According to the June quarter's national accounts, Australia is in the midst of a per capita growth recession, with falls of 0.3% in each of the March and June quarters. However, the financial national accounts, released on Thursday, tell a very different story with the country and Australians getting wealthier. It's all down to the joys of statistics.
The Australian Bureau of Statistics says the national financial accounts show that household wealth rose for the third straight quarter in the three months to June, up 2.6% (or $379 billion) from the three months to March when it rose 2.1% or $299 billion.
The ABS said that wealth per capita grew 2.1% (or $11,442) to $567,632 per person at June 30, much faster than the 1.6% growth in the three months to March. That saw per capita wealth rise $13,678 over 2022-23. However, the June quarter per capita figure was still less than the $574,807 reported for the March 2022 quarter (when the population was smaller).
So the first six months of 2023 have seen household wealth grow by a total of $678 billion, but at the same time, economic growth per capita has gone backward in the same period.
From the ABS figures, the rise in household wealth has been driven in particular by rises in house and property prices and higher superannuation. The fall in per capita growth has been the result of weakening demand, inflation, and the impact of the dozen rate rises from the Reserve Bank.
After the fall in house and property prices in mid to late 2022 as a result of the RBA’s rate rises, property and house prices have turned around and recovered strongly this year, helped by a shortage of supply of existing and fewer new homes being built, plus still high levels of demand and the rapid rebound in immigration and the national population.
These pressures have pushed hard against the negative impact of all those rate rises and higher mortgage rates.
The ABS said that total household wealth was $15.1 trillion in the June quarter, 3.9% or $568 billion higher than at June 2022. That rise over the 2022-23 financial year compares well with the 2.1% rise in economic growth in the same time. Population growth was 2.2% thanks to the rebound in inbound migration.
Employment rose 3.1% in the year to June, which added to the higher wealth (because of more superannuation payments) and extra income to support property purchases.
The ABS says that higher prices for residential land and dwellings drove the increase in household wealth, contributing 2.1 percentage points to the overall quarterly growth of 3.9%, or well over half.
Dr. Mish Tan, ABS head of finance statistics, said: “Household wealth has grown alongside increasing house prices this year. Population growth has supported demand for housing while the supply of new and established dwellings to the market remained constrained.”
But he said that despite an improvement in household wealth, there were signs that household budgets were under strain in the June quarter. Household deposit accounts shrank by $6.0 billion, the first quarterly decline since June quarter 2007.
This was driven by an $18.0 billion decrease in transferable deposits, partly offset by a $12.0 billion increase in non-transferable deposit accounts such as savings and fixed-term deposits. The largest driver of the fall in household deposits was from unincorporated businesses.
“This was the first fall in deposit balances since the Global Financial Crisis and indicates that the household sector was tapping into cash reserves amid rising cost pressures,” Dr. Tan said.
He said this was consistent with the falling household savings ratio (3.2% in the June quarter, down from 8.1% in the same quarter of 2022), which is at its lowest level since June quarter 2008. Higher interest rates and income tax payable, paired with high consumer inflation, has reduced households’ savings buffers.
Demand for credit was weak - another sign of growing financial strains in the wider economy, though a big whack of debt repayments from the Federal government added to that impression.
The ABS data shows that total demand for credit of $38.1 billion "was the weakest since June quarter 2005,” thanks to households which borrowed $37.7 billion and state and local general government ($10.2 billion).
Private non-financial businesses’ demand for credit was just $851 million, while the Commonwealth government repaid $15.7 billion of its debt. That was because of record tax receipts and lower welfare transfers because of low unemployment.
The ABS said the federal government repaid $11.8 billion of Treasury bonds and $4.1 billion of short-term debt securities which matured during the quarter.