Morningstar Spotlight
The Big Picture

A map of wealth in Australia

James Gruber  |   09th Oct 2024  |   5 min read
There are two new reports that shed light on wealth in Australia. The first is from UBS via its Global Wealth Report 2024.

The report says that global wealth – defined as the value of financial assets plus real assets owned by households, minus their debts – grew 4.2% last year in US dollar terms. That was a rebound from the 3% decline recorded in 2022.

The rebound was driven by Europe, the Middle East and Africa (EMEA), which saw wealth grow by 4.8%, ahead of the Asia-Pacific’s 4.4%. The Americas trailed behind, with close to 3.5% growth.

Wealth in Australia grew at a faster pace, up almost 9% year-on-year, helped by the continued rise in residential property prices and the snapback in the local share market last year.

Average growth in wealth
Globally, there are 58 million people, or 1.5% of the world’s population, with wealth greater than US$1 million. At the other end of the spectrum, there are 1.49 billion people with wealth of under US$10,000.

Global wealth

Australia remains the lucky country

Australia remains one of the world’s richest countries. We’re ranked second in the world when it comes to median wealth per adult, well ahead of the likes of Switzerland, the UK, and the US.

On an average wealth per adult basis, Australia ranks fifth. According to the report, the average Australia has US$546,184 in wealth, or A$810,000.

Top countries

Zooming out, the report suggests that growth in global wealth has slowed in recent years, including in Australia. Global wealth has cooled from average annual growth of 7% from 2000 to 2010 to 4.5% from 2010 to 2023. The report says that demographics have played a role in the slowdown, with shrinking populations in the likes of Japan and Italy resulting in slower economic activity. Other factors include a stronger US dollar, the sovereign debt crisis in Europe in the early 2010s, and the maturation of economies in Asia and Latin America.

The growth in Australian wealth has also slowed since 2010. The sharp pullback in commodities from 2011-2012 has arguably been a big factor in this.

Comparing wealth growth
Growth in average wealth
 

Wealth inequality

There’s been progress with inequality. The only wealth band that’s been in constant decline over the past 15 years is the lowest one. Adults with less than US10,000 have nearly halved from more than 75% in 2000 to below 40% in 2023. All other wealth brackets have been steadily expanding.

Inequality has tended to increase in fast-growing markets and decline in many developed economies. Despite all the negative headlines, wealth inequality has fallen in the US of late. Inequality in Australia has risen marginally, though remains low compared to other developed countries.

Percentage of adults by wealth band

Inequality

The great horizontal wealth transfer

UBS says wealth is more mobile than static, and that applies across the globe. If you’re wealthy, there’s no guarantee you’ll stay that way, and vice versa.

The report also touches on the intergenerational wealth transfer that’s about to take place. Globally, US$83 trillion is expected to be passed on within the next 25 years. Given that people over the age of 75 hold nearly 20% of the world’s wealth, and the average life expectancy for 75-year-olds ranges between 82-86 across most of the world, a large chunk of assets are expected to be transferred within the next ten years.

UBS also points out that before being transferred from one generation to another, wealth is frequently passed on within the same generation between spouses. Life expectancy varies between men and women, and couples can have age gaps, and the inheriting spouse will typically own and hold onto the wealth for an average of four years before passing it on. UBS calls this ‘the great horizontal wealth transfer’ and suggests around US$9 trillion of wealth will soon be transferred between spouses.

How Australia’s high net worth individuals are faring

A separate report from Praemium and Investment Trends has looked at how Australia’s high-net-worth individuals (HNWIs) are faring. Pretty well, it turns out.

As of June this year, there are 690,000 high-net-worth investors in Australia, up 8.7% year-on-year.  These investors are defined as those who have at least $1 million in investable assets – net wealth clear of debt, excluding their own home, business, and super (but including SMSF assets). They now control $3.3 trillion in assets, up from under $3 trillion in 2023.

HNW investors
It seems the wealthy are getting wealthy. The report reveals a surge in wealth among ultra-HNWIs – those with investable assets of $10 million or more. Their assets saw an 11.6% increase in value in 2024, versus an 8.6% rise in 2023.

How the wealthy are investing their money

The breakdown of how HNWIs are investing their money makes for fascinating reading. The so-called ‘emerging affluent’ – those with $1-2.5 million in investable assets – are putting a lot more money into direct shares, compared to other asset classes such as property. Those wealthier than this hold much less in direct shares. Across the board, managed funds and listed investment companies are waning in popularity, while holdings in cash, term deposits, and bonds are relatively small. And alternative assets are gathering more funds, albeit off a small base.

Investment allocation
The report also notes that HNWIs continue to retain a preference for getting financial advice from time-to-time. The number identifying themselves as validators – who seek advice to validate their own opinions – remains high, yet unchanged, at 58% (at least they’re honest!). Those who describe themselves as self-directed investors stands at 35%. For those using an adviser, around 38% of their wealth is under the stewardship of an adviser while the remaining 62% is self-managed.

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