Believe it or not, 1 in 10 Australian adults are millionaires!
A new report from Credit Suisse estimates as many as 1.8 million Australians are millionaires today based on net household wealth (defined as the value of financial and real assets minus debts).
And over 3 million Australian adults could soon be millionaires, according to the report.
In fact, Australians grew their net wealth through the COVID-19 pandemic more than any other country in the world, bar Switzerland, thanks to a strong recovery in Australia’s property and equity markets where most of us hold our wealth.
Source of graphic: Australian Financial Review
Australia also topped the rankings for median net wealth in 2020 and placed fourth in terms of mean wealth, according to Credit Suisse’s latest global wealth report.
Australian adults, who have an average net wealth of A$315,000 (US$238,000) are the richest in the world.
That 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.
A surprising feat during a global pandemic.
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.
According to Credit Suisse Australia head of private banking Michael Marr, this is mainly because of the ongoing performance of Australia’s housing and financial assets, underpinned by strong growth in GDP.
But he also warns that Australians need to watch out for signs of inflation and an “inevitable” increase in interest rates given this will have a knock-on effect on the property market.
“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,” Marr said.
Wealth creation in 2020 appears to have been completely detached from the economic woes resulting from COVID-19.
While the COVID-19 pandemic has sent shockwaves through global markets over the past 18 months, wealth creation was “largely immune” to the challenges facing the world due to the actions taken by governments and central banks to mitigate the economic impact of the virus, Credit Suisse explains.
Total global growth grew by 7.4% and wealth per adult rose by 6% to reach another record high.
Source: Credit Suisse
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But unfortunately, the report also shows that the pandemic had a profound short-term impact on global markets in the first quarter of 2020.
Credit Suisse estimates that US$17.5 trillion was lost from total global household wealth between January and March 2020 alone, equivalent to a 4.4% decline.
But this was largely reversed by the end of June, and surprisingly in the second half of the year markets increased to reach record levels.
Global property markets have also benefited from the recovery, with house prices rising rapidly to add US$7.4 trillion to global household wealth by the end of the year.
Widespread depreciation of the US dollar accounted for 3.3% of the growth.
If exchange rates had remained the same as in 2019, total wealth would have grown by 4.1% and wealth per adult by 2.7 per cent.
Wealth per adult rose by 6 per cent to reach another record high of US$79,952, according to the report.
In Australia, wealth per adult jumped by US$65,695 in the year, behind only Switzerland’s US$70,729 rise.
Our median wealth per adult sat at US$238,070 at the end of 2020, while the mean grew to US$483,760 over the year.
The global number of millionaires expanded by 5.2 million to reach 56.1 million, but that means individuals need over US$1 million to belong to the global top 1%.
Meanwhile, just a year ago, the requirement for a top 1% membership was US$988,103.
That means that 2020 marks the year when for the first time, more than one percent of all global adults are in nominal terms dollar millionaires.
And the group of ultra-high net worth (UHNW) individuals grew even faster, adding 24% more members, the highest rate of increase since 2003.
Since 2000, people with wealth in the range of US$10,000–100,000, have seen the biggest rise in numbers, more than trebling in size from 507 million in 2000 to 1.7 billion in mid-2020.
This reflects the success and growth of emerging economies, especially China, and the expansion of the middle class in the developing world.
Credit Suisse expects that global wealth will rise 39% over the next five years to 2025, to reach US$583 trillion by 2025.
According to the report, low and middle-income countries will be responsible for 42% of the growth, although they account for just 33% of current wealth.
At the same time, wealth per adult is projected to increase by 31%, passing the mark of US$100,000.
And, unadjusted for inflation, the number of millionaires will also grow markedly over the next five years reaching 84 million, while the number of UHNW individuals is expected to reach 344,000.