Housing Wealth, Stock Market Wealth and Consumption: A Panel Analysis for Australia*

Using a panel of Australian States, we estimate how changes in household wealth affect consumption expenditure. Both housing and stock market wealth have a significant effect on consumption: a permanent $A1 increase in stock market wealth increases long‐run annual consumption by 6–9 cents; the same increase in housing wealth increases annual consumption by around 3 cents. With households’ housing assets more than three times that of stock market assets, a 1 per cent increase in housing wealth has an effect on consumption at least as large as that of a 1 per cent increase in stock market wealth.