Friday, 2 October 2015

Live Long and Prosper

Australia is becoming richer by getting older.
Australian household net worth rose from an average of $764,500 in 2011-2012 to $809,900 in 2013-2014. Those under 35 have barely seen any increase. The old, in particular the over-45s, are getting richer faster than the young.

Older households are also a greater proportion of the sample, and of the population.

Social change is not a huge factor. Household composition remains fairly constant over this short period as ten years is not enough for couples to combine or separate en masse.

Australia had a concurrent property boom which would be easy to blame for the divergence, but the change in wealth composition across age groups reveals a more complex picture.

Financial assets, superannuation in particular, led gains across the age groups, propelled by a bull market. So much so that although property prices have risen, property's share of net wealth has remained fairly steady. What strikes me is the larger property loans that the under-45s have had to take out. Even younger cohorts seem to be giving up on loans and property altogether.

From a policy perspective, despite the young's complicity in their heavier burdens, we should question the distribution of social welfare. 11.7% of 35-44 year old households rely on government payments for more than half their income. This figure becomes 11.2% for 45-54s, and 17.7% for 55-64s.

The over-45s have hit the hat-trick of having bought property before crippling loans were required, becoming a dominant political constituent, and seeing their fortunes rise through stable employment and the timely enactment of compulsory superannuation. Naturally, in any lucky country some will be luckier than others. The nation needs to decide whether to compound their advantage.


  1. Don't worry, Mr Wee! It's all paper wealth built on nothing. Australia has seen the destruction of real spending power and productivity unprecedented for the last 50 years. An epic recession/depression is approaching, and those wealth figures will be shown to be the mirage that they really are.

    1. Nice insight. As nominal as wealth is, many still rely on its exchange into necessities. The fair distribution of paper wealth is a conversation I believe we should have, as the erosion of spending power has not occurred evenly.