A recent report shows retirement prospects of Australian households remain relatively low despite the continued growth in overall wealth, according to a recent report published by the Australian Centre for Financial Studies (ACFS).
Forums were held in major cities from 18th- 22nd August to discuss the key outcomes of the report. The study is part of larger project, Funding Australia’s Future which was launched in 2012. Section 2, Australian Household Sector Finances, provides an overview of household savings, investments and borrowing trends.
The report reveals that total household wealth reached $6,689 billion, more than six times the household wealth recorded in 1998. Dwellings accounted for 54% of household wealth at the end of 2013. Other assets included superannuation and life policies (25%) and consumer durables (3%). Financial assets have increased significantly over the past 25 years, comprising 53% of household net worth in 2013, compared to 40% in 1988.
While Australians are wealthier, the researchers are concerned that financial literacy has not improved accordingly. ACFS director, Prof. Deborah Raltson argues that Australians need more financial guidance.
“There is a gulf between what households actually do and what may be in their best interests to do. The complexity of the problem means that households need assistance in making these decisions.”
Retirement is cited as a major concern due to increased life expectancy and relatively low superannuation balances. The capacity for an individual to support onself in retirement reduced in recent years. The study also illustrates how this will impact women, who on average retire with around half the superannuation balances of men.
The report also identifies an increase in household debt. Total household liabilities, comprised mostly of debts, stood at 49% of the value of household financial assets.
Over half of the total value of household liabilities in Australia in 2013 were owner-occupied dwellings. A further 32% is attributed to property loans, while credit card debt, study loans and vehicle loans each accounted for 2% of liabilities. The research also noted that the amount of debt Australians carried into the retirement phase is a notable risk.
Deborah Raltson suggests the need for innovative approaches to retirement income products alongside other measures to guide Australian households in decision-making processes.