It's been a double whammy. Billions of dollars have been wiped off the sharemarket in recent weeks and, at the same time, home owners' mortgage repayments have shot up, with the possibility of more by year's end. Yet people are being told they have never been wealthier, a view that sits oddly with those who feel financially stressed.

Why are the signals so mixed? And how do you measure genuine wealth?

Household debt stands at a record $1 trillion, which means even a slight tremor can have devastating consequences. Earlier this month the Reserve Bank lifted the official cash rate to 6.5 per cent - the ninth rate rise in a row. Bankruptcies are up and so are mortgagee repossessions.

There is plenty of evidence of new money around but it's also true many families are struggling to meet their mortgage commitments. And then again, what may look like fabulous wealth may be an illusion, funded by massive debt.

Job security and a decent income are the two basics for wealth accumulation. Most people need to borrow to invest and without the ability to service the loans and ride the market's ups and downs, life can be precarious. This may explain why different parts of society are experiencing vastly different realities.

Either way, it's a reminder to take stock of your assets and liabilities in the view of market volatility and work out how shock-proof you are.

Jobs

Academic John Buchanan, the director of Sydney University's Australian Centre for Industrial Relations Research and Training, says without employment there is no wealth. The labour force is experiencing record low unemployment of 4.3 per cent but the bad news is that in the economic downturn of the early 1990s, the nature of the jobs market changed irrevocably to include a larger number of casual workers.

In his book Fragmented Futures: New Challenges in Working Life, Buchanan says the workforce is almost equally split between those working as permanent employees and those who work on a non-standard or more precarious basis. A quarter of the workforce is made up of casuals and a further quarter is made up of either owner-managers or contractors.

Casual jobs can offer flexibility but they can also result in inequality if pay rates fall, workers lose their entitlements and suffer a lack of job security, Buchanan says. He says the 1990s were a time of strong economic growth and deregulation, productivity increases and low unemployment.

"But low- and middle-income earners suffered reduced or stagnant earnings, while most of the growth occurred in the top of the labour market. The casualisation of the workforce does not deliver quality part-time work," he says. Buchanan believes that if the Federal Government's Work Choices is implemented, there will be even more casuals with fewer benefits.

He says the Government wants to axe penalty and shift allowances, and the basic minimum wage is also under attack: "That affects the bottom 30 per cent of the population - the low wage earners." Buchanan says this means a two-tiered society, with greater differences between Australia's very rich and poor.

How do you define wealth?

"Wealth is a whole lot of things," says Shane Oliver, the chief economist at AMP Capital Investors. "It is strong economic growth, low unemployment, a strong rise in company profits, and a low interest rate environment which has helped to push the value of people's homes higher and made them wealthier. That has underpinned the wealth of Australians."

As long as you have a job, you can generate wealth. "The net wealth held by Australians is extremely high," says Oliver, who measures aggregate wealth. "The sharemarket has delivered a huge amount of wealth since the 1987 crash. At the moment, total wealth is about nine times total disposable income."

Craig James, an economist at Commonwealth Securities, agrees: "We have had 16 years of strong growth and people expect a pay-off from that. We are getting it: we have strong employment and the share and property markets have generated great wealth."

CommSec has a "misery index" that tracks unemployment and inflation. As joblessness rises and prices increase, the misery index travels higher.

"It is at its lowest in 36-years," James says. "High wealth and income levels have given people money to spend. Food, general groceries and clothing take up much less of people's income than they did 20 years ago."

And the sharemarkets gyrations? "The sharemarket is still underpinned by strong profits. But one-way traffic can't go on without a pause. The value of our assets minus our liabilities is still huge," he says.

Property

Rod Cornish, the head of Macquarie Property Research, says investors are better diversified across investments today, which is a good thing.

Although most wealth is still held in the family home, there are more people invested in the sharemarket than there were 10 years ago. And property prices on Australia's east coast are stabilising, or slowly rising.

"If you have more than 20 per cent equity in your home, then you have wealth," Cornish says.

"The biggest swing we have ever had in property was 20 per cent and that was in Sydney in the 1990s."

Cornish says there are pockets of stress where prices have not recovered. But, he says, strong labour force conditions mean people won't necessarily be forced to sell because rates are higher.

"Big shifts in the property market relate to unemployment," he says.

"People don't sell because the price of something has fallen. They sell because they can't meet their mortgage repayments.

"Anyone who has 20 per cent or more equity in their home is in a good position. And there are a lot of people in that position because of the last run-up in property prices. Also, about 35 per cent of owner-occupiers actually own their home outright."

Cornish says people are greatly affected by their home price, even if they are not in the market to sell. "An increase in share prices does not send people out to buy consumer goods but a rise in your house price does," he says.

Debt threats

AMP's Oliver says we are in good shape but "we need to be cautious because debt levels are high".

"For every $100 of income, we have $170 of debt. That debt may be spread across a home loan, a sharemarket portfolio and a car or boat loan, plus credit card debt, which is high-rate unsecured debt.

"We need to think carefully about the way we manage our debt. Debt is fine when everything is going well but when things change, then debt can really work against you."

The Insolvency and Trustee Service of Australia says there has been a 13 per cent rise in the number of personal bankruptcies nationally over the past year, to 20,421.

Gerard Brody, the director of policy and campaigns at the Consumer Action Law Centre, says complex debt problems afflict some of the poorest.

"The [lending] market is very competitive and very sophisticated," he says. "Competition is great but you have to make sure that market forces and competition don't leave people so far behind that it affects their health and wealth."

Roger Mendelson, the chief executive of Prushka Fast Debt Recovery, says people who bought property in the past three or four years took out much bigger loans because prices were at their peak.

"Consumer credit has blown out and that's not a situation we have seen before. That is a fact that has to come home to roost at some time," he says.

Mendelson also believes the nature of lending has changed and it is now harder for authorities to tell when large numbers of borrowers are stressed. "The Government needs to establish a default register," he says. "Real estate agents should be able to pass to the Reserve Bank data that shows whether a sale is through the owners, or through the owner at the bank's request, or a mortgagee sale."

Mendelson says he suspects that non-bank lenders may foreclose more readily on home borrowers than banks.

An August 10 House of Representatives economic committee hearing into home lending heard that although there are about 7 million home loans outstanding, there is very little data on non-bank lenders.

Prushka's submission was not the only one calling for more information on the non-bank sector and mortgage foreclosures. Ian Graham, the chief executive of PMI Mortgage Insurance, also warned the number of foreclosures is rising. Mortgage insurance companies provide a good insight into what is happening in the mortgage market because policies they write are called on when borrowers default.

"There is a clear trend up in the severity of defaults with a marked divergence between standard, non-standard [low doc] and other non-conforming loans," he says.

He says that, surprisingly, there are an increasing number of defaults among first home-buyers, and defaults within the first 12 months of the loan being settled are rising. "This raises questions as to the borrower's ability to service the mortgage loan at the time of approval," he says.

Graham says that 71 per cent of claims paid by the mortgage insurer have come from loans where the first default was reported within the first year of the loan being advanced. Ten per cent of these were first payment defaults.

Risky thinking

Peter Hall, the chief executive from another mortgage insurance firm, Genworth Financial, says this paints a picture of first home-buyers getting a loan and then significantly increasing their debt using credit cards.

"They get a loan, they buy a house and then they go out and get a couple of credit cards," Hall says.

"They put all sorts of things on those credit cards to fill the house. They have plasma TVs and new furniture.

"A lot of that debt is short-term, unsecured, high-rate debt.

"If you have a lot of equity in your house then maybe that is not a problem. But it can be a problem for a lot of younger people."

Hall says of the loans that go into default, about 87 per cent are sorted out without the home being sold. He says defaults do not come about because people have too much debt on their credit cards. "Usually, it is a major life-changing event, like the loss of a job or a marriage break-up," he says. "I don't think the criteria for getting a loan has become easier. But I think there has been a change in attitudes towards debt and saving."

This anecdotal reporting on the state of borrowers is supported by the Australian Bureau of Statistics's publication Australian Social Trends 2007.

Paul Atyeo, its assistant director of social analysis and reporting, says the income growth of low-income households has largely kept pace with middle- and high-income households over the past decade.

In poor households, income has grown by 2.7 per cent a year; middle-income families have seen their income grow 3 per cent; and at the top end of the scale, rich households have had a 3.4 per cent increase in income.

In the poorest households, only 0.4 per cent of a person worked and the average number of hours spent each week at work was eight.

The winners

Frank Stilwell, the author of Who Gets What, published this month by Cambridge University Press, says when you look at the percentage increases, they mean very little.

"But in dollar terms, low-income earners got an extra $24 a week in income over the two years to 2006; middle-income earners got $34 a week; and high-income earners got an increase in their income of $139 a week."

Stilwell says that the chief executives of the top 50 companies that make up the Business Council of Australia now earn 63 times average weekly earnings. "The ratio was 18 times 15 years ago.

"And that's just cash remuneration, not shares or bonuses or anything else they get," Stilwell says.

"There has been increased prosperity across the board but winner takes most."

Stilwell says four factors have contributed to an accumulation of wealth among the rich.

The first is what's happened in the labour market, where fewer Australians are employed full-time in secure, well-paid jobs.

The second is the housing market, where "if you own more than one house you win but if you own less than a house, you lose".

And if you accelerated your purchase to get a foothold in the market, you could easily be saddled with too much debt.

The third is changes to the tax system that favour those who can save and higher income-earners; and the fourth is the increase in company profits over wages.

"The gap between the rich and poor has widened. We have got more wealth but the inequality in the distribution of that wealth is now very marked in Australia," Stilwell says.

Easy money, volatile markets and job insecurity can be a toxic cocktail.

Who Gets What? Analysing Economic Inequality in Australia by Frank Stilwell & Kirrily Jordan is published by Cambridge University Press, $34.95rrp).

Keeping up appearances

"There is real wealth and there are all the trappings of wealth," says Robert Keavney, a chief investment strategist at Centric Wealth. "You might feel wealthy if you have a huge house, a nice car and a million dollar wardrobe.

"But if all that is acquired with debt, then that's not real wealth. Wealth is assets you invest to generate income to fund a lifestyle."

Keavney believes one of the biggest traps for young families is the mortgage re-draw facility. "It is one of the great unnoticed catastrophes of our time. In the past, families had a sense that they were paying off their debt. They don't have that with re-draw mortgages."

Keavney also laments the fact that investors forget about risk. And he says the downturn in the sharemarket and the trouble in the US subprime lending market mean people should be in quality assets right now.

Keavney thinks that consumers consume too much and borrow too easily.

"Wealth is having enough cash for that new car, or holiday or whatever else it is you need. People in their 20s are prepared to take on very big mortgages. Are they aiming too high?

"Everything has a price and that apartment might take 10 years too long to pay off, which in turn could impact on your ability to save for retirement.

"My wife says that people don't have modest expectations anymore and I think she is right."