Australia's wealth divide

AUSTRALIA appears to be dividing into rich and poor, with many struggling with debt, as others build wealth at a record pace.

Coins in hand /File

Australia's wealth divide

AUSTRALIA appears to be rapidly dividing into rich and poor.

Millions of households are reported to be struggling with high debt, mortgage stress and living close to poverty, yet personal wealth in Australia is growing faster than almost anywhere else in the world.

According to two recent reports, Australians are building up assets and investments at a record pace.

Boston Consulting Group found that average personal wealth surged a massive 19 per cent during the past five years in Australia -- more than double the global average of just less than 9 per cent.

Elsewhere a Merrill Lynch and Capgemini report found the number of millionaires in the Asia Pacific region had jumped almost 9 per cent with 2.6 million people now in the multi-million dollar club.

Recent Treasury statistics also showed private sector wealth in Australia had jumped 6 per cent to a record $8588 billion at June 30.

So where is all the wealth coming from?

According to Boston Consulting partner Matthew Rogozinski, Australia's record wealth is largely thanks to our compulsory superannuation system and strong financial markets during recent years.

"The superannuation system is having a very large effect on the way personal wealth is accumulated in Australia relative to most other countries,'' Mr Rogozinski said.

The effect of this has been to shift the bulk of people's savings out of their traditionally low-interest earning deposit accounts and into the high performing investment and stock markets via their super funds.

Overall, Australia's growing wealth ranked seventh fastest among the 62 countries measured in the survey. However, it was still the fastest growing nation within the developed world, with the top six rankings going to the emerging economies of China, Brazil, Hungary, Poland, Slovakia and Czech Republic.

Merrill Lynch vice-president of investments Peter Opie also cited Australia's strong economy and surging share market as the key drivers of wealth in our country.

In particular Australian "high net worth individuals'' were big share market investors, allocating about 37 per cent of their wealth to equities.

This is a much higher weighting to shares than investors in other countries in the Asia Pacific region. For example wealthy South Koreans allocated the largest slice of their wealth to real estate.

"Relative to the rest of the region, Australia is seen as a mature financial market,'' Mr Opie said. It has a high level of sophisticated products and wealth management and investment options.

Boston Consulting also found that the number of millionaire households in Australia jumped 23 per cent during 2006 to total 135,000 throughout the country.

This, too, was among the fastest growth rates in the world and compares with an average of just 14 per cent for all countries surveyed.

The rapid growth in personal wealth in Australia has been driven by huge increases in assets within ``mass affluent households''. These were defined as households with assets of between $100,000 and $1 million, Boston Consulting said.

The wealth of these households jumped 40 per cent during 2006, the survey found. Personal wealth was measured as being listed securities, cash and other funds and investments, excluding business wealth, residences and any luxury assets.

Globally, there are 9.6 million households with more than $US1 million assets each, while personal wealth around the world now totals almost $US100 trillion.

Not surprisingly the biggest pool of wealth was in North America, which had more than a third of the world's personal assets at $US36.2 trillion, followed by Europe at $US33 trillion.

Australia's region, Asia Pacific, accounted for a total of $US10.6 trillion -- a bit more than 10 per cent of global wealth.