Are you feeling wealthier these days? Or maybe you're wondering how anyone is getting rich right now.
That may seem like a silly question in the midst of a cost-of-living crisis.
But according to the Australian Financial Review (AFR), the average wealth of Australian adults grew by nearly 10% in 2023. And that was more than twice the growth rate of 56 other countries.
These are the findings of the 2024 UBS Global Wealth Report.
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Our wealth is building faster than other countries
On a median basis, our wealth grew by about 5% to US$261,805 per person. That translates to about $386,758 per person in Aussie currency, making us the second-wealthiest people on the planet.
We've moved up a spot this year and sit behind Luxembourg, which has the highest median wealth per person, at US$372,258 or AU$549,927.
Below us in third position is Belgium, with a median wealth per person of US$256,185 or AU$378,456.
According to UBS, 1.9 million Australians are currently officially millionaires in US dollar terms. Our country has the third-highest number of millionaires per capita, at 10% of the adult population.
UBS also predicts that this particular population cohort will grow by 21% over the next four years.
How to get rich in Australia?
Well, the bulk of it is 'on paper', so to speak.
Australians' personal wealth is largely tied up in our properties and superannuation.
In fact, UBS says more than half of Australia's wealth is held in non-financial assets, like real estate.
However, in our broader Asia-Pacific neighbourhood, 60% of people's wealth is in financial assets like shares, bonds, and cash. In North America, 70% of people's personal wealth is in these types of assets, too.
The relatively illiquid nature of our wealth is a bit of a problem in a cost-of-living crisis, right?
Our net worth is impressive, but there's a problem…
We can't get access to the equity in our homes unless we sell, or ratchet up our home loans, and we can't access our superannuation until we reach the preservation age.
Home values have been moving higher across Australia for 17 consecutive months.
In June, the national median home value rose by another 0.7%, according to CoreLogic data. In FY24, Australian homeowners gained a median $59,000 in capital gains on paper.
Meantime, our superannuation balances are getting bigger thanks to share market gains in FY24.
The latest data from Chant West suggest the median growth superannuation fund will have risen in value by 9% over FY24.
The average superannuation balance among Australians aged 65 to 69 years (the cohort closest to the retirement age of 67) is $404,553. The median is $198,715.
Of course, all of this property and superannuation wealth sounds great, but it doesn't help pay the next electricity bill, does it?
This is the problem with being asset-rich. If you're also cash-poor, you don't feel so wealthy when you're struggling to pay for the essentials!
Particularly when you're also trying to cover what the Reserve Bank estimates to be 30% to 60% higher mortgage repayments these days.
How the next generation is set to get rich
UBS values the coming global intergenerational wealth transfer from baby boomers to Gen Xers at US$83 trillion or AU$122.6 trillion.
And as we know, that money is already being distributed in Australia via the Bank of Mum and Dad.
Andrew McAuley, managing director at UBS Wealth Management Australia, said:
The inheritocracy, the bank of mum and dad, it's real.
To be able to afford a house, young people are going to need help. The last of the Baby Boomers will have retired, and the oldest Baby Boomers will be starting to pass away.
There's a real bulge of the population there, and … they're the first big group who had super. Definitely, there's going to be a transfer.
Wealth building via ASX shares
One of the great things about investing in ASX shares is the generous dividends many of our big companies pay.
ASX dividend shares can provide a reliable income stream as part of your investment portfolio. And there are big tax advantages if you stick to fully franked ASX shares.
Popular dividend stocks include BHP Group Ltd (ASX: BHP), Fortescue Ltd (ASX: FMG), Westpac Banking Corp (ASX: WBC) and National Australia Bank Ltd (ASX: NAB).
