HOUSEHOLD ACCUMULATION OF WEALTH

		Amount outstanding at end	Transactions during	Other changes in volume during (a)	Holding gains (+)/losses (-) during	Amount outstanding at end
		Sep Qtr 2014	Dec Qtr 2014	Dec Qtr 2014	Dec Qtr 2014	Dec Qtr 2014
		$b	$b	$b	$b	$b
Non-financial assets
	Land and dwellings	5 267.3	11.1	6.8	100.8	5 386.1
	Other non-financial assets	616.9	5.0	-	2.4	624.3
Financial assets		3 862.1	45.5	-	53.2	3 960.8
Liabilities		2 052.1	30.0	-	5.0	2 087.1
Net worth		7 694.3	31.6	6.8	151.3	7 884.0
Memorandum item
	Consumer durables (b)	301.8	4.6	-	-2.7	303.7
- nil or rounded to zero (including null cells) (a) Not all other changes in volume are separately identifiable. Some have been shown as holding gains. (b) Consumer durables are not included in net worth.

At the end of December quarter 2014, household net worth was $7,884.0b, made up predominantly of $5,386.1b of land and dwelling assets and $3,960.8b of financial assets, less $2,087.1b of household liabilities. During the quarter, household net worth increased by $189.7b, driven mainly by an increase in holding gains of $151.3b, of which holding gains in land and dwellings and financial assets was $100.8b and $53.2b respectively.

The increase of $31.6b in transactions in net worth was driven by $11.1b increase in net capital formation of dwellings; and net financial transactions of $15.5b, of which transactions in financial assets were $45.5b and liabilities were $30.0b. The December quarter 2014 increase in transactions in financial assets was driven by $22.8b increase in deposits and an increase of $18.5b in superannuation assets (net equity in reserves of pension funds). These were partially offset by a $2.8b decrease in other accounts receivable. Transactions in liabilities in December quarter 2014 were driven by $31.1b increase in long term loan borrowing.

Graph 1. Components of Household balance sheet


Both household assets and household liabilities continued to grow over December quarter 2014, resulting in 2.5% growth in household net worth. Household financial assets grew faster than both residential land and dwelling assets and financial liabilities, growing by 2.6% ($98.7b), 2.4% ($118.2b) and 1.7% ($35.0b) respectively.

For the last eight quarters up to December 2014, the composition of household financial assets has remained constant, with insurance technical reserves- superannuation, currency and deposits and shares and other equity, on average being 21.6%, 9.0% and 6.5% respectively of total assets since March quarter 2013. For the same period , household residential land and dwelling asset composition has shifted upwards from 50.3% of household assets at the end of March quarter 2013 to 51.3% at the end of December quarter 2014.


HOUSEHOLD SECTOR FINANCIAL RATIOS

The financial ratios graphs presented here are derived from the household balance sheet, financial account and income account (Australian National Accounts: National Income, Expenditure and Product (cat. no. 5206.0)).

Graph 2. Interest payable to income ratio


The interest payable to income ratio represents the proportion of household gross disposable income that is required to meet interest payments. Interest payable in the graph is the "adjusted interest payable". It includes the financial intermediation services indirectly measured (FISIM) on the dwelling loan plus the dwelling interest payable from the household income account. It therefore represents the total nominal amounts paid as interest by the household sector. The interest payable to income ratio is relatively volatile in the short term, however some long term trends may be observed. After a period of volatility during the Global Financial Crisis, the ratio stabilised from March 2010 onwards, settling into a gradual downward trend. The ratio at December quarter 2014 was 10.4%, an increase of 0.1% from the September quarter ratio of 10.3%.

Graph 3. Gearing ratios


The mortgage debt to residential land and dwellings ratio shows the extent that household residential real estate assets are geared. Since March 2010, the ratio has increased, recording a peak of 30.6% at 30 September 2012. In the last two years the ratio has stabilised and is at 29.0% in December quarter 2014, indicating that household mortgage debt is growing at the same rate as residential real estate owned by the household sector.

The debt to assets ratio gives an indication of the extent that the overall household balance sheet is geared. That is the degree to which assets are dependent on debt. At 30 December 2014, household debt was equal to 20.9% of assets, down from 30 September 2014 when the ratio was 21.1%.

The debt to liquid assets ratio reflects the ability of the household sector to extinguish debts in a short period of time using their readily available, or liquid, assets. The following are classified as liquid assets: currency and deposits, short and long term debt securities, and equities. The ratio of household debt to liquid assets fell from 135.8% at 30 September 2014 to 134.2% per cent at 31 December 2014.


ANALYTICAL MEASURES OF INCOME, CONSUMPTION AND WEALTH

Graph 4. Household net saving


For the current quarter, household net saving was $24.0b and with the addition of the real wealth effects, net saving increased to $160.5b. The largest driver of the increase in other changes in real net wealth was real holding gains, which made up $129.1b of the $136.5b increase. This in turn was largely driven by an $85.6b in real holding gains for land and dwelling assets, which has been the biggest driver of real holding gains since December quarter 2013, and $41.8b in real holding gains on financial assets. This marks the second quarter of growth for real holding gains for financial assets after three quarters of declining real holding gains from September quarter 2013 to June quarter 2014.