Record Wealth! Population growth slows

Financial Accounts; Population

• 

  Australia’s wealth at record levels.

  Household wealth stood at a record $7,718.5 billion at the end of September, up $122.5 billion or 2.0 per cent over the quarter. In per capita terms, wealth rose to a record $327,267 in the September quarter, up $3,906 over the quarter.

• Households held a record $877.6 billion in cash and deposits at the end of September. Cash and deposit holdings represented 22.7 per cent of financial assets, above the decade average of 20 per cent.
• Population: Australia’s population grew by 68,400 people over the June quarter to 23,490,700. Annual population growth eased from 1.69 per cent to 1.59 per cent. Population growth is above decade averages in just NSW (23 per cent above decade averages) and Victoria (10 per cent above decade averages).
• Baby boom: In the year to June, 300,900 babies were born, easing from the further from the record 312,200 babies born in the year to September 2013. A total of 212,700 people migrated to Australia over year to June, well off the low of 172,100 in the year to December 2010.

What does it all mean?

• The old adage is that it is time in the market, not market timing. And that adage certainly applies to the wealth of Australians. Not only has household wealth levels lifted to fresh record highs but generational-low interest rates are also reducing borrowing costs across an array of sectors. The global financial crisis caused the biggest ever drop in wealth for Australian households, however wealth levels have been repaired over the past couple of years and have hit new highs. In short, we aren’t as badly off as it may seem. Average financial wealth per person stands at just over $327,000.
• Australia’s financial wealth lifted by over $122 billion in the September quarter. Interestingly the improvement in wealth levels and low interest rate environment over the past year has supported a lift in consumer activity. Interestingly almost 23 per cent of total household assets are being held in cash and deposits – well above the decade average of 20 per cent.
• As the Reserve Bank has highlighted on many an occasion, the improvement in household balance sheets certainly bodes well for future spending. And given that a low interest rate environment is likely to be part of the economic landscape over the coming year, it is likely to see households continue to invest in other asset classes and spend a little bit more freely.
• The strength in share markets has certainly been the key driver of the turnaround in wealth and more importantly the pickup in wealth is expected to continue. CommSec expects an ongoing improvement in wealth over coming quarters. The cheap cost of debt will support Corporate Australia and over the coming year CommSec expects Aussie businesses (outside of mining) to feel more confident to ramp up investment plans.
• Australian superannuation funds are holding well over 1½-times the ‘normal’ proportion of money in defensive assets like cash and bank deposits. That is not to say that super funds have not been investing in equity markets, rather that equity investments have been less than the cash inflows recorded by fund managers. The risk for fund managers is being caught with too much money on the sidelines while equity markets track higher. With term deposit rates offering lower returns than growth assets, it is likely pension funds will allocate a larger proportion of inflows to listed property funds and equity markets
• Population growth is healthy although in recent quarter it has drifted sideways – largely due to a slowdown in migration. Importantly population growth is still amongst the fastest across the OECD nations and as such more people coming to Australia means greater demand for houses, cars and retail items. Clearly faster population growth is good news for builders and retailers.
• Some people aren’t convinced that faster population growth is a good thing. It is all about striking the right balance. If we need more workers and we can’t get them locally, it makes sense that we bring them in from abroad. It is vital that supply and demand for workers is brought into balance.
• An ongoing lift in migration is also positive from a longer-run point of view in that it flattens out the ageing profile. We will need more in the way of younger people over time to support the growing ranks of pensioners.

What do the figures show?

Financial Accounts:

• Total household wealth (net worth) stood at a record $7,718.5 billion at the end of September, up $122.5 billion or 2.0 per cent over the quarter. In per capita terms, wealth rose to a record $327,267 in the September quarter, up $3,906 over the quarter.
• In real terms, the value of land and dwellings rose by $69.6 billion in the September quarter while financial assets rose by $9.4 billion. Net saving plus real wealth rose by $117.4 billion in the quarter.
• Households held a record $877.6 billion in cash and deposits at the end of September. Cash and deposit holdings represented 22.7 per cent of financial assets, above the decade average of 20 per cent.
• Pension fund (superannuation fund) assets rose by $23.1 billion to $1,681.7 billion in the September quarter. Cash and deposits stood at 15.9 per cent of financial assets, still well above the long-term average of 9.3 per cent.
• Australian non-financial private companies held $408.2 billion in cash and deposits at the end of September. Cash and deposits were 41.3 per cent of all financial assets in the quarter, up from 41.1 per cent of financial assets in the June quarter but below the 22-year high of 43.6 per cent recorded in the December quarter 2011. The long-term average is 37.8 per cent.

Population Statistics:

• Australia’s population expanded by 364,900 people over the year to June 2014 to 23,490,700 people. Overall, Australia’s population growth rate eased from 1.69 per cent to 1.59 per cent. Australia’s population grew by 68,400 people over the June quarter. Population growth hit a 5-year low of 1.39 per cent in the year to March 2011 before lifting to 1.78 per cent in December 2012 and has since eased in subsequent quarters.
• A total of 212,700 people migrated to Australia over year to June, well off the low of a gain of 172,100 in the year to December 2010. The record high was 315,700 in-bound migrants over the year to December 2008.
• There were 300,900 babies born in the past year, just shy of the record 312,200 births in the year to September 2013. And deaths (148,600) held just shy of the record highs reached in September quarter 2012.
• Over the past year population growth was the strongest in Western Australia (2.16 per cent) followed by Victoria (1.86 per cent), Queensland (1.52 per cent), NSW (1.47 per cent), the ACT (1.23 per cent), Northern Territory (1.05 per cent), South Australia (0.91 per cent), and Tasmania (0.32 per cent).
• Population growth is above decade averages in just NSW (23 per cent above decade averages) and Victoria (10 per cent above decade averages). Population growth has lifted for 8 straight quarters in Tasmania after hitting 12 year lows in September 2012.
• The Australian Bureau of Statistics releases the Financial Accounts publication each quarter. The data covers assets, liabilities and financial flows for the key sectors of the economy. Figures on financial wealth help reveal the true state of household finances.
• Demographic Statistics are issued by the Bureau of Statistics each quarter. The figures include estimates of births, deaths, in-bound and out-bound migration movements and estimates of population change by State.
• The Australian Bureau of Statistics (ABS) and Federal Treasury release the Modellers’ Database each quarter. The ABS notes: “the Modellers’ Database consists of over 500 quarterly times series constructed from the NIF and TRYM econometric models. They are useful to economists, econometricians, financial analysts and students.
• Household and company balance sheets remain strong, and it is likely that more money will be put to work in the low interest rate environment over the coming year.
• The Reserve Bank would be hoping that the lift in wealth levels continue to entice consumers and businesses to spend a little bit more freely – driving activity and helping to absorb the weakness in mining investment. Interest rates are unlikely to move in the first half of 2015.
• The ongoing lift in population growth is good news for a raft of Australian companies. Governments must ensure that our infrastructure expands in line with our population.

What is the importance of the economic data?

• The Australian Bureau of Statistics releases the Financial Accounts publication each quarter. The data covers assets, liabilities and financial flows for the key sectors of the economy. Figures on financial wealth help reveal the true state of household finances.
• Demographic Statistics are issued by the Bureau of Statistics each quarter. The figures include estimates of births, deaths, in-bound and out-bound migration movements and estimates of population change by State.
• The Australian Bureau of Statistics (ABS) and Federal Treasury release the Modellers’ Database each quarter. The ABS notes: “the Modellers’ Database consists of over 500 quarterly times series constructed from the NIF and TRYM econometric models. They are useful to economists, econometricians, financial analysts and students.

What are the implications for interest rates and investors?

• Household and company balance sheets remain strong, and it is likely that more money will be put to work in the low interest rate environment over the coming year.

• The Reserve Bank would be hoping that the lift in wealth levels continue to entice consumers and businesses to spend a little bit more freely – driving activity and helping to absorb the weakness in mining investment. Interest rates are unlikely to move in the first half of 2015.

• The ongoing lift in population growth is good news for a raft of Australian companies. Governments must ensure that our infrastructure expands in line with our population.