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Aussies have never been this rich and we are about to get richer

Brendon Lau
Wealthy man with money raining down

Australians have never been this rich! Household wealth in the September quarter jumped to a record high, according to the latest data from the Australian Bureau of Statistics (ABS).

What’s more, we are set to get even wealthier in the current quarter as the drivers of wealth continue to extend gains in the last three months of 2019.

If you feel you are missing out, you probably are unless you’re invested in stocks. I’ll explain why later in this article.

The average Aussie is worth nearly $430k

The average Aussie is $10,698 richer and is worth $428,573.50 per person in the quarter, thanks to rebounding house prices and gain on the share market, noted the ABS.

Total household wealth jumped 3% (which is well above inflation) in the period to $10.9 billion, and is outpacing June’s quarter growth of 2.6%.

“Although growth in the share market moderated, it continued to build on gains seen earlier in the year, boosting the value of household shares held directly and through superannuation funds,” said ABS Chief Economist, Bruce Hockman.

“Residential real estate recorded its first real holding gain since December 2017.”

Share market adds to financial well being

The All Ordinaries (Index:^AORD) (ASX:XAO) index recorded an 1.8% increase in the third quarter of 2019 while the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) was up 0.6%.

Both indices increased further since the end of September with both sitting on an extra 1.5% gain. House prices have also extended its recovery and this means we can expect total wealth to increase further in the December quarter unless we get a market meltdown in the last few days of 2019.

What’s also boost wealth is falling interest rates on mortgages. The Reserve Bank of Australia cut rates three times this calendar year and is widely expected to lower the cash rate again early in 2020.

Still too debt ridden

Rising house prices and lower repayments mean the ratio of debt-to-real estate assets dipped 28.6% in the latest quarter from 29.2% in the June quarter.

The ABS noted that the decline reflects the strongest increase in the value of residential land and dwellings of 2.9% since December quarter 2016, combined with the weakest growth in mortgage debt of 1.1% since September quarter 2013.

No ticker tape parade

It’s a Pyrrhic victory though as Aussie households are still sitting on way too much debt compared to their income, which is struggling to grow.

This leads me to my next point – many Australians may not be feeling the wealth effect. The ABS data may be telling us that we have never been wealthier, but sentiment on the street paints a different picture with sluggish consumer discretionary spending.

Foolish takeaway

The problem is the way wealth is measured. House prices have a big influence on household wealth when many cannot benefit from without selling their homes.

This shows why investing in the share market is so important, particularly in this low wages growth environment.

Buying shares isn’t only for your superannuation. It’s a good place to put your savings and returns (dividends and capital) can make an immediate and direct impact on your everyday living standards.

This is perhaps something worth putting on your New Year’s resolution list.

The post Aussies have never been this rich and we are about to get richer appeared first on Motley Fool Australia.

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Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned.

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019