How Australia's wealth is split

Published in the Herald Sun, October 2011 by Karina Barrymore

Property, including the family home, is still the favourite place to build wealth for Australian households but superannuation has quickly become our biggest financial asset.

According to the latest Household Wealth Report from the Australian Bureau of Statistics, the average household has about 60 per cent of its wealth stored in property, with superannuation in second place, albeit well behind, at 14 per cent.

The huge property wealth also compares with just 4 per cent of assets in bank accounts and 2.6 per cent in shares.

"Outside the family home super is fast becoming the largest asset for households with significant tax benefits and increasing age pension age, many people are using super as a wealth accumulation vehicle for their retirement," Hewison Private Wealth director Glenn Fairbairn says.

"Australians are obviously not too concerned about putting all their eggs in one basket.

"Even for the richest 20 per cent of households, shares only account for 4 per cent of total assets.

Of particular concern for the poorest 20 per cent is that they have on average only $9500 of equity in their home."

Fortunes do vary greatly between rich and poor, the report finds.

While our poorest households have little property equity, retirement savings are already playing a much larger role for these people, who typically have little or no disposable income for extra investments or savings.

According to the ABS, the poorest 20 per cent of households have a higher than average proportion of their wealth tied up in super perhaps because it is compulsory and not able to be withdrawn - at 17 per cent of total assets, while richer households, which typically also have other investments, average only 15 per cent of their wealth locked up in superannuation.

Investment adviser and fund manager Wealth Within analyst Dale Gillham says the poorest 20 per cent of households are not necessarily low-income earners but include young households.

"It could be that a large percentage of them are actually people under age 25, who haven't had time yet to grow their wealth," Gillham says.

"In this young age group, a big percentage of income is spent on consumables or things other than investments, such as a car, furnishings and the latest electronic gadgets.

"However, the concern for the poorest 20 per cent of households is that their level of debt is up around 43 per cent of their assets, compared with the average of about 14 per cent.

"The sad thing is that Australians who don't work on building wealth early enough are at risk of getting stuck in the debt cycle by spending on things before they can really afford them.

"Buying a home with little or no deposit can turn out to be completely wrong for people who don't have the capacity to pay off the debt and they risk going backwards when property markets soften."