HOUSEHOLD SECTOR SUMMARY

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 2017	Dec Qtr 2017	Dec Qtr 2017	Dec Qtr 2017	Dec Qtr 2017
		$b	$b	$b	$b	$b
Non-financial assets
	Land and dwellings	6 747.7	10.8	8.2	74.1	6 840.8
	Other non-financial assets	645.9	4.6	-	2.3	652.8
Financial assets		4 918.1	40.4	-	83.0	5 041.5
Liabilities		2 311.1	27.0	-	4.7	2 342.8
Net worth		10 000.6	28.8	8.2	154.7	10 192.3
Memorandum item
	Consumer durables (b)	376.4	5.6	-	-3.8	378.3
- 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.

Household net worth was $10,192.3b at the end of December quarter 2017, comprising predominantly of land and dwelling assets, financial assets, and household liabilities. During the quarter, household net worth increased by $191.7b driven by holding gains (real and neutral) of $154.7b.

Holding gains on financial assets were $83.0b in December quarter 2017, driven by valuation increases in insurance technical reserves, and the equities market. Holding gains on land and dwellings were $74.1b. Households recorded real holding gains on land and dwellings this quarter of $51.9b after reporting a real holding loss in the September 2017 quarter. The real holding loss in September quarter 2017 was the first recorded since December quarter 2015. Real holding losses occur when the increase in the value of assets is less than the general price increase.

Transactions in net worth were $28.8b. Net capital formation recorded $15.4b, driven by net acquisitions of land and dwellings. Net acquisition of financial assets were $40.4b, the major contributors of which were net equity in reserves of pension funds, and deposits. Net incurrence of liabilities were $27.0b driven by transactions in liabilities of long term loans.




Household assets outgrew liabilities during December quarter 2017, resulting in a 1.9% quarterly growth in household net worth, recovering from the 0.1% decline last quarter. Of the 1.9% increase in net worth this quarter, holding gains contributed 1.5 percentage points to the growth.

Financial assets were the largest contributor to growth in household net worth increasing 2.5%. This result was driven by a 3.1% increase in insurance technical reserves, and a 2.8% increase in shares and other equities, both of which were primarily due to holding gains on these financial assets.

Household residential land and dwellings was the next largest contributor to growth, increasing 1.4% in December quarter 2017, a stronger result than the 0.7% fall reported in the September quarter 2017.


HOUSEHOLD SECTOR FINANCIAL RATIOS




The interest payable to income ratio at December quarter 2017 increased to 10.1%, from the September quarter 2017 ratio of 9.9%. This indicates that the proportion of household gross disposable income required to meet interest payments increased slightly in the December quarter.




The mortgage debt to residential land and dwellings ratio remained unchanged from the September quarter 2017 result of 26.4%, indicating that the value of residential real estate owned by households grew at the same pace as household mortgage debt for the past two quarters.

The debt to assets ratio gives an indication of the extent to which the overall household balance sheet is geared. Household debt equalled 18.7% of assets at 31 December 2017, decreasing from 18.8% in September quarter 2017. This ratio has remained stable over recent quarters, reporting results between 18.6% and 19.0% since September quarter 2016. This highlights that the degree to which household assets are dependent on debt has been consistent in recent years.

The ratio of household debt to liquid assets decreased from 115.4% at 30 September 2017 to 114.8% at 31 December 2017, indicating holdings of liquid assets outgrew debt during the quarter. The growth in liquid assets was driven by increases in equities and deposits. Household debt have exceeded 100% of liquid assets since 30 September 2002, peaking at 129.8% at 30 June 2011. Although the ratio continues to fall from this high, it remains at an elevated level, indicating Households may not be able to hurriedly extinguish debt if required.


ANALYTICAL MEASURES OF INCOME, CONSUMPTION AND WEALTH




Household net saving was $3.4b at 31 December 2017, decreasing from $21.4b at 30 September 2017. When other changes in real net wealth, commonly known as the wealth effect, is added to net saving, the value increases from -$64.3b in September 2017 to $133.8b in December quarter 2017. This was largely driven by real holding gains in financial assets and in land and dwelling assets.




The addition of $130.5b in other changes in real net wealth (wealth effects) to household gross disposable income, increased household income from $303.2b to $433.7b in December quarter 2017. This follows negative wealth effects in September quarter 2017 of -$85.7b, which was driven by real holding losses in land and dwelling assets and financial assets. Both assets recovered in December quarter 2017, resulting in positive impacts on real household wealth.