- Australia is $US443 billion poorer this year after fallen house prices and a depreciating dollar wiped the country’s wealth, according to the latest Credit Suisse report.
- This helped de-mint 124,000 Australian millionaires, as the country underwent the biggest wealth decline of any country this year.
- Despite this, it has managed to retain the second-highest median wealth in the world, and the fourth-highest average wealth, well above countries like the US and China which led the world in wealth creation last year.
In an Australia that values the everyday bloke — see Scott Morrison’s strained impression of one for proof — it might come as a surprise we’re a nation of millionaires.
A sustained property boom largely helped elevate the status of many of our countrymen and women to millionaires, on paper at least.
However, as prices drifted towards earth over the last 18 months, so too has the net worth of Australians. In 2019, the country lost some 124,000 millionaires according to this year’s Credit Suisse global wealth report and it’s not like they simply pulled up sticks and departed our shores.
“On the downside, Australia was the biggest loser, shedding $US443 billion due to a decline in house prices combined with currency depreciation against the US dollar,” Credit Suisse said in its report, noting that Australia lost more wealth this year than any other nation on earth.
It was led downwards by the value of the family home, the main asset for most households, which dropped as the market slumped. According to Credit Suisse data, that led to a 6.3% decline in home values across the country. Match that with a 5% decline of the Australian dollar against the US greenback and suddenly things aren’t looking so rosy.
It has led to the median wealth of Australians, once the highest in the world, to be overtaken by Switzerland, falling from $US191,453 to $US181,361. It’s also seen us drop from second to fourth place in average wealth — measured by the value of financial and real assets after subtracting debt.
“In the period since 2007 average wealth has stagnated in the world outside China and North America, although this is due in part to appreciation of the USD,” Credit Suisse said.
For Australia, this has resulted in little movement north in the last eight years, with average wealth just about remaining the same since 2011. Meanwhile, both China and the US took out the top honours throughout the list in terms of gross gains. The US, lifted by a roaring sharemarket, managed to add an astounding $US3.8 trillion of wealth, with China lagging behind in second with a gain of $US1.9 trillion.
Despite this, Australia still lays claim to 1.1 million millionaires, the ninth most in the world. This places it in the same company as Spain (0.9m), Canada (1.3m) and Italy (1.5m) and well behind the US (18.6m) and China (4.4m).
While a property rebound now appears to be underway in Australia, gains in prices still have a long way to go to return the market to its 2017 peak. Thankfully, the Australian dollar also seems to have found a floor for now at the 69 US cents level.
The report demonstrates the danger Australia faces with all its eggs in one basket. Earlier this month, analysis by Harvard showed that our economy is absurdly dependent on the mining economy at the cost of all other sectors. So too, have economists of all stripes expressed concern that Australia has bet the house — excuse the pun — on a property market susceptible to a housing bubble. Perhaps it’s time Australians began diversifying their investments.
Easy come, easy go after all.
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