Million-dollar question

Forget the two-speed Australian economy – it seems our wealth entrepreneurs have been firmly stuck in a high gear over the last 12 months.

According to the latest survey of the world’s wealth by Merrill Lynch Global Wealth Management and Capgemini, the number of individuals in Australia with more than $1 million of investable assets – that is, not the family home or super – grew by an impressive 11.1% to 192,900.

The combined wealth of Australia’s high-net-worth individuals was up 12.1% to $US582 billion.

What is most impressive is our standing in the global wealth rankings. While Australia might account for a tiny percentage of the global economy, we rose one spot in 2010 to have the ninth-highest number of millionaires of the 71 countries Merrill Lynch and Capgemini cover.

We’re now in front of Italy and India, two countries with vastly larger populations than Australia.

Overall, the report suggests the world’s wealthy have had a good year. The number of millionaires around the world rose 8.3% to 10.9 million (driven largely by the Asian region, including China and, to a lesser extent, Australia) while their total wealth jumped 9.7% to reach $US42.7 trillion.

According to the report, the wealth held by these 10.9 million millionaires has now surpassed the pre-GFC peak reached in 2007.

So the wealthy are doing very nicely indeed, particularly in Australia.

Which makes you wonder – as we’ve questioned before – exactly why Australian consumers remain so fragile at present.

The problem seems to be a psychological (or philosophical) one rather than a financial one.

As the Merrill Lynch/Capgemini report underlines, bank balances might have been restored, but the mental scars of the GFC remain.

While the report claims wealthy investors have taken on more risk in the last year, it’s marginal.

The percentage of assets allocated to equities only increased from 29% to 33%, while allocations to fixed interest dropped from 31% to 29% and cash dropped from 17% to 14%.

I would argue these figures do not represent a stampede back into equities, but rather a measured return to risk.

And given the rich are usually ahead of the pack, it seems we’ve still got a wait before the average consumer puts their hand in the pocket again.