Biggest lift in wealth in 11 years

Healthcare leads job gains in quarter
Finance & Wealth; Jobs by industry; Business conditions

Wealth: Total household wealth (net worth) rose by 4.3 per cent to a record high $12,033.5 billion in the December quarter to be up 7.0 per cent on a year ago. It was the biggest quarterly gain in wealth in 11 years.

Average wealth: Average (per capita) household wealth rose by $19,028 (4.2 per cent) in the December quarter to $467,709.

Employment by industry: In seasonally adjusted terms, employment rose by 157,300 in the three months to February. Jobs rose in 11 of the 19 major industry sectors. Over the 12 months to February 2021, 4,900 jobs were created with jobs up in 11 of 19 sectors.

Business Conditions: The Bureau of Statistics has provided an update on Aussie business conditions.

The wealth data is important as a guide to future spending. The data on employment by industry gives insights into which industries are growing the fastest as well as insights on the performance of the broader economy.

What does it all mean?

• Feeling rich? Not only did household wealth hit record highs at the end of 2021, the lift in wealth in the quarter was the biggest recorded in 11 years. No wonder that people are feeling more confident and spending. And we can trace the gain in wealth to massive government and central bank stimulus.

• Importantly, the value of houses and listed shares continue to rise, meaning fresh highs for wealth will be recorded this quarter.

• New data confirms that job numbers are back at record highs. And while JobKeeper is to end next week, the good news is that job vacancies are at 9-year highs, according to yesterday’s data from the National Skills Commission.

What do the figures show?

Financial Accounts: December quarter

• Total household wealth (net worth) rose by $501.5 billion or 4.3 per cent to a record high $12,033.5 billion in the December quarter to be up 7.0 per cent on a year ago. It was the biggest quarterly gain in wealth in 11 years.

• Average (per capita) household wealth rose by $19,028 (4.2 per cent) in the December quarter to $467,709 to be up 6.6 per cent over the year.

• Household assets rose by 3.7 per cent in the December quarter and non-financial assets rose by 3.1 per cent while financial assets rose by 4.7 per cent.

• The Bureau of Statistics noted (media release): “Residential assets contributed 2.2 percentage points to the quarterly growth in household wealth, followed by superannuation balances and directly held shares, at 1.4 and 0.5 percentage points.”

• “The growth in residential assets was seen across both owner-occupier and investor housing in the December quarter. Owner-occupier housing loans grew 1.9 per cent, which was the strongest growth seen in four years, while investor housing loans grew 0.4 per cent, which was the first positive growth recorded in the past two years.”

• Households held a record $1,322.6 billion in cash and deposits at the end of December. Cash and deposit holdings represented 21.6 per cent of financial assets. The share of cash and deposits stands near the 21.5 per cent average since the global financial crisis and long-run average of 21.4 per cent.

• Households held $1,121.4 billion in shares, up 5.7 per cent in the December quarter. Listed share holdings were 18.3 per cent of all financial assets in the December quarter, up from 18.1 per cent in the December quarter, but below the 19.5 per cent average since the global financial crisis as well as the long-run average of 22.1 per cent.

• Pension fund (superannuation fund) assets rose by $159.8 billion to $2,410.9 billion in the December quarter. Cash and deposits stood at 9.6 per cent of assets, below the 12.2 per cent average since the global financial crisis, but above the long-term average of 9.2 per cent.

• Foreigners held a record $712.9 billion of Aussie listed shares in the December quarter, up by $85.4 billion in the quarter. Foreigners held 31.7 per cent of total listed shares, below the 32.5 per cent average since the global financial crisis and also below the long-term average of 34.8 per cent.

• Aussie businesses (non-financial corporations) lifted cash and deposits by $9.4 billion to a record $741.4 billion in the December quarter (44.4 per cent of assets).

• Corporate net worth (non-equity financial assets less loans) rose by $13.3 billion to a record $182.3 billion.

Jobs by industry

• In seasonally adjusted terms, employment rose by 157,300 in the three months to February. Jobs rose in 11 of the 19 industry sectors.

• Over the 12 months to February 2021, 4,900 jobs were created. A record 13.017 million people are employed.

• Over the three months to February, the number of jobs rose by the most in Health Care and Social Assistance (up 57,900); Manufacturing (up 54,900); and Retail trade (up 37,700). Main job losses were in Administrative and Support Services (down 66,900) and Public Administration and Safety (down 31,600).

• Over the year to February, 11 out of 19 sectors created jobs. Main gains were by Retail Trade (up 77,600); Professional, Scientific and Technical Services (up 57,100) and Transport, Postal and Warehousing (up 25,600). Main job losses were in Accommodation and Food Services (down 86,300).

• Health Care and Social Assistance remains the biggest employer with 1.81 million employees (13.9 per cent of the total), followed by Retail Trade (1.32 million jobs or 10.2 per cent), Professional, Scientific & Technical Services (1.23 million or 9.4 per cent) and Construction (1.15 million or 8.9 per cent).

What is the importance of the economic data?

• The Australian Bureau of Statistics releases the Finance and Wealth 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 and corporate finances.

• The Australian Bureau of Statistics (ABS) provides detailed labour market figures one week after releasing ‘top level’ statistics of employment & unemployment levels across states and territories. The detailed data is useful in identifying broader underlying trends and instructive about the health of the economy.

What are the implications for investors?

• There is cash everywhere. Both Aussie families and businesses are enjoying record net worth or wealth. Aussie consumers are spending. Aussie businesses need to follow the lead and take advantage of record fiscal and monetary stimulus – it won’t last forever.

• Businesses will have to decide on paying more dividends to shareholders, investing more in the company’s operations or turning attention to mergers and acquisitions.

Published by Craig James, Chief Economist, CommSec