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WEALTH AND SPENDING
DEFINING LOW, MIDDLE AND HIGH WEALTH HOUSEHOLDS
Household wealth (also known as net worth) is the value of assets, such as property and investments, minus liabilities, like loans and credit card debts.
In this section, to compare different wealth levels:
DIFFERENCES IN HOUSEHOLD SPENDING FOR LOW, MIDDLE AND HIGH WEALTH HOUSEHOLDS
For most Australians, both income and wealth tends to increase over the life course, and then decrease after retirement, as households have less income after they stop working, and start to draw on stores of wealth, such as superannuation. The average age of the household reference person in low wealth households was 42 years compared to 54 years middle wealth households and 58 years high wealth households.
Spending patterns are different for low, middle and high wealth households, particularly spending on housing and health.
Current housing costs comprised almost one third (30%) of total spending on goods and services for low wealth households, compared to 19% for middle wealth households, and 14% for high wealth households. For many households, the dwelling they live in is their biggest asset. Low wealth households are likely to be renting, while middle wealth households are likely to have a mortgage that offsets the value of their home. For these reasons, low and middle wealth households have higher housing costs, including rent or interest on mortgage repayments. Households with high net worth are more likely to own their own home with little or no mortgage outstanding on their own home, and therefore have much lower housing costs. Only 5% of low wealth households own their own home (either outright or with a mortgage), compared to 90% and 96% of middle and high wealth households.
In line with the average age of household reference person discussed above, household spending on medical care and health expenses was higher for high wealth households, accounting for 3% of spending on goods and services in low wealth households, 6% in middle wealth households and 7% for high wealth households. In general, the proportion of household spending on recreation, household furnishings and equipment, clothing and footwear, and miscellaneous goods and services also rose as net worth rose, while the proportion spent on tobacco, communications, and domestic fuel and power was lower.
Graph 1 - PROPORTION OF WEEKLY HOUSEHOLD SPENDING ON GOODS AND SERVICES, by low, middle and high wealth quintiles, 2015-16
Source(s): Household Expenditure Survey, 2015-16
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