HOUSEHOLD WEALTH

While people living in low income households are less likely to have sufficient command over economic resources, income is not the only economic resource that relates to household economic wellbeing. Households that have low levels of income may have relatively high levels of wealth that can be utilised to extend consumption possibilities. For example, households with retired members may have low income levels but relatively high levels of wealth through the ownership of their home and other investments.

Wealth is an important household economic resource in three ways. Firstly, living costs can be financed for a limited time by running down cash reserves, borrowing against assets or selling assets outright. Secondly, wealth can generate income, such as rental income from an investment property or interest from savings. Finally, wealth may reduce household living costs; for example, those who own their own home outright will, on average, have lower housing costs than those paying a mortgage or rent.

Household sector

Householders' wealth holdings have been directly measured by ABS in 2003-04, 2005-06 and 2009-10. However, the ABS National Accounts data provide an extended time series on total household sector net worth, which includes the wealth of householders as well as the wealth of people in non-private dwellings and the wealth of non-profit institutions serving households, such as churches, sporting and social clubs (see glossary). Over the previous two decades there has been a sharp increase in total household sector net worth per capita, increasing from $76,000 in 1988-89 to $232,000 in 2008-09. However, between 2007-08 and 2008-09, total household net worth per capita displayed its first year-on-year decrease over the 20 year period, dropping from $248,000 to $232,000.

Household net worth

Household wealth is expressed by net worth, which is measured by the value of household assets minus the value of liabilities.

The 2003-04 and 2005-06 cycles of the ABS Survey of Income and Housing collected a range of detailed information on household assets and liabilities that allows a more detailed disaggregation of householders' net worth. In 2005-06, the mean value (in real dollars) of household assets was $655,300 and the mean value of household liabilities was $92,500, resulting in average household net worth of $563,000. This was 14% higher than in 2003-04 ($494,000).

However, in 2005-06 the median household net worth measured in the ABS Survey of Income and Housing, at $340,000, was substantially lower than average household net worth. The difference between the mean and median values of net worth reflects the asymmetric distribution of wealth among households, where a relatively small proportion of households had high net worth and a relatively large number of households had low net worth. For example, in both 2003-04 and 2005-06 the 20% of households with the lowest wealth accounted for just 1% of total household net worth at an average of $27,000. In comparison, the wealth of households in the highest net worth quintile accounted for 59% of total household net worth in 2003-04 and 61% in 2005-06, at an average of $1.7 million per household (ABS 2007a).