RBA: Wealth recovers but still well below peak

By Leith van Onselen

The Reserve Bank of Australia (RBA) Financial Stability Review (FSR), released earlier today, contains some interesting data on Australian real household wealth, which has rebounded 3.5% over the past year, but remains some 6.5% below the peak level reached in 2007:

Real net worth per household rose by an estimated 31/2 per cent over the year to March 2013, to be about 6½ per cent below its 2007 peak. Most of the rise was in the financial assets component; continued net inflows into deposits and superannuation were accompanied by positive valuation effects associated with the recovery in share prices, particularly since the middle of 2012. There has also been a recent pick-up in the value of housing assets, with the average dwelling price rising by around 4 per cent since its trough in May 2012. After the weakness of the past few years, there are some signs that a recovery in housing markets now seems to be underway in most capital cities, with auction clearance rates and rental yields increasing throughout 2012 and in 2013 to date. Assuming household credit growth remains subdued, the recovery in dwelling and share prices is likely to reduce the household debt-to-assets ratio.

The RBA also notes that households remain fairly cautious about their finances, still favouring the safety of bank deposits over risk assets:

As yet there is little sign that the recent recovery in asset prices has encouraged households to shift away from their more cautious financial behaviour of recent years or to make less conservative investment choices. Data for the September quarter 2012 (the latest data available at the time of publication) showed a further net outflow from households’ direct equity holdings over the past year, albeit less than in recent years, while flows into deposits remained close to their decade average (Graph 3.15). More recent survey data show most households continue to favour deposits as the ‘wisest place’ for their savings.