Key takeaways
Australia’s average wealth-per-adult increased by nearly 10% in 2023, more than twice the growth-rate of UBS’ sample of 56 countries.
Australia ranked second in terms of median wealth behind Luxembourg, and fifth in terms of average wealth in 2023.
Wealth inequality has worsened between 2008 and 2023, with the gap between the haves and have-nots increasing 5.4% in that time.
Australian currently has fewer than 2 million millionaires, but it expects to see an increase of 21% – or 400,000 – by 2028.
There will be a 21 per cent jump in the number of millionaires in Australia over the next four years, mirroring a trend in developed and developing nations, according to the latest UBS Global Wealth Report.
The number of adults worth $US1 million ($1.48 million) or more is expected to grow in 52 out of 56 countries surveyed between 2023 and 2028.
The report says the number of Australian millionaires will grow from just under 2 million today to about 2.3 million in four years.
This forecast increase is being driven by soaring property prices, inherited wealth and substantial superannuation balances.
Average wealth in Australian has grown 150% between 2008 and 2023, to US$546,184 (AU$807,898) and median growth isn’t far behind, up 110% to US$261,805 (AU$387,254).
Median wealth estimates are regarded as a more precise measure than the average because it is not so easily distorted by the few ultra-rich people.
Andrew McAuley, managing director at UBS Wealth Management Australia said:
“This growing wealth, and the wealth transfers now occurring as the baby boomer generation ages, reinforces the need for investors to build a long term wealth plan and to get the correct advice.”
The rate of growth in wealth is slowing.
In 2023, Australia’s average wealth-per-adult increased by nearly 10%, but median wealth only increased about half as much. which suggests wealth in the lower brackets rose slower than those in higher ones.
That made us the second-wealthiest in the world, with a median wealth of $388,192, behind the $551,967 of adults in Luxembourg.
Australia is currently home to 1.9 million US-dollar millionaires, with a collective $US5.4 trillion ($8 trillion).
The great Wealth Transfer
Australia, along with the rest of the world, is on the cusp of the largest intergenerational wealth transfer in history.
Termed as the “great wealth transfer,” we’re looking at an eye-watering US$68 trillion (A$100.2 trillion) moving hands globally over the next 20-30 years.
This shift, predominantly from the baby boomer generation, is not just significant in its magnitude but also in its potential economic and social impacts.
Australian baby boomers are set to transfer $4.9 trillion in wealth to the next generation, in the largest wealth transfer in history.
On average, each recipient will inherit about $320,000, but financial advisory firm JBWere estimates women will become the custodians of more than 65% ($3.2 trillion) of the total transfer because they tend to outlive their partners.
Finances at the point of wealth transfer are most likely to be managed by eldest daughters – who are also 50% more likely to shoulder the burden of managing the family’s estate.
“The inheritocracy, the bank of mum and dad, it’s real. To be able to afford a house, young people are going to need help”, Managing director at UBS Wealth Management Australia Andrew McAuley said.
Is a nation where its younger citizens cannot afford to house themselves without parental report really “wealthy”?
Bringing forward the inheritance
Currently, it’s hard to go anywhere without hearing about homes, affordability, rising, interest, rates and the higher cost of living.
This is encouraging many baby boomers to bring forward some of the inheritance they will leave their children.
This way the parent see the benefit of the positive impact of giving their kids a hand up, more than a handout, rather than happening after they’re gone.
The Bank of Mum and Dad is helping many first-home buyers get into the market with loans, gifts, and guarantees.
Looking Forward
This impending wealth transfer, unprecedented in scale, offers both challenges and opportunities.
It’s crucial to continuously assess and adapt our economic and social structures to ensure equitable wealth distribution and capitalize on the potential economic benefits.
The decisions made today will shape the financial landscape for generations to come.
The team at Metropole Wealth Advisory specialise in helping Australians with estate planning to ensure their assets fall into the hands of their intended beneficiaries.
