Household Wealth Falls – Mortgage Business

Household wealth fell for the first time since the start of the pandemic, coinciding with cost of living pressures and rising interest rates.

The latest data from the Australian Bureau of Statistics revealed that household wealth fell by 3.3% ($484 billion) in the June quarter of 2022 to $14.4 trillion.

Despite declining household wealth, household deposits rose 0.5% ($7.4 billion) in the quarter, driven in part by households hoarding $311.9 billion in cash and cash. in deposits since the start of the pandemic.

Total credit demand fell from its record high last quarter (which was dominated by significant corporate restructuring), but remained elevated at $134.9 billion.

The strength was led by households ($53.1 billion), government ($44.9 billion) and other private non-financial corporations ($25.4 billion).

Household demand for credit was the second-highest on record, reflecting continued activity in the housing market for loans to homeowners and investors, the bureau said.

National government credit demand ($26.0 billion) was driven by bond issues to finance defense equipment and capital transfers to state governments for natural disaster relief payments .

State and local government credit demand ($18.8 billion) was driven by loans for investment in road and rail infrastructure and buildings for health and education.

Credit demand from other private non-financial corporations was fueled by loans of $18.0 billion.

In addition, favorable growing conditions in the agricultural sector led to higher investment in machinery and equipment, and car rental companies restocked their fleets as interstate travel increased demand for car rental. cars.

Given house prices have fallen from their peak, with the latest data from the Australian Bureau of Statistics (ABS) showing the average price of residential housing fell by $18,900 to $921,500 in the three months to June , and economists expect falls of up to 20% by the end of 2023.

AMP economist Diana Mousina explained that since 65% of wealth is tied to housing, a decline in house prices will contribute to a “negative wealth effect”.

As consumer spending ‘holds steady for now’ due to high accumulated household savings, prepayments on housing, a shift in spending from goods to services and lags between rising interest rates interest rates and changes in housing debt payments – this won’t last forever, Ms Mousina said.

ABS data revealed residential property prices fell for the first time in two years, contributing 1.1 percentage points to the overall drop in household wealth.

Katherine Keenan, head of finance and wealth at ABS, said the drop in household wealth also reflected sharp price declines in domestic and overseas stock markets.

Mitigating the slowdown was $38.0 billion in pension contributions reflecting continued strength in the labor market and the typical strong personal contributions seen at year-end.

[Related: Fall in house prices sparks ‘negative wealth effect’]

Household wealth falls

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Last update: September 30, 2022

Posted: October 03, 2022

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