Australian wealth rises to $16.2tn

Data from the Australian Bureau of Statistics (ABS) revealed household wealth rose for a sixth straight quarter, by 2.7% in the March quarter to total $16.2 trillion.

Residential land and dwellings was the largest contributor to quarterly growth in household wealth, adding 1.3 percentage points.

"Rising asset values continued to drive growth in household wealth in the first quarter of 2024, with house prices continuing to increase," ABS head of finance statistics Mish Tan said.

Superannuation assets contributed 0.9 percentage points to growth in household wealth this quarter and was driven by strong investment performance in both domestic and overseas markets.

Households' direct ownership of shares and other equity contributed an additional 0.4 percentage points to the quarterly growth in household wealth.

Capspace managing director Tim Keith said Australians are stockpiling their wealth in residential property, raising the need for Australians to diversify into other asset classes to reduce financial risk.

"With such a large proportion of individual wealth tied up in property, it makes sense for investors to diversify into other asset classes, to lessen their risk of their wealth falling should residential property prices pull back on higher interest rates and any slowing in the economy," Keith said.

"While property owners have benefited from property price rises, more defensive assets such as fixed income, and particularly private credit, can deliver more attractive yields than residential property and even fully franked shares. That's important because it is income-yielding assets that will support Australians in everyday living and in retirement."

Keith said private credit, or non-bank loans, could offer investors a relatively attractive income stream and capital protection through stringent loan process, along with the security taken over borrower assets.

"Private credit can deliver investors yields close to 10% per annum, which is almost double typical yields on residential property which fall below 5%," he said.

"In addition, many private credit loans are floating rate and returns can increase with changes in the cash rate or bank bill swap rate."

Keith added that with inflation remaining sticky, the increased possibility of a rate rise in August could lift returns on private credit.