A map of wealth in Australia
An analysis on generational wealth in Australia.
Recently, KPMG Urban Economist, Terry Rawnsley, did some great analysis on generational wealth in Australia, using ABS figures to June last year. His firm put out a media release proclaiming, “The great wealth transfer begins as Gen X overtake Boomers for housing and shares”, and the Fairfax press ran with that in their own headline, “From grunge to Grange: How Gen X became wealthier homeowners than Boomers”.
A closer analysis at the data, though, suggests these headlines are wrong: while the great wealth transfer may have started, Boomers are still the wealthiest when it comes to housing and total net worth, and younger people are loading themselves with a lot more debt as they seek to get ahead.
To see why, let’s look at the numbers.
Wealth in housing
The figures reveal that Generation X has the most significant amount of wealth in housing, with an average value of $1.31 million per person, marginally in front of Baby Boomers at $1.30 million.
These numbers include any property owned, such as primary residences, investment properties or second homes.
“Baby Boomers have historically been the largest holders of housing assets, but as this cohort ages into retirement they are beginning to sell down their property portfolios,” Rawnsley says.
On the other hand, many Gen Xers are upgrading from their first homes to something more.
Meanwhile, Rawnsley highlights the lower wealth in housing of younger cohorts, as Millennials and Gen Z, who face greater challenges to enter the housing market:
“While the starter’s gun has been fired on the great wealth transfer, our findings still demonstrate a clear disparity in housing wealth between older and younger generations.”
Rawnsley notes that for younger Millennials and older Gen Zs, the home ownership rate is 10 to 15 percentage points lower than at the same ages for Baby Boomers.
Don’t forget about debt
It’s settled, then: Generation X has overtaken Baby Boomers for wealth in housing. Well, not quite. Because the above figures only consider the asset side of the equation. They exclude debt.
And when it comes to debt, Baby Boomers are far better off than Gen Xers or Millennials. The latter have gross debt of $448,000 and $410,000 per person respectively. That’s 5-6x more than the $82,000 in debt held by the average Baby Boomer.
It’s worth noting that these debts include all loans, not just housing. However, while there isn’t a breakdown of housing debt in these numbers, Rawnsley acknowledges that they’re likely to account for the vast majority of the gross debt figures. If right, it means that Gen Xers aren’t wealthier than Boomers when it comes to housing: their houses may be worth more, but they’re holding more debt against those houses.
Other assets
This doesn’t tell the full story of wealth among different generations. There are other assets to consider.
Of cash and deposits, Baby Boomers lead with $242,000 followed by Gen X with $176,000, while Millennials and Generation Z hold $104,000 and $26,000 respectively.
"Baby Boomers' are gravitating towards liquidity and higher cash holdings which reflect their inclination towards safer investments," Rawnsley says.
When it comes to shares, Gen X has the most, valued at $256,000. Baby Boomers hold $206,000 in shares, highlighting Boomer desire for less risky assets. Meanwhile, Millennials and Gen Z have considerably lower amounts, with $51,000 and $7,000 respectively.
"These lower levels of share ownership among younger generations indicate a cautious approach towards equity markets, possibly due to financial pressures and less cash to invest," Rawnsley comments.
Other assets, mostly superannuation and business assets, show Baby Boomers and Gen X with comparable holdings, $641,000 and $586,000 respectively. Millennials and Gen Z hold $260,000 and $43,000 in other assets.
“There is some good news for younger generations in the superannuation asset class as they are coming off a far higher base than their parents. This means the wealth they will eventually accumulate from super will be far higher than older generations,” Rawnsley says.
Net worth
Adding it all up, which of the generations is the wealthiest? It turns out that Baby Boomers remain well out in front, with net wealth per person of $2.31 million, 23% higher than the $1.88 million of Gen X, and about 3x greater than that of Millennials.
"These net worth figures highlight the wealth accumulation lifecycle, where older generations have had more time to build assets and pay down debt," says Rawnsley.
The gross debt held against net worth tells a tale. It’s 54% for Millennials, 51% for Generation Z, 24% for Generation X, and just 4% for Baby Boomers.
Summing up, the KPMG analysis shows Baby Boomers are still the wealthiest generation in Australia by far, and younger people are taking on more debt to try to catch up to them. It also underlines the extent that housing has driven the gap between generations.
