Slumping house prices and a jittery sharemarket have led to the biggest decline in household wealth in seven years, underscoring pressure on the Reserve Bank to cut rates again.

Household wealth decreased 2.1 per cent in the final three months of last year, the largest drop since the third quarter of 2011, the Australian Bureau of Statistics said on Thursday. Household wealth per capita dropped by $10,198 to $404,320, falling for a second consecutive quarter.

The slumping property market has left a mark on Australian household wealth. Credit:Rob Homer

The decline was driven by land and property values, which slid for a fourth straight quarter, and financial assets as super funds were hit by falling share prices in the December quarter. The sharemarket has recouped losses since then, but house prices continued their declines.

Australia is seeing a reversal of its traditional wealth generation method of gearing up to the limit to buy a house and then inflating away debt with wage rises and gains from rising property values.