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5232.0 - Australian National Accounts: Financial Accounts, Jun 2006  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 29/09/2006   
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JUNE KEY FIGURES

Credit market outstandings at end
Demand for credit during
Other changes during
Credit market outstandings at end
Mar Qtr 2006
Jun Qtr 2006
Jun Qtr 2006
Jun Qtr 2006



Non-financial domestic sectors
$b
$b
$b
$b

Non-financial corporations
Private
1 503.8
38.3
-10.2
1 531.9
National public
38.8
-0.8
-0.6
37.4
State and local public
46.7
0.5
0.0
47.2
General government
National
67.3
0.7
-2.7
65.4
State and local
33.1
-0.1
0.0
33.0
Households
974.0
34.4
0.0
1 008.4
Total
2 663.7
73.1
-13.6
2 723.3

Total demand for credit
Graph: Total demand for credit

Credit market outstandings
Graph: Credit market oustandings



JUNE KEY POINTS


SUMMARY

  • Total demand for credit by the non-financial domestic sectors for the June quarter 2006 was $73.1b, an increase of $24.0b on the revised previous quarter estimate. Increased raisings by private non-financial corporations (up $15.9b) and borrowing by households (up $11.5b) were the main contributors to the rise.


NON-FINANCIAL CORPORATIONS
  • Private non-financial corporations raised a net $38.3b, with share raisings of $14.5b and loans of $12.9b.
  • National public non-financial corporations repaid a net $0.8b and state and local public non-financial corporations raised a net $0.5b during the quarter.


GENERAL GOVERNMENT
  • National general government raised a net $0.7b. State and local general government repaid a net $0.1b.


HOUSEHOLDS
  • Households raised a net $34.4b during the June quarter 2006, up from the $22.9b raised during the March quarter 2006. Households borrowed $21.4b from banks (of which $10.0b was for owner-occupied housing and $5.2b for investment housing) and $13.3b from Financial intermediaries n.e.c., (up $3.4b).


NOTES

FORTHCOMING ISSUES

ISSUE (QUARTER) Release Date
September 2006 21 December 2006
December 2006 30 March 2007



CHANGES TO THIS ISSUE

There are no changes in this issue.



SIGNIFICANT EVENTS

There were no privatisations or other significant structural changes impacting the aggregates.



REVISIONS IN THIS ISSUE

There have been significant revisions to previously published aggregates through:

  • application of 15 quarters' revisions in the International Investment Survey, back to September quarter 2002. The principal impacts are on equity series by application of improved approximations to market valuations. See also page 2 of Balance of Payments and International Investment Position (cat. no. 5302.0) June quarter 2006.
  • quality assurance work undertaken with providers of the ABS Survey of Financial Information and APRA administration data sets, resulting in revisions back to September 2002
  • improved estimation methodology for allocating the asset holders of bonds issued in Australia by non-residents (kangaroo bonds). The major impact of the methodology has been the reduction of pension fund's holding of kangaroo bonds and an increase in their holdings of unlisted equity issued by domestic sectors. As stated in the footnote to table 37 and 45, the issues of kangaroo bonds are recorded at face value.
  • investigation into the apparent demand for Australian Government Treasury Bonds. In addition to adjustments to remove double counting by asset holders through the use of repurchase agreements, supply (liability issuances) has been increased to accommodate securities lending activity by the Australian Office of Financial Management.


INQUIRIES

For further information about these and related statistics, contact the National Information and Referral Service on 1300 135 070 or Amanda Seneviratne on Canberra (02) 6252 5338.



ANALYSIS AND COMMENTS SECTORAL SUMMARY


INTERSECTORAL FINANCIAL FLOWS

During June Quarter 2006

Significant flows during the June quarter 2006 were the net $15.0b and $10.9b borrowed by non-financial corporations from rest of the world and financial corporations, respectively. General government repaid a net $13.0b to financial corporations. Households borrowed a net $2.5b from financial corporations and non-financial corporations raised net $3.3b from households.

Diagram: During June Quarter 2006


During Year 2005-2006

Significant flows during the year ended June 2006 were the net $42.9b financial corporations borrowed from rest of the world; the net $ 42.5b raised by non-financial corporations from financial corporations; the net $24.3b borrowed by households from financial corporations, and the net $24.2b repaid by general government to financial corporations.

Diagram: During Year 2005-2006



ANALYSIS AND COMMENTS MARKET SUMMARY


FINANCIAL MARKET ANALYSIS

Selected Financial Instruments

Outstanding at end
Trans- actions during
Other changes during
Outstanding at end
Mar Qtr 2006
Jun Qtr 2006
Jun Qtr 2006
Jun Qtr 2006
Selected Financial Instruments
$b
$b
$b
$b

Currency and deposits
934.8
45.6
-2.3
978.1
Short term debt securities
414.3
14.1
-1.1
427.3
Long term debt securities
823.2
32.9
-9.4
846.7
Derivatives
164.6
-20.8
12.1
155.9
Loans and placements
2 098.0
70.5
-6.2
2 162.2
Listed shares
1 212.4
19.0
-15.3
1 216.0
Unlisted shares
1 084.4
20.0
-6.3
1 098.1
Reserves of life offices and pension funds
918.3
21.7
-8.7
931.4
General insurance prepayments and reserves
63.4
-0.1
0.0
63.3


Deposit liabilities increased to $978.1b at the end of June 2006, following transactions of $45.6b during the quarter, compared with transactions of $12.4b in the previous quarter. Banks accepted $26.7b (up $20.6b on that accepted last quarter), central bank accepted $9.6b (up $5.4b), and rest of the world accepted $5.0b (up $8.4b).


Short term security liabilities increased to $427.3b at the end of June 2006. There were issues of $14.2b, comprised of $3.6b in bills of exchange and $10.6b in one name paper issued. Total long term debt security liabilities increased to $846.7b at the end of June 2006, following issues of $32.9b during the quarter. Banks issued $13.8b, of which $10.1b was issued domestically and $3.6b was issued offshore. Financial intermediaries n.e.c. (mainly securitisation vehicles) issued $12.0b, of which $11.4b was issued domestically. Private non-financial corporations issued $7.1b, of which $7.0b was issued offshore.


The value of derivative contracts on issue at the end of June 2006 decreased by $8.7b to $155.9b. Components of the decrease were net settlements of $20.8b and valuation increases of $12.1b.


Loan liabilities rose to $2,162.2b at the end of June 2006, following transactions of $70.5b during the quarter. Borrowing by households was $33.4b, while private non-financial corporations borrowed $15.0b and rest of world borrowed $10.5b.


The listed share market increased by $3.6b to $1,216.0b at the end of June 2006, with valuation decreases of $15.4b and transactions of $19.0b. Private non-financial corporations had issues of $13.4b and financial intermediaries n.e.c. issued $4.6b. The value of the unlisted share market increased by $13.7 to $1,098.1b at the end of June 2006. Valuation decreases were $6.3b and transactions were $20.0b. Rest of the world had issues of $10.7b and financial intermediaries n.e.c. issued $5.7b.


At the end of June 2006, the reserves of life offices and pension funds were $931.4b following transactions during the quarter of $21.7b and valuation decreases of $8.7b. General insurance prepayments and reserves were $63.3b.



SECTORAL ANALYSIS


NON-FINANCIAL CORPORATIONS

Summary

Private non-financial corporations raised a net $38.4b (excluding derivatives and accounts payable) during the June quarter 2006. They borrowed $12.9b in loans and made a net issue of $10.9b in debt securities. Share issues rose a net $14.5b during the quarter. These transactions resulted in total borrowings outstanding of $567.0b and total equity on issue of $964.8b.

PRIVATE NON-FINANCIAL CORPORATIONS, NET ISSUE OF EQUITY AND BORROWINGS
Graph: Private non-financial corporations, net issue of equity and borrowings



During the June quarter 2006, total liabilities of national public non-financial corporations decreased by $2.1b following repayments of $0.8b and valuation decreases of $1.3b. Liabilities of state and local public non-financial corporations increased by $1.5b to $139.5b.


Private non-financial corporations debt to equity ratio

From the end of June 2004 to the end of June 2006, the value of equity on issue increased by $254.1b. The value of debt outstanding rose $140.6b during the period. During the quarter, private non-financial corporation debt increased by $20.1b, while equities on issue increased by $7.4b. Over the June quarter 2006, the original debt to equity ratio increased from 0.70 to 0.72 and the adjusted ratio fell from 1.49 to 1.48. The adjusted ratio reflects the removal of price change from the original series.

Debt to Equity ratio - june 1995 Base
Graph: Debt to Equity ratio – june 1995 Base




FINANCIAL CORPORATIONS

Summary

During the June quarter 2006, financial corporations issued $71.0b liabilities on a consolidated basis (see table 33, June quarter 2006). Issuers of liabilities were: banks, $29.1b; pension funds, $21.5b; financial intermediaries n.e.c., $20.3b; the central bank $10.0b; life insurance corporations $2.1b and other depository corporations, $0.7b. Central borrowing authorities redeemed liabilities of $3.1b.


Banks

Transactions of financial assets of banks were $49.0b during the quarter. Banks loaned a net $44.0b, of which loans to households were $21.4b, private non-financial corporations were $10.7b and rest of the world were $10.6. Transactions in bank assets holdings were: currency and deposits $5.7, bills of exchange $4.3b and equities $3.3b. These were offset by redemptions of derivatives $7.5b, bonds $1.8b and one name paper $0.5b.


During the quarter, transactions of banks’ currency and deposits liabilities were $26.4b. They had issuance in bonds of $12.0b and one name paper of $4.0b. These were offset by net settlements of derivatives of $8.2b and the redemption of bills of exchange, $6.1b.


Other depository corporations

Transactions of other depository corporations liabilities increased by $0.7b during the June quarter 2006, driven mainly by transactions in currency and deposits of $4.6b. This was offset by net settlements of derivatives of $3.7b and bond redemptions of $2.3b. There was a net decrease in the holdings of financial assets by $6.6b, with the main contributors being a net sale of one name paper, $4.2b, and a decrease in the holding of derivatives of $3.8b. The decrease in the holdings were partially offset by a net increase in bond transaction $2.0b and loans and placements issued, $0.9b.


Life insurance corporations

At the end of June quarter 2006, the financial assets of life insurance corporations stood at $230.7b, a decrease of $2.2b from the previous quarter. Net transactions were $1.5b and valuation decreases were $ 3.7b. During the quarter, there were increases in holdings of bonds of $3.9b and currency and deposits of $0.7b. This was offset by net sale of equities, $1.4b, and one name paper, $1.5b. Pension fund claims against the reserves of life offices increased by $0.5b following net transactions of $3.6b and valuation decreases of $3.1b. Households claims against the reserves of life offices decreased by $1.4b following net transactions of $-0.2b and valuation decreases of $1.2b.


Pension funds

Net equity in reserves of pension funds was $871.3b at the end of the June quarter 2006, an increase of $14.4b. This follows net transactions of $21.9b and valuation decreases of $7.5b during the quarter. Assets increased due to transactions in equities of $10.9b, currency and deposits of $5.8b, other accounts receivable of $2.0b, loans and placements of $0.9b and bonds of $0.4b. These were partially offset by the sale of one name paper of $1.7b and holdings of bills of exchange of $1.2b.


Other insurance corporations

Net transactions in financial assets of other insurance corporations were $2.0b during the June quarter 2006. The main contributors were other accounts receivable, $1.8b, one name paper, $0.5b and bonds $0.3b. These were partially offset by borrowers paying off their loans and placements, $0.6b. During the June quarter, net liability transactions of other insurance corporations were $0.1b.


Central borrowing authorities

Total liabilities of central borrowing authorities was $116.4b at the end of the June quarter 2006. During the quarter, the authorities increased their loans and placements borrowed by $2.3b, this was offset by a redemption of both bonds, $3.0b and one name paper, $1.4b. During the June quarter, net asset transactions of central borrowing authorities were -$7.4b, main contributors being the sale of one name paper of $4.1b and the holdings of bills of exchange of $3.0b.


Financial intermediaries n.e.c.

At the end of the June quarter 2006, net liabilities of financial intermediaries n.e.c. were $533.4b, with unlisted shares of $174.9b on issue. Net liability transactions of financial intermediaries n.e.c. were $20.3b during the quarter, with bonds issued in Australia of $7.2b, loans and placements of $4.8b and unlisted shares of $4.7b. During the June quarter 2006, transactions in financial assets were $23.5b, with loans and placements of $13.7b and equities of $10.4b.


Net flow of currency and deposits to banks

Transactions in currency and deposit liabilities of banks during the June quarter 2006 were $26.4b. The transactions in currency and deposit assets of private non-financial corporations, $8.1b, rest of the world, $6.3b, pension funds, $5.7b and households, $3.3b. These were partially offset by reductions in bank deposits by other depository corporations of $0.6b.

CURRENCY AND DEPOSITS LIABILITIES, BANKS
Graph: Net flow of currency and deposits to banks



Financial asset portfolio of life insurance corporations and pension funds at end of quarter

At the end of the June quarter 2006, life insurance corporations held $142.3b in shares and other equity (62% of their financial assets), of which $118.2b was in resident companies and $24.1b was in non-resident companies; $46.2b in bonds (20% of their financial assets), of which $37.3b was in Australian bonds and $8.9b in non-resident bonds; and $17.8b in short term securities (8% of their financial assets).


At the end of the June quarter 2006, pension funds held $474.0b in shares and other equity (56% of their financial assets), of which $343.1b was in resident companies and $130.9b was in non-resident companies. They held $154.1b of the net equity in life office reserves (18% of their financial assets); and $75.5b in bonds (9% of their financial assets), of which $45.9b were Australian bonds and $29.6b were non-resident bonds.

Graph: Financial Accounts, Quarters (June 1988 to current) ; Consolidated Subsector/Instrument, Assets, Total, Original


Financial claims between households, life insurance companies, pension funds and investment managers at end of quarter

At the end of the June quarter 2006, households had claims against the reserves of life insurance corporations of $60.1b and pension funds of $871.3b. Pension funds had claims against the reserves of life insurance corporations of $154.1b. Life insurance corporations invested $142.5b of their financial assets through investment managers, and pension funds invested $393.2b through investment managers.

Diagram: Financial claims between households, life insurance companies, pension funds and investment managers at end of quarter


Financial asset portfolio of other insurance corporations at end of quarter

The graph below shows that at the end of the June quarter 2006, other insurance corporations held $41.0b in shares and other equity (35% of total financial assets), of which $32.8b was in resident corporations; $33.9b in bonds (29% of total financial assets), of which $29.6b was issued by resident corporations and $10.2b of short-term securities ( 9% of total financial assets)

Graph: Other insurance corporations, assets


Central borrowing authorities net issue of debt securities

During the June quarter 2006, central borrowing authorities made a net redemption of bonds of $3.0b, and a net redemption of one name paper of $1.4b.

Graph: Central borrowing authorities - net issue of debt securities


Financial intermediaries n.e.c. net issue of debt securities

During the June quarter 2006, financial intermediaries n.e.c. made a net issue of bonds of $7.7b and net $0.0b issuance of short term paper.

Graph: Financial intermediaries n.e.c. - net issue of debt securities



GENERAL GOVERNMENT

Summary

During the June quarter 2006, consolidated general government transactions resulted in a net change in financial position of $5.1b (see table 33, June quarter 2006).


The net change in financial position for national general government was $1.0b. The liability transactions of national general government during the June quarter were $7.8b. Main contributors were accounts payable, $7.1b and the issuance of bonds in Australia, $0.8b.


During the June quarter, asset transactions for national general government were $8.8b. Main contributors were currency and deposits, $9.5b partially offset by accounts receivable of $-2.4b. At the end of June 2006, national general government had total liabilities of $199.3b and total financial assets of $134.4b.


Transactions in state and local general government financial assets were $4.0b in the June quarter 2006, while transactions in total liabilities were $-0.2b, resulting in a change in financial position of $4.1b. At the end of the quarter, state and local general government had total liabilities of $99.8b and total financial assets of $149.6b.


Change in financial position

Graph: Change in financial position, general government



National government issue of debt securities

The accompanying graph illustrates the national general government’s bond issuance. The net issue of treasury bonds was $0.8b during the quarter.

Graph: National general government - net issue of debt securities



HOUSEHOLDS

Summary

Household change in financial position was $-10.5b during the June quarter 2006. Households borrowed a total of $33.4b in the form of loans and deposited $5.3b, of which $3.3b were bank deposits. Net contributions to life insurance and pension fund reserves were $21.7b while net contributions to unfunded superannuation schemes were $1.0b.


Household purchased a net $5.0b in equities during the June quarter 2006, the major contributors being purchases of $3.8b of private non-financial corporation shares and $2.2b of financial intermediaries n.e.c. shares. These were offset by the $0.6b sale of bank and $0.4b sale of national public non-financial corporation shares.


At the close of the quarter, households' stock of financial assets was $1,979.3b. This was up $14.7b from the revised previous quarter number, following net transactions of $29.1b and valuation decreases of $6.4b. Major asset holdings were net equity in reserves of life insurance corporations and pension funds of $931.4b, currency and deposits of $407.0b, equities of $374.2b, and unfunded superannuation claims of $155.4b.


Household net borrowing and debt to liquid asset ratio

Of the net $33.4b borrowed by households during the June quarter 2006, bank loans were $21.4b and borrowing from financial intermediaries n.e.c. was $13.3b. Of the bank loans, $10.0b was borrowed for owner occupied housing and $5.2b for investment housing.


The graph below illustrates that the debt to liquid assets ratio at the end of June 2006 was at 123.6%, an increase of 4.1 percentage points from the revised March quarter ratio. The ratio was influenced by an increase from the previous quarter of 3.5 % in total outstanding household borrowings and a marginal increase in total liquid assets of 0.1%. Major contributors to liquid assets were deposits (up 1.3%) and holdings of equities (down 1.4%).

Graph: Household debt to liquid assets ratio


Insurance and pension claims

During the June quarter 2006, households' net equity in reserves of pension funds increased $14.4b, made up of $21.9b transactions and $7.5b valuation decreases, bringing household net equity in pension funds to $871.3b. Net equity in reserves of life insurance corporations decreased $1.4b, made up of -$0.2b transactions and $1.2b valuation decreases, bringing the household net equity in life insurance to $60.1b. Net transactions in households' unfunded superannuation claims were $1.0b during the quarter. Prepayments of premiums and claims against reserves in general insurance corporations was -$0.1b.



REST OF THE WORLD

Summary

Non-residents invested a net $38.4.0b in Australian financial assets during the June quarter 2006, resulting in $1,335.3b of Australian financial assets held by non-residents, up $27.5b from the March quarter (of which $10.9b were valuation decreases). There were net purchases of bonds, $17.5b (of which, $7.3b was issued by private non-financial corporations), one name paper, $10.0b (of which, $8.5b was issued by banks) and equity, $6.8b (of which $5.8b was issued by private non-financial corporations) and an increase in their holdings of currency and deposits assets, $6.6b. These were partially offset by a reduction in net settlements of derivatives in an asset position of $5.6b.


Australian residents purchased foreign financial assets worth $26.4b during the June quarter 2006. The total value of foreign assets held by Australian residents increased to $794.4b at the end of the quarter, up $19.7b from the March quarter (of which $6.7b were valuation decreases). Residents made net purchases of equity ($10.7b) and bonds ($3.1b), and provided loans and placements ($10.5b) and currency and deposits ($5.0b) . These were partially offset by net settlements of derivatives in a net asset position of $6.3b.


Net purchases of equities

During the June quarter 2006 non-residents acquired a net $6.8b in equities, an increase of $0.1b compared with the March quarter 2006.

Graph: Net purchases of equities by non-residents


Net purchases of bonds

Non-residents purchased $17.5b of Australian bonds during the June quarter 2006, a decrease of $0.3b compared with the March quarter 2006.

Graph: Net purchases of bonds

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