Thursday, April 16, 2009

What have we got? 12 per cent less.

Australian wealth held in the form of shares, investments and property is collapsing at the fastest rate on record, shrinking an extraordinary 12 per cent in the past year.

Treasury calculations released to economic modelers Wednesday suggest that the average Australian lost an inflation-adjusted $26,400 during 2008 - 11.8 per cent of his or her buying power.

"This quantifies the collateral damage from the global slump," said CommSec economist Savanth Sebastian who crunched the Treasury numbers to come up with the 11.8 per cent figure.

"It's the biggest fall in records going back 48 years. It's the only time wealth has fallen for four continuous quarters"...

The average Australian's real estate, share market and financial wealth amounted to $223,985 in December, down from around $250,000 a year before.

The Treasury does not break down the total wealth estimate into individual components.

The collapse comes at the end of a decade in which wealth per Australian roughly doubled.

Mr Sebastian said it was possible that wealth had began climbing again since the December quarter.

"Household prices improved in the early months of the year and share market jumped sharply in March, he said. "Things could improve going forward."

Separately released Residex data showed house price growth in every city but Perth in the first three months of the year, with Melbourne Prices up 0.5 per cent over the three months and 1.6 per cent in March.

Perth prices plunged 1.9 per cent in March, to be down 3.9 per cent Over the quarter. Perth prices are plunging at an annualised rate of 16 per cent.

The Westpac-Melbourne Institute leading index deteriorated further in February pointing to bleak economic outlook as the government frames the May Budget.

The index is made up of indicators thought to point to conditions three to nine months ahead, including overtime worked, manufacturing materials prices and productivity.

It is now running at an annualised rate of minus 5 per cent, well below its long term average of plus 3 per cent.

"The rate of deterioration of the index is truly remarkable," said Westpac chief economist Bill Evans. "The consistent run of negative reads is comparable with Australia's previous recessions which began in 1961, 1974, 1982, and 1990."

"A comparison with the last recession is disturbing. During that recession the annualised growth rate of the index reaching a low point of minus 3.4 per cent. In this cycle we are already at minus 5.1 per cent."

"We are forecasting that the economy will bottom in 2009. The rapid deterioration in the index points to downside risk to that forecast."