Expert reviewed • 22 November 2024 • 7 minute read
Wealth, unlike income, represents the total value of assets owned by an individual or household, minus any liabilities. Understanding the sources of wealth is crucial for analysing economic inequality and developing policies to promote a more equitable distribution of resources. This article explores the various sources of wealth, discussing economic terms, arguments, and the most current statistics, supported by detailed graphs.
The major sources of wealth in Australia are as follows:
Property remains the cornerstone of wealth for most Australian households, with residential real estate valued at AUD 9.8 trillion in 2023. The homeownership rate stood at 66% in 2021, while 20% of households owned investment properties. Factors such as location, market trends, interest rates, and urban development significantly influence property wealth. Recent years have seen notable fluctuations, with a surge in property prices during 2020-2021 due to low interest rates and increased demand, followed by a cooling market in 2022-2023 as interest rates rose.
Superannuation has become a crucial and expanding source of wealth for Australians, with total assets reaching $3.4 trillion in 2023. As of 2021, the average superannuation balance stood at $161,834 for men and $139,049 for women, highlighting a gender disparity. Key factors influencing superannuation wealth include contribution rates, investment returns, fees and charges, and policy changes such as early release schemes during COVID-19. Recent developments in the sector include an increase in the compulsory contribution rate to 11% from July 2023 and a growing emphasis on ethical and sustainable investments within super funds, reflecting changing investor priorities and market trends.
Financial assets, excluding superannuation, form a significant component of Australian household wealth, totalling approximately $1.8 trillion in 2023. This category encompasses shares, bonds, savings accounts, and other financial investments, with 35% of adult Australians directly owning shares as of 2021. The main types of financial assets include equities, bonds and fixed-income securities, cash and deposits, and managed funds. The Australian Securities Exchange (ASX) exemplifies trends of growth, with its total market capitalisation reaching $2.5 trillion in 2023, contributing significantly to household wealth accumulation, particularly among higher-income groups.
Business equity represents a substantial source of wealth for many Australians, with approximately 15% of households holding such assets in 2021. As of 2022, Australia reported 2.5 million actively trading businesses, highlighting the role of entrepreneurship in the economy. The value of business equity is influenced by factors such as industry sector performance, economic conditions, innovation and technology adoption. Recent trends include a surge in new business registrations during and after the COVID-19 pandemic, as well as an increasing focus on digital and technology-driven enterprises. Small and medium-sized enterprises (SMEs) play a particularly crucial role, accounting for over 50% of total private sector employment in 2023 and contributing substantially to household wealth.
Other assets encompass a diverse range of physical possessions that contribute to household wealth in Australia. This category primarily includes vehicles, household furnishings and equipment, collectibles such as art, jewellery, and antiques, as well as livestock and crops for rural households. Recent trends have seen significant shifts in the value of these assets, notably the increased value of used vehicles due to supply chain disruptions in 2021-2022.