RDP 9109: Estimates of Private Sector Wealth 4. A Comparison with Previous Wealth Studies
October 1991
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This section compares the methodology and estimates presented in this paper to those of Piggott and the Treasury. Since the main areas of difference are in the calculation of business and dwelling wealth, only these categories are detailed. Table 4 sets out the differences in methodology between the three studies. Table 5 compares the estimates of dwelling wealth, business wealth and total wealth.[17]
| Business | |
| This Study | – included an estimate of the market value of land in estimates of
NDC. – the value of the non-farm business sector is estimated by scaling up ABS capital stock figures by a market valuation ratio. Two ratios were used: the first derived from a sample of large non-mining, non-finance companies, the second from a sample of property trusts. The latter was used to value the NDC of the banking, finance and property sector. – rural wealth was estimated separately. – overseas ownership of business assets was deducted, but domestic ownership of foreign assets was included. |
| Piggott | – derived the market value of a large sample of non-financial companies and
grossed this up to be representative of all non-financial companies. – estimated rural wealth separately. – overseas ownership of business assets was deducted, but domestic ownership of foreign assets was not included in the estimates. |
| Treasury | – used the market valuation ratio from the sample of non-mining, non-finance
companies to gross up ABS capital stock estimates. – no separate estimates were provided for rural wealth. – the value of land was excluded from NDC. – overseas ownership of business assets was deducted, but domestic ownership of foreign assets was not included in the estimates. |
| Dwellings | |
| This Study | – used a weighted average of median established dwelling prices in capital cities and other areas. |
| Piggott | – used average established dwelling prices in Sydney, Melbourne, Adelaide and Brisbane. |
| Treasury | – used a median established dwelling prices series for capital cities. |
| Total Wealth | |||
|---|---|---|---|
| This Study | Piggott | Treasury | |
| June 1980 | 405 | 477 | 391 |
| June 1985 | 693 | 794 | 676 |
| June 1990 | 1,428 | – | 1,269 |
| Business Wealth | |||
| This Study | Piggott | Treasury | |
| June 1980 | 135 (33) | 159 (33) | 87 (22) |
| June 1985 | 224 (32) | 234 (29) | 127 (19) |
| June 1990 | 525 (37) | – | 289 (23) |
| Dwelling Wealth | |||
| This Study | Piggott | Treasury | |
| June 1980 | 205 (51) | 253 (53) | 234 (60) |
| June 1985 | 346 (50) | 440 (55) | 426 (63) |
| June 1990 | 741 (52) | – | 824 (65) |
|
The figures in brackets are percentages of total wealth. |
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The estimates presented in this paper are somewhat higher than those published by the Treasury who estimated total private wealth at $1,269 billion for 1989/90. The contribution of dwellings in their estimates is higher (65 per cent in 1989/90) and that of business assets lower (18 per cent in 1989/90) than here. The value of dwellings is higher because of their use of capital city prices rather than a weighted average of capital city and other area prices. The contribution of business assets is lower for the reasons given earlier.
Piggott's estimates of dwelling wealth are higher than those made here due to his use of mean capital city prices rather than the median-weighted average price series used here. The estimates of business wealth in this paper are similar to those made by Piggott. However, it is likely that the importance of financial companies has increased since June 1985 with the likelihood that Piggott's estimates would now be lower than those presented here.
Footnote
Piggott's estimates are only available up until 1985. [17]