Australian wealth rockets despite Covid-19

Australians grew their wealth through the Covid-19 crisis more than any other country in the world bar Switzerland.

Australians grew their wealth through the Covid crisis more than any other country in the world, bar Switzerland, as central bank action fuelled the recovery in equity and housing markets.

Australians grew their wealth through the Covid-19 crisis more than any other country in the world bar Switzerland, as central bank action fuelled the recovery in equity and housing markets.

Australia also topped the rankings for median wealth per adult in 2020 and placed fourth in terms of mean wealth, according to Credit Suisse’s latest global wealth report.

That swell in wealth means just under one in 10 Australians can now call themselves millionaires, in US dollar terms, with 392,000 added to the club in the last year alone.

And the pace of Aussies joining the millionaire’s club will only quicken in the next five years, rocketing 70 per cent from 1.8 million to 3 million, Credit Suisse predicts.

“This is primarily due to the ongoing performance of our two principle sources of wealth, housing and financial assets, underpinned by robust GDP growth, Credit Suisse Australia head of private banking, Michael Marr, said.

“Looking forward, we need to be watchful of signs of inflation and an inevitable increase in interest rates and the knock-on effect this will have on the housing market,” he cautioned.

“The link in normal times between GDP growth and household wealth growth, combined with the expected rapid return of economic activity to its pre-pandemic time path, leads us to believe that wealth will grow at a fast pace over the next five years,” he said.

The Reserve Bank slashing interest rates, alongside action by central banks around the world, was probably the biggest contributor to Australia’s performance in the global wealth rankings in 2020, according to Mr Marr.

The appreciation of the Australian dollar over the year also underpinned Australia’s high position in the rankings, he noted.

While the pandemic sent shockwaves through global markets in February and March last year, wealth creation was “largely immune to the challenges facing the world” as governments and central banks stepped in.

Credit Suisse estimates that $US17.5 trillion was lost from total global household wealth between January and March 2020, equivalent to a 4.4 per cent decline.

But this was largely reversed by the end of June, and equity markets gained further in the following months, reaching record levels by the end of the year.

House prices also rose rapidly, contributing to the net result that saw $US7.4 trillion added to global household wealth by the end of the year.

Widespread depreciation of the US dollar accounted for 3.3 percentage points of the growth. If exchange rates had remained the same as in 2019, total wealth would have grown by 4.1 per cent and wealth per adult by 2.7 per cent.

Wealth per adult rose by 6 per cent to reach another record high of $US79,952, according to the report.

In Australia, wealth per adult jumped by $US65,695 in the year, behind only Switzerland’s $US70,729 rise.

Our median wealth per adult sat at $US238,070 at the end of 2020, while the mean grew to $US483,760 over the year.