- It is a per capita measure. Total wealth could rise if the population grew, even though there may have been no improvement in Australians' average wealth.
SOME DIFFERENCES WITHIN AUSTRALIA
Wealth statistics are not yet dissected by either geography or type of household.
FACTORS INFLUENCING CHANGE
The growth in a nation's wealth is the outcome of a wide variety of influences. Changes in Australia's net worth are the net result of changes in assets and liabilities. Between June 1992 and June 2001, Australia's real assets per capita grew by 2.2% a year, but this was largely offset by the 7.6% growth in real per capita liabilities to the rest of the world.
Broadly, changes in real wealth reflect both accumulations of past saving or dissaving and changes in the prices of assets and liabilities. More information is provided in the commentaries Capital formation and Saving.
Between 1992 and 2001, real produced assets per capita grew by around 1.5% a year. Of the produced assets, dwellings showed fairly strong growth (up by more than 2% a year). Computer software grew by more than 16% a year, although even by 2001 software still accounted for a small proportion of total assets. Non-produced assets (such as land, mineral resources and native forests) are largely the result of natural endowment although, even for these assets, exploration and development may have been undertaken to discover or improve their economic value. Real non-produced assets per capita rose more slowly (less than 1% a year) between 1992 and 2001.
Australia's financial assets with the rest of the world more than doubled in real per capita terms between 1992 and 2000 (up by around 11.7% a year). Shares and other equity showed particularly strong growth. Australia's liabilities to the rest of the world rose by around 7.6% a year between 1992 and 2001. Again, shares and other equity showed strong growth. More information about the changes in Australia's assets and liabilities is provided in the commentary Wealth: Looking more closely.
- It is a real measure - it is adjusted to remove the effects of price change. Nominal (or current price) wealth could rise during periods of asset-price inflation, even though there may have been no increase in the volume of tangible assets or no increase in capacity to generate future real income.
Real national assets and liabilities per capita(a)
Estimates of assets and liabilities are shown in the national balance sheet which forms part of the Australian System of National Accounts. For an asset to appear in the balance sheet, some person or institution must be able to enforce ownership rights over it; also, it must be possible for the owner of the asset to derive economic benefit from holding or using it. Assets include:
- dwellings, other buildings, machinery, inventories, plantation forests and so on ('produced non-financial assets');
- land, native forests and minerals that are used for economic purposes ('non-produced non-financial assets'); and
- currency, shares, loans and other securities ('financial assets').
- Australia's liabilities to the rest of the world which include borrowings from overseas and foreign holdings of Australian currency, shares and other securities.
In principle, all assets and liabilities appear in the balance sheet at market value; in practice, owing to data limitations, a variety of approximations and estimating procedures must be used.
The headline indicator includes a wide range of items, but it does not take account of everything that might be regarded as valuable. For example, it excludes:
- consumer durables (such as refrigerators) and motor vehicles that households use to produce services for themselves;
- native forests and other natural assets not used for economic production;
- valuables held as stores of value such as monetary gold; and
- human capital, the stock of knowledge and skills embodied in the Australian population.
Although these items are not built into the headline wealth measure, other commentaries (such as those for the Biodiversity, Marine ecosystems and Education and training dimensions of progress) provide information about some of them.
LINKS TO OTHER DIMENSIONS OF PROGRESS
The connections between wealth, income and saving are discussed above and in the commentaries on those dimensions of progress.
The buildings and infrastructure used to deliver education, health and other services are important components of wealth, as are natural assets such as land and minerals.
See also the commentaries National income, Saving, Biodiversity, Housing, Land degradation, and Land use.
1 All data in this commentary are derived from Australian Bureau of Statistics 2001, Australian System of National Accounts 2000-01, Cat. no. 5204.0, ABS, Canberra.
|WHAT ASSETS DO AUSTRALIAN OWN?|
The composition of Australia's total assets has been fairly stable during the past decade. There has been a modest decline in the relative importance of produced assets, and increases in the importance of non-produced and financial assets.
At 30 June 2001, significant assets included:
- land (28% of the total, up marginally from 27% in 1992) and subsoil assets (5%, up from 3%);
- dwellings (19%, down marginally) and other buildings and structures (22%, down from 27%);
- machinery and equipment (9%, down from 12%); and
- financial assets with the rest of the world (13%, up from 6%).
Major assets and liabilities per capita(a)
| Produced assets|
| Financial assets|
| with ROW(b)|
| Total assets|
| Total liabilities|
| to ROW(b)|
| Net worth|
|(a) In real/volume terms. Reference year 1999-2000.Components may not sum to totals|
(b) ROW = rest of the world.
| Source: Australian System of National Accounts.(SEE FOOTNOTE 1)|