Consumption and wealth in Australia

Abstract

This paper examines the relationship between consumption and wealth in Australia. We find a steady-state relationship between nondurables consumption, labour income and aggregate household wealth for the period 1988-1999. We also find that changes in both non-financial and financial assets have significant but different short-run and long-run effects in dynamic consumption models. Finally, we place our results within the broader empirical literature and examine whether they are consistent with standard theories of consumption.