Australian household finances are in better shape than you think, despite turmoil on the sharemarket

THE sharemarket might be in turmoil, but Aussie households’ assets are growing, fuel is cheap, jobs are up and wealth sits at a record $356,000 per person.

GLOBAL gloom in sharemarkets is masking the fact that Australian households are in their strongest financial shape in years.

Fresh economic data shows a growing list of positive factors benefiting Australians, even though their superannuation and share portfolios have taken a nasty hit.

Households’ assets are growing faster than their debts and the cost of servicing home loan debt is the lowest in 12 years, according to Reserve Bank statistics.

Fuel price data shows motorists are saving almost $20 a month through low oil prices, unemployment is falling, and wealth sits at a record $356,000 per person.

CommSec chief economist Craig James said there was a disconnect between the sharemarket and Australia’s economy.

“The fundamentals for the average consumer are generally pretty good, and on balance the consumer looks as though it’s going to hold up reasonably well,” he said.

It’s a different story for shares, which have slumped 8 per cent this month and are 17 per cent below where they were in April last year.

“The sharemarket is weakening because of global effects, not local effects,” Mr James said.

CommSec Chief Economist Craig James.

About one-third of Australians own shares directly, but a majority have some in their superannuation funds, which Mr James said might cause concerns among people nearing retirement. “Interest rates are still low and in the current environment they could go lower, the petrol price looks as though it’s going to fall further, and a few goods and services are cheaper now than what they were six or seven years ago.”

HSBC Australia and New Zealand chief economist Paul Bloxham said the key positive for households was that jobs growth was increasing.

“One of the main things that drives the financial strength of households is whether they are able to get jobs. The improving labour market is reducing consumers’ concerns about unemployment,” he said.

While share price plunges of resources giants such as BHP Billiton and Santos have dominated headlines, Mr Bloxham said resources only represented 10 per cent of Australia’s economy and just 2 per cent of the nation’s jobs.

HSBC chief economist Paul Bloxham.

“Over 80 per cent of jobs are in the services sector,” he said, and this area was benefiting from a lower Australian dollar and more confident consumers.

“A key factor has been Asian demand, particularly Chinese demand for tourism and education.”

Australians were spending more at home because the weak dollar made local goods and travel more attractive, Mr Bloxham said. Tourism authorities have predicted a bumper 2016 for local operators.

Altair chief economist Stephen Roberts said the Reserve Bank had been cautiously optimistic about the domestic economy thanks to growth in employment and household spending.

“There is a possibility that global growth could slow sharply in 2016 and that the Australian economy could fall into recession, but the chances of this happening are not high,” he said.