The wealth data below is important as a guide to future spending. The airfares data provides a guide on inflationary pressures as well as giving an insight into operating conditions for airlines.

Total household wealth (net worth) rose by 0.2% to $10,406.2 billion in the September quarter. Over the year to September, net worth rose by 3.4%. In per capita terms, however, wealth fell from $415,616 in the June quarter to $415,024 in the September quarter. Financial assets added 0.87% to household net worth, but land and dwellings detracted 0.56%. 

Foreigners held a record $613.8 billion of Aussie shares in the September quarter, up from $605.5 billion in the June quarter.

Discount airfares rose by 38.9% in December - the biggest monthly increase in six years - after falling by 3.7% in November. Discount fares are up by 11% over the year. In smoothed terms, discount fares rose 15.6% on a year ago.

What does it all mean?

The Finance & Wealth publication from the Bureau of Statistics contains the most complete figures on household finances. Aussie wealth remains elevated, but continues to ease on the back of falling home prices.

Despite the fall in national home prices over the quarter, losses were more than offset by gains in financial assets, such as Aussie shares, bonds, currencies and cash deposits. Households (and foreigners) have been increasing their allocation of financial assets this year.

On average, each Australian has net assets (assets less liabilities) of over $415,000, a total that has lifted by over $7,600 in the past year. And over the past five years per capita wealth has risen by almost $106,000 or 34%. It is clear that household balance sheets remain solid. 

 Looking ahead, per capita wealth may consolidate closer to $400,000 after significant gains over the past five years should home valuations continue to decelerate. Home prices are likely to fall further – especially in Sydney and Melbourne. And global share markets have become increasingly volatile on investor concerns about slowing global growth, rising US interest rates, tech valuation concerns, trade uncertainty and mounting geo-political risks. 

What do the figures show? 

Total household wealth (net worth) rose by 0.2% to $10,406.2 billion in the September quarter. Over the year to September, net worth rose by 3.4%. In per capita terms, however, wealth fell from $415,616 in the June quarter to $415,024 in the September quarter - below the record high of $416,258 in December 2017. Wealth is still up $7,627 (or 1.9%) over the year.

The ABS noted:Household net worth increased by 0.2% during September quarter 2018, slowing from the 0.6% growth last quarter. Financial assets were the largest contributor to the increase in household net worth, contributing 0.87% to growth. Other non-financial assets was the next largest contributor to growth in household net worth, contributing 0.02%. In contrast, land and dwellings, and liabilities detracted 0.56 and 0.11% from growth, respectively.” 

Households held a record $1,134.6 billion in cash and deposits at the end of September. Cash and deposit holdings represented 21.4% of financial assets, up from 21.2% in the June quarter, but below the 21.9% average since the global financial crisis and long-run average of 21.6%.

Households held a record $989.9 billion in shares (or 18.7%) of all financial assets in the September quarter, up from 18.6% in the June quarter, in-line with the average since the global financial crisis, but below the long-run average of 22.5%.

Pension fund (superannuation fund) assets rose by $40.0 billion to a record-high $2,289.35 billion in the September quarter. Cash and deposits stood at 10.7% of financial assets, below the 13.1% average since the global financial crisis, but above the long-term average of 9.4%.

Foreigners held a record $613.8 billion of Aussie shares in the September quarter, up from $605.5 billion in the June quarter. Foreigners held 31.3% of total listed shares, below the 31.2% average since the global financial crisis and long-term average of 32.9%.  

Airfares

The Bureau of Infrastructure, Transport and Regional Economics (BITRE) reports that discount airfares rose by 38.9% in December - the biggest lift in six years - after falling by 3.7% in November. Discount fares are up by 11% over the year. In smoothed terms, discount fares rose 15.6% on a year ago.

Restricted airfares increased by 2.2% in December after lifting by 0.7% in November. Restricted economy fares are up by 4.5% over the year. In smoothed terms, restricted economy fares increased by 7.3% on a year ago. 

Business airfares fell by 4.6% in December – the largest fall in over four years - after falling by 0.1% in November. Business fares are down by 4.1% over the year. In smoothed terms, business fares fell by 1.5% on a year ago.

What is the importance of the economic data?

The Australian Bureau of Statistics releases the Financial Accounts 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 finances.

The Bureau of Infrastructure, Transport and Regional Economics (BITRE) releases regular aviation data, including the Australian Domestic Airline Activity publication monthly and the Domestic Air Fares publication. The data provides insights on airline activity as well as trends in the broader Australian economy. If more people are flying, then it suggests businesses are more active and consumers are more confident.

What are the implications for interest rates and investors?

Household consumption remains a key uncertainty for Reserve Bank policymakers. Household income growth remains soft, but appears to have stabilised with wages gradually increasing. In this environment, consumers have been eating into their savings to maintain discretionary spending. 

The downward trend in the savings rate may reverse as households become increasingly risk averse, preferring bank deposits to property investments as home prices fall in some cities. But it is hoped that productivity growth will lift and consumers remain resilient, given still-solid jobs growth.  

More attention will be given to global share markets in 2019. After a stellar run culminating in bourses reaching decade (Australia) and record (US) high levels earlier this year, shares are under pressure. The S&P/ASX200 index is down over 6 per cent so far this year. 

And while the Reserve Bank’s key focus is on currency stability, price stability and “full employment”, Marion Kohler, Head of Domestic Markets Department, said today that the Reserve Bank pays close attention to the equity market in particular because it is a transmission channel for monetary policy. When interest rates go down, share prices tend to increase, and this increases the wealth of households who hold those equities.”

As evidenced by today’s wealth report, the Reserve Bank will be hoping that Aussie shares and bonds will continue do the heavy lifting next year, shielding households from downside risks around the Sydney and Melbourne property markets. Aussie bonds have been a strong performer over the year to November, up by 2.5% (Bloomberg Australian Composite Bond Index 0+ Years). Australia’s AAA sovereign credit rating, stable interest rates and solid fiscal position has made government bonds an attractive destination for risk averse investors.  

CommSec expects the Reserve Bank to leave the official cash rate on hold for the foreseeable future.