RDP 9109: Estimates of Private Sector Wealth 1. Introduction

This paper provides quarterly estimates of private non-human wealth at market prices in Australia over the past decade. These estimates are based on the methodology set out in Piggott (1987), although improvements have been made in several important areas. The first part of the paper sets out the basic methodology used and discusses the concepts involved in calculating the components of the wealth series. In the second part, the results are discussed, particularly the contributions of the individual components to total wealth. These estimates are then used to construct an index of asset prices.

The two main areas where the methodology employed differs from that of Piggott are in the calculation of dwelling wealth and business assets. For dwelling wealth, Piggott used a price series based on prices in four capital cities (Sydney, Melbourne, Adelaide and Brisbane). This paper uses a weighted average of capital city and other area prices. Because prices in other areas are lower than in capital cities, this lowers the estimated market value of the dwelling stock. For business assets, the approach used here is to obtain separate estimates for the market value of plant and equipment and non-residential structures, with each estimate based on a sample of companies grossed up by ABS estimates of the respective capital stocks. Piggott calculated business wealth directly from the market valuation of a sample of corporate enterprises. This procedure ignored financial companies altogether. Furthermore, it probably resulted in an under-representation of commercial property. Given the boom in commercial property prices in recent years, this would cause a further understatement of the market value of total business wealth in recent years.

The estimates suggest that the dwelling stock accounted for 52 per cent and business assets 37 per cent of total private non-human wealth in the June quarter of 1990. The remainder is made up of consumer durables, holdings of government bonds and holdings of currency. In the June quarter of 1980, the proportions were 51 per cent for the dwelling stock and 33 per cent for business assets.