Strong bounces in property and share prices over the last 18 months have seen Australia’s financial sector balloon to well over $10 trillion, new research has revealed.
Stats released by Roy Morgan’s Banking and Finance Report revealed that Australia’s total market for financial services grew by a record 13.2 per cent over the last financial year to a total of almost $10.9 trillion in June.
All four categories, including owner-occupied homes, wealth management, traditional banking and direct investments showed signs of growth.
Australia’s financial fortunes remain tied up with the property market, which at the end of June made up a third of Australia’s total wealth at $3.83 trillion. Despite an increase of $277 billion on a year ago, the overall share was down by 1.8 per cent from June 2020.
Wealth management is the second largest segment representing well over a quarter of the entire financial services market with a value of $3.06 trillion, while direct investments now represent 12.9 per cent with a value of $1.39 trillion.
An influx of savers saw Australia’s traditional banking sector become the fastest-growing category, up to 23.8 per cent of the nation’s wealth with a value of $2.59 trillion. This is the highest share of the overall financial services market represented by traditional banking over the last five years and an increase in value of over $500 billion on a year ago.
Explaining the impressive overall growth of the financial sector, Roy Morgan’s CEO, Michele Levine, pointed to the government’s hefty stimulus packages, which have helped carry the sector amid an economic downturn.
“For many Australians, the government stimulus went straight into the bank account with a lack of options for spending it with international (and, for much of the time, domestic) borders closed and travel restricted,” she said.
Ms Levine opined that much of the predicted damage to the Australian economy did not occur as a result of the government’s aid, which ultimately helped the financial services boom.
“The COVID-19 pandemic hit Australia nearly 18 months ago in March 2020, and at the time there were significant worries about the durability of the Australian economy as well as key financial assets such as housing, stock-market investments and traditional banking and wealth management accounts,” she added.
Not only is the market showing resilience, but Ms Levine believes history could repeat itself post the current lockdown restrictions.
“Although the next few months are set to be tough ones for many Australians forced out of work by the lockdowns, there is an optimistic view that once the vaccination thresholds are reached towards the end of this year, the economy will quickly recover from this ‘third wave’ of COVID-19,” she concluded.
Source: Australia’s financial sector balloons to just under $11 trillion, Cameron Micallef, Nestegg.com.au