Shares of overall wealth held by the lowest 40%, middle 50% and highest 10% around 2018 (%)
Source: OECD (2021) Inequalities in household wealth and financial insecurity of households, OECD Policy Insight. Note: Households are ranked according to wealth.
The level of wealth inequality in Australia around 2018 (before the pandemic) was somewhat below the average among 28 wealthy nations surveyed by the OECD. The highest 10% of households ranked by wealth held approximately 45% of all wealth in Australia compared with an OECD average of approximately 50%.
The high level of home ownership and housing wealth in Australia is a major reason for this.
Household wealth per capita (2019 dollars)
While the COVID recession in March 2020 at first reduced household wealth through declines in share and housing prices, a combination of lockdowns, public income support, and low interest rates dramatically lifted household saving and wealth from mid-2020 through to December 2021. The largest contributor to this increase in wealth was a sharp rise in housing prices, as shown on this graph.
Cumulative increase in capital city dwelling prices 2017 – 2021
This graph shows that average capital city home purchase prices rose by 3% through 2020, despite dipping slightly in the recession. They then increased by 22% the following year to finish 24% above September 2017 values.
Share of indebted households with debt-to-annual income ratio above three
The Organisation for Economic Cooperation and Development (OECD) regards households in the lowest 40% by income with debt at least 3 times their annual disposable income as ‘over-indebted’ and therefore at-risk financially. Australia ranks 6th highest on this measure among 23 OECD countries, with 29% of low-income households over-indebted. Due to our high and rapidly growing home prices and relatively easy access to credit, Australian households are more indebted than in most other wealthy nations.
Interest rates from 2019 to 2021 (% per annum)
In April 2020 the Reserve Bank reduced its cash rate target to an historic low of 0.1%. Consequently, typical interest rates for new home loans fell to 2-3%. These and other interest rate reductions boosted investment in housing, increasing demand and putting strong upward pressure on house prices and housing wealth.
Gross household saving by income quintile
Between 2020 and 2021, the rate of saving by the highest 20% of households ranked by income rose by half (from 8% to 12% of disposable income), along with that of the middle 20% (from 2% to 3%). The average saving rate for the lowest 20% was less than 1% throughout this period.
Increase in wealth, by wealth group since 2003
During the sustained period of economic growth from 2003-04 to 2018-19, wealth inequality increased sharply: * The wealth of the highest 1% of households rose (after inflation) by an average of $6.8 million or 84%; * The wealth of the highest 10% rose by an average of $1.9 million or 65%; * That of the middle 30% rose by an average of $380,000 or 44%; * That of the lower 60% rose by just $45,000 or 20%. In the first 2 years of the pandemic (during 2019-20 and 2020-21 including the recession), wealth inequality declined slightly: * The wealth of the highest 1% of households rose by an average of $1.5 million or 10%; * The wealth of the highest 10% rose by an average of $530,000 or 11%; * That of the middle 30% rose by an average of $168,000 or 13%; * That of the lower 60% rose by an average of $43,000 or 16%. In the third year of the pandemic (2021-22, a year of economic recovery), wealth inequality declined further: * The wealth of the highest 1% of households rose by an average of…
Average wealth by wealth group ($)
Consistent with the findings of our last Inequality in Australia report, wealth is still very unequally distributed in 2021-22. *The highest 10% of households by wealth has an average of $6.1 million or 46% of all wealth. *The next 30% have an average of $1.7 million or 38% of all wealth. *The lower 60% has an average of $376,000 or 17% of all wealth.
Profile of wealth of each wealth group
There is a significant inequality in wealth between of the highest 10% and the lowest 60% people in Australia. This graph presents the wealth profiles of these groups. Of the wealth of the richest 10% in 2021: • A higher proportion was held in investment property (18%), shares, bonds and trusts (13%), and own-business assets (9%), compared with 8%, 3% and 2% respectively for the middle 30%; • A lower proportion was held in their homes (32%), superannuation (19%), deposits (5%), and durables (4%), compared with 50%, 21% and 9% respectively for the middle 30%. Of the wealth of the lower 60% in 2021: • Higher proportions were held in superannuation (23%), durables (17%) and deposits (8%), compared with 21%, 9% and 7% respectively for the middle 30%; • A similar proportion was held in their homes (48% compared with 50%, taking account of people who were not owner-occupiers); • Almost negligible proportions were held in investment property (4%), shares, bonds and trusts (1%), and…
Total return indices
Source: Reserve Bank of Australia (2021), Statement on Monetary Policy, August 2021.
Share prices in Australia and other countries in which Australians invest responded quickly to the recession, falling sharply. Over the following year they grew strongly - to end well above their average values from the beginning of 2020.