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Economics | September 24 2015

Aussies have never been wealthier Financial Accounts; Population Total household wealth (net worth) stood at a record $8,416.8 billion at the end of June 2015, up $225.5

billion or 2.8 per cent over the quarter. In per capita terms, CommSec estimates that wealth rose to a record $353,881 in the March quarter, up $8,464 over the quarter.

Foreign holdings of Australian shares fell from record highs in the June quarter, down by $18.5 billion to $747 billion. Foreigners still held 46.2 per cent of Australian listed shares at the end of June, well above the long-term average near 42.5 per cent.

Population: Australia’s population grew by 93,942 people over the March quarter to 23,714,272 – the smallest March quarter increase since 2006. Annual population growth stands at 1.35 per cent – the slowest rate in nine years.

Victoria leads: Victoria continues to maintain the highest annual rate of population growth in the nation (1.68 per cent). The last time that occurred was 1888.

The wealth data is a guide to future consumer spending intentions so is important for retailers. The population figures are important for companies exposed to home building and consumer spending.

What does it all mean? We’ve been saying it consistently quarter after quarter but it still remains the case – Australians have never been

wealthier. Assets continue to rise, especially underpinned by higher home prices. And amazingly financial debt – in real terms – has recorded the biggest fall on record. Clearly the balance sheets of Aussie households are in good shape. And higher wealth levels may point to higher spending ahead.

But while wealth is at record highs, companies and super funds still have cash holdings well above long-term averages. Pension (superannuation) funds hold almost 15 per cent of assets in cash, well above the long-term average near 9 per cent.

Population growth has continued to slow – in fact now growing at the slowest annual pace in nine years. If population is growing near 1.3 per cent, we will need productivity growth near 1.7 per cent to maintain the “speed

Economic Insights

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Economic Insights: Aussies have never been wealthier

limit” of the economy at 3 per cent. As the Reserve Bank has intimated, the speed limit of the economy has probably come down to a rate closer to 2.75 per cent.

Victoria is still the population leader. You have to go back to 1888 to find a time when Victoria held the position of the state with the fastest population growth. But only NSW now has an annual population growth rate above long-term averages – important in absorbing the record amount of homes being built.

The latest data confirms a key point – just under half of Australia’s listed shares are held by foreign investors. And that is important. Because it highlights the weight that Aussie dollar fluctuations and global relativities play in movements on the domestic sharemarket.

What do the figures show? Financial Accounts:

Total household wealth (net worth) stood at a record $8,416.8 billion at the end of June 2015, up $225.5 billion or 2.8 per cent over the quarter. In per capita terms, CommSec estimates that wealth rose to a record $353,881 in the June quarter, up $8,464 over the quarter.

In real terms, the value of land and dwellings rose by $177 billion in the June quarter offsetting an $86 billion fall in financial assets. Net saving plus real wealth rose by $132.1 billion in the quarter.

Household financial liabilities fell by $22.4 billion in the June quarter in real terms – the biggest decline on record.

Households held a record $920.0 billion in cash and deposits at the end of June. Cash and deposit holdings represented 21.8 per cent of financial assets, up from a 6½ year low of 21.6 per cent in the March quarter but below the long-term average of 22.3 per cent.

Pension fund (superannuation fund) assets fell by $27.5 billion to $1,825.8 billion in the June quarter – the first fall in almost four years. Cash and deposits stood at 14.7 per cent of financial assets, still well above the long-term average of 9.5 per cent and up from 14.5 per cent in the March quarter.

Foreign holdings of Australian shares fell by $18.5 billion in the June quarter, down from a record $765.5 billion to $747.0 billion. Foreigners held 46.2 per cent of Australian listed shares at the end of June, up from 44.4 per cent in the March quarter and above the long-term average of 42.5 per cent.

Australian non-financial private companies held $433.3 billion in cash and deposits at the end of June. Cash and deposits were 40.2 per cent of all financial assets in the quarter, up from 40.1 per cent of financial assets in the March quarter but above the long-term average is 37.9 per cent.

Population Statistics:

Australia’s population expanded by 315,952 people over the year to March 2015 to 23,714,272 people. Overall, Australia’s population growth rate eased from 1.44 per cent to a 9-year low of 1.35 per cent.

Australia’s population grew by just 93,942 people over the March quarter– the smallest quarterly March quarter increase for nine years.

A total of 173,000 people migrated to Australia over year to March, the lowest since the year to December 2010.

There were 298,400 babies born in the past year, down from the record 312,200 births in the year to December 2013. But deaths (155,500) were at a record high.

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Economic Insights: Aussies have never been wealthier

Over the past year population growth was the strongest in Victoria (1.68 per cent), followed by Western Australia (1.39 per cent), NSW (1.35 per cent), Queensland (1.30 per cent), the ACT (1.26 per cent), South Australia (0.83 per cent), Tasmania (0.28 per cent) and Northern Territory.

Population growth is above decade averages in just NSW (7.1 per cent above decade averages) Annual population growth eased in all states except Tasmania and the ACT in the past quarter.

What is the importance of the economic data? The Australian Bureau of Statistics releases the Financial Accounts publication each quarter. The data covers

assets, liabilities and financial flows for the key sectors of the economy. Figures on financial wealth help reveal the true state of household finances.

Demographic Statistics are issued by the Bureau of Statistics each quarter. The figures include estimates of births, deaths, in-bound and out-bound migration movements and estimates of population change by State.

What are the implications for interest rates and investors? Cash levels remain high. Eventually they will be put to work in high-yielding assets but companies and super

funds don’t appear in a rush. However household cash holdings are more “normal”.

The latest data has few implications for interest rate settings. But if population growth continues to ease, the Reserve Bank may need to make further adjustments to economic growth assumptions.

High wealth levels provide a solid plank of support for household spending – a fact that should hold the economy in good stead for the next year.

Craig James, Chief Economist, CommSec Twitter: @CommSec