Are we really getting wealthier?

Ross Greenwood speaks to CEO of Roy Morgan, Michele Levine,  who says on average per capita net wealth is 30.5% higher in 2017 than it was in 2007

Introduction: Are we really getting wealthier?

Ross Greenwood:  An interest rate decision will be made by the Reserve Bank tomorrow. It’ll be on hold, there’s no doubt about that. Part of the reason why it’ll be on hold is because the Reserve Bank is cautious at the moment about raising interest rates as it probably should do as the economy picks up. The reason it’s cautious is because Australia now has one of the highest levels of personal indebtedness in the world that’s come about as a result of people taking on big mortgages, in particular in Sydney and Melbourne, as property prices have increased.

Now, we’ll tell you a little bit later that property values in the past month in September according to CoreLogic, those numbers out today have fallen and especially in Melbourne and Sydney where the prices appear to be now accelerating and even further. The one issue about this is that while Australians have got plenty of debt right now, they’ve also accumulated over the past 10 years lots of assets. This is always about the timing of when you have bought a property. If you bought more recently and taken on a big mortgage, you could very well be under mortgage stress if something were to happen to your income or if interest rates were to rise.

On the other hand, if you bought six years ago, five years ago, you probably be pretty comfortable because you’ve probably got a wedge of equity inside your mortgage plus also the values will have already increased. You could probably withstand some modest fall in the value of properties. People have also increased their wealth faster than they’ve increased their debts. That’s according to a new report by the Roy Morgan Wealth Report. Michele Levine is the chief executive Roy Morgan, she’s on the line. Many thanks as always, Michele.

Interview with: Michele Levine, CEO, Roy Morgan 

Michele Levine: My pleasure, good evening.

Ross Greenwood:  This is an important one because one issue of the wealthy growing faster than debts and it’s largely accumulated off the back of property prices, isn’t it?

Michele Levine: Absolutely, that’s one of the key drivers. The first thing to remember is basically the average Australian is 30.5% wealthier today than they were in 2007 just before the global financial crisis, and that’s after taking the inflation into account. It is important not to just look at the debt story, we are actually wealthier. You’re right, it’s very much driven by property. That’s our own homes that we live in and we have mortgages on and investment properties, but it’s also driven strongly by superannuation and the growth in superannuation.

Ross Greenwood:  There’s one interesting part about this, Michele, and that is maybe why people feel a bit squeezed up, we were talking about this even with the treasurer a little earlier on the program. That is, if you own a house, it’s not quite that you can eat the house, you can maybe feel a little better, renovate it, do something with it. If you’ve got superannuation, that money is locked up until these days, increasingly you’re 65 to 67. From that point of view, you can’t touch your wealth. It’s not accessible wealthy is it for most people?

Michele Levine: That’s true. I think that that issue will be up for grabs going forward. I think there’ll be lots of discussion about whether people should be able to use their superannuation and how that should be locked up because people are fairly happy when their super funds are going up and performing well. If they’re not performing well and they’re still paying fees, and they start to look flat or down, there’ll be really big questions around super. As we speak, they can’t really get their hands on it.

Ross Greenwood:  That’s so true. The second part about that it is, and I did note this, that it’s good news that Australians are wealthier and prosperous, all that type of thing. There’s one other aspect also and that is that people have always got to remember that while you might have built your debt level up to take on certain assets, if those assets starts to fall in price, the debts don’t commensurately fall. At the moment, while we’re seeing property prices falling, for example, there is a genuine problem that the debts are not falling commensurate with the fall on those property values.

Michele Levine: Of course, the debts is not going to fall. I think they’re talking about a 3% drop in the property market. The debts is not falling at all, the debt sits there. Look, I do tend to feel that there’s bit of a Calamity Jane feeling about all of this. We’re talking about a 3% decrease in housing prices. We’re not actually talking about a situation where people’s mortgage is greater than the value of their home. We’re not looking at a situation like that. Even if we were in that situation, that doesn’t mean the people up and leave their homes. It really isn’t like that.

Ross Greenwood:  So long as they got a job, they can stick with it that’s another issue as well.

Michele Levine: That’s probably the critical thing.

Ross Greenwood:  I got to keep on moving, but I appreciate your time. The chief executive of Roy Morgan.


Interviewed –Michael Rice, CEO,Rice Warnertitled –Super changes in the 2017 Budget

Interviewed –Michael Rice, CEO,Rice Warnertitled –Super for homes

Interviewed –Stephen Anthony, Chief Economist, Industry Supertitled –Why our retirement savings may be at risk

Interviewed –Scott Morrison, Treasurer, Federal Governmenttitled –Treasurer Scott Morrison: We do not want a recession

Interviewed –Cathy Nance, partner, PWCtitled –Can you afford to retire?

Interviewed –Mark Fitzgibbon, Managing Director, NIBtitled –Do the Private Health Insurance companies agree with the changes?

Interviewed –Josh Frydenberg, Treasurertitled –Why is the Australia economy going so well?

Interviewed –Richard Di Natale, Senator, Greens Leadertitled –Should the PM call an election?

Interviewed –Scott Morrison, Treasurer, Federal Governmenttitled –Treasurer Scott Morrison: Its not looking after your customer, its taking them for granted

Interviewed –John Wacka Williams, Senator, Parliamenttitled –Did the CBA chose an appropriate new boss amid its scandal allegations?

Interviewed –Ian Narev, CEO,Commonwealth Banktitled –Commonwealth Bank Shareholders hit hard

Interviewed –Matt Comyn, CEO, CBAtitled –Why has the CBA severed ties with scandalous wealth management business?

Interviewed –Peter Strong, CEO, Council for Small Business Australiatitled –Why has the Senate voted down penalty rate cuts?

Image Source: 2GB

Previous: Was ASIC too soft on the banks?
Next: Is the housing market going to crash?

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

1384 More posts in News category
Recommended for you
UK Prime Minister ‘very embarrassingly’ calls off Brexit vote

Ross Greenwood speaks to David Buik, from Core Spreads, after British Prime Minister Theresa May has...