Household wealth tumbles

The latest data from the Australian Bureau of Statistics found household wealth fell 3.3 per cent ($484 billion) in the June quarter 2022 to $14.4 trillion.

Despite the fall in household wealth, household deposits grew by 0.5 per cent ($7.4 billion) during the quarter, partly due to households that have accumulated $311.9 billion in currency and deposits since the start of the pandemic.

Total demand for credit fell from its record high last quarter (which was dominated by a large corporate restructure) but remained elevated at $134.9 billion. 

The strength was driven by households ($53.1 billion), government ($44.9 billion) and other private non-financial corporations ($25.4 billion).

Household demand for credit was the second highest on record, reflecting ongoing activity in the property market for both owner-occupier and investor loans, the bureau said.

National government demand for credit ($26.0 billion) was driven by bond issuances to fund defence equipment and capital transfers to state governments for natural disaster relief payments. 

State and local government demand for credit ($18.8 billion) was driven by loans for investment in road and rail infrastructure, and buildings for health and education.

Other private non-financial corporations’ demand for credit was driven by $18.0 billion of loans. 

In addition, favourable growing conditions in the agricultural sector led to strength in machinery and equipment investment and car rental businesses restocked their fleets as interstate travel increased demand for car hire.

Given house prices have fallen from their peak, with latest data from the Australian Bureau of Statistics (ABS) showing the mean price of residential dwellings fell $18,900 to $921,500 over the three months to June, and economists expecting falls up to 20 per cent by the end of 2023.

AMP economist Diana Mousina explained that given 65 per cent of wealth is housing-related, a fall in home prices will contribute towards a “negative wealth effect”.

While consumer spending is “holding up for now” due to high household accumulated savings, housing prepayments, a shift in spending from goods to services and lags from interest rate rises to changes in housing debt payments — this won’t last forever, Ms Mousina said.

ABS data revealed residential property prices fell for the first time in two years, which contributed 1.1 percentage points to the overall decline in household wealth.

Katherine Keenan, head of finance and wealth at the ABS, said the drop in household wealth also reflected the large price falls in domestic and overseas share markets.

Softening the downturn was $38.0 billion in contributions to superannuation that reflect ongoing strength in the labour market and the usual strong personal contributions seen at the end of the financial year.

[Related: Fall in house prices sparks ‘negative wealth effect’]