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MARCH KEY FIGURES
SYMBOLS AND OTHER USAGES
INTERSECTORAL FINANCIAL CLAIMS
At end of March Quarter 2004
At the end of March 2004, claims on non-financial corporations stood at: $400.8b from financial corporations; $269.7b from rest of the world; $131.0b from general government and $104.4b from households. Financial corporations financed claims on other sectors from net claims by households, $406.7b, and by rest of world, $199.3b.
ANALYSIS AND COMMENTS: MARKET SUMMARY
Deposit liabilities increased to $740.5b at the end of March 2004, following net transactions of $2.9b during the quarter, compared with transactions of $32.4b in the previous quarter. Transactions in bank deposits were $7.7b, down from the $26.2b recorded during the December quarter.
Short term security liabilities increased to $342.0b at the end of March 2004, with net issuance of $12.3b and valuations remaining steady during the quarter. $11.0b in one name paper was issued, of which banks issued $19.8b. There was a net increase of bills of exchange on issue of $1.3b for the quarter.
Total bond liabilities increased to $564.9b at the end of March 2004 following net issues of $33.0b and valuation decreases of $5.4b during the quarter. Banks issued a net $11.3b, of which $9.5b was issued offshore. Financial intermediaries n.e.c, mainly securitisation vehicles, issued $12.3b, of which $9.1b was issued offshore.
The value of derivative contracts on issue at the end of March 2004 decreased by $9.6b to $158.3b. With net settlements of -$15.3b.
Loan liabilities rose to $1,551.2b at the end of March 2004 following net transactions of $31.0b and valuation decreases of $0.2b during the quarter. Borrowing by households continued to be strong, raising $24.6b, while pension funds borrowed $6.4b and financial intermediaries borrowed $3.2b during the quarter. Other depository corporations repaid a net $5.5b and private non-financial corporations repaid $4.4b.
The listed share market increased by $26.9b to $827.9b at the end of March 2004, with net issues of $5.0b and valuation increases of $21.9b.
The value of the unlisted share market increased by $21.5b to $816.8b at the end of March 2004. There were net issues of $11.0b, with issues by other depository corporations of $4.5b and Australian investment overseas of $4.7b. Valuation increases amounted to $10.5b.
At the end of March 2004, the reserves of life offices and pension funds were $599.5b following net transactions during the quarter of $7.0b and valuation increases of $9.2b. General insurance prepayments and reserves were $58.1b.
During the March quarter 2004, total liabilities of national public non-financial corporations decreased by $3.3b to $85.7b. There was net redemption of debt securities of $0.8b and accounts payable increased by $0.5b. Liabilities of state and local public non-financial corporations increased by $1.1b to $138.4b.
Private non-financial corporations debt to equity ratio
From the end of March 2002 to the end of March 2004 the value of equity on issue increased by $79.2b. The value of debt outstanding rose $29.1b during the period. During the quarter, private non-financial corporation debt increased by $0.4b, while equities on issue increased by $16.0b. Over the March quarter 2004, the original debt to equity ratio fell and the value adjusted ratio was almost constant. The value adjusted ratio reflects the removal of price change from the original series.
During the March quarter 2004, financial corporations issued $31.2b in liabilities on a consolidated basis. Net issuers of liabilities were: banks $32.4b, financial intermediaries n.e.c. $13.4b, and pension funds $10.3b. Net redeemers were: other depository corporations $16.0b, the central bank $5.7b, life insurance corporations $2.0b, and other insurance corporations $1.0b.
During the quarter, banks increased their currency and deposits liabilities by $8.8b. They had net issuance in bonds of $10.0b, one name paper of $11.6b, and other accounts payable $5.2b. They also increased their loans and placements liabilities by $2.9b and net settlements of derivatives was $6.5b. Banks had an increase of $14.9b in financial assets during the quarter. Banks loaned a net $17.4b, with increases in loans to households of $10.9b, and to private non-financial corporations of $1.1b. They also increased their holdings of currency and deposits by $2.6b, bills of exchange by $1.0b, one name paper by $0.8b and equities by $0.7b. They reduced their holdings of derivatives by $5.5b and bonds by $1.7b
Other depository corporations
Funding of other depository corporations decreased by $16.0b during the March quarter 2004 following net redemptions in one name paper of $7.4b, loans and placements of $5.5b, and currency and deposits of $4.3b. These were partially offset by net issuance of equities of $4.5b. Financial assets decreased by $6.8b, through decreases in loans and placements of $3.6b, and in derivatives of $3.1b. These reductions were offset by increases in currency and deposits of $0.8b.
Life insurance corporations
At 31 March 2004, the financial assets of life insurance corporations stood at $187.0b, an increase of $0.7b from the previous quarter with net transactions of -$1.9b and valuation increases of $1.2b. During the quarter, there were net purchases of bonds of $1.2b, one name paper of $0.5b and loans and placements of $0.1b. There were net sales of currency and deposits of $2.5b, equity of $0.7b and bills of exchange of $0.3b. Pension fund claims against the reserves of life offices increased by $3.2b with net transactions of $2.1b and valuation increases of $1.1b. Other claims against the reserves of life offices decreased by $2.8b with withdrawals of $3.1b and valuation increases of $0.3b.
Net equity in reserves of pension funds was $561.3b at the end of the March quarter 2004, an increase of $19.0b (4%), following net transactions of $10.1b and $8.9b valuation increases during the quarter. Most asset classes experienced increases during the quarter, with transactions in long term debt securities of $4.4b, net equity of pension funds in life office reserves of $2.1b, currency and deposits of $1.5b, equities of $1.1b, loans and placements of $0.9b and short term debt securities of $0.3b. Transactions in unfunded superannuation claims were -$0.2b.
Other insurance corporations
Liability transactions were -$1.0b, to which net decreases in other accounts payable of $0.5b and loans and placements of $0.4b were the largest contributors. Transactions in financial assets of other insurance corporations fell by $1.8b due mainly to net decreases in one name paper of $0.7b, loans and placements of $0.6b and other accounts receivable of $0.6b. These decreases were partially offset by an increase in currency and deposits of $0.9b.
Central borrowing authorities
Total liabilities of central borrowing authorities were $106.8b at the end of the March quarter 2004. The authorities had net issue in bonds of $1.7b, a net redemption in one name paper of $0.8b and an increase in loans and placements liabilities of $0.6b.
Financial intermediaries n.e.c.
Financial intermediaries n.e.c. increased their liabilities by $13.4b during the quarter, mainly through increases in issue of bonds offshore of $9.1b, loans and placements of $3.0b and one name paper of $1.0b. Financial assets increased by $17.6b, mainly through loans to households which increased by $12.6b and purchases of equity issued by rest of world of $2.2b.
Net flow of currency and deposits to banks
Net transactions in currency and deposit liabilities of banks during the March quarter 2004 were $8.8b. Sectors that increased currency and deposit assets during the quarter included households ($2.3b), central borrowing authorities ($1.4b), private non-financial corporations ($1.1b) and other depository corporations ($0.9b).
Asset portfolio of life insurance corporations and pension funds at end of quarter
At the end of March quarter 2004, life insurance corporations held $111.0b in shares and other equity (59% of their financial assets), of which $89.5b were in resident companies and $21.6b in non-resident companies; $38.8b in bonds (21% of their financial assets), of which $34.7b were in Australian bonds and $4.1b in non-resident bonds; and $18.1b in short term securities (10% of their financial assets).
At the end of March quarter 2004, pension funds held $264.2b in shares and other equity (49% of their financial assets), of which $191.4b were in resident companies and $72.8b in non-resident companies. They held $130.2b of net equity in life office reserves (24% of their financial assets); and $49.1b in bonds (9% of their financial assets), of which $25.3b were Australian bonds and $23.8b were non-resident bonds.
Financial claims between households, life insurance companies, pension funds and investment managers at end of quarter
At the end of March quarter 2004, households had claims against the reserves of life insurance corporations of $38.2b and pension funds of $561.3b. Pension funds had claims against the reserves of life insurance corporations of $130.2b. Life insurance corporations invested $138.5b of their financial assets through investment managers and pension funds invested $211.1b through investment managers.
Asset portfolio of other insurance corporations at end of quarter
The graph below shows that at the end of March quarter 2004 other insurance corporations held $26.7b in bonds (31% of total financial assets), of which $25.5b were issued domestically. Other insurance corporations held $21.5b in shares and other equity (25% of total financial assets), of which $18.7b were in resident corporations and $2.8b in non-resident corporations.
Central borrowing authorities net issue of debt securities
Central borrowing authorities had net issue of bonds of $1.7b and a net redemption in one name paper of $0.8b in the March 2004 quarter.
Financial intermediaries n.e.c. net issue of debt securities
During the March quarter 2004, financial intermediaries n.e.c. made a net issuance of bonds of $7.5b and a net issuance of short term paper of $1.2b.
During the March quarter 2004, general government transactions resulted in a net increase in financial position of $1.0b (see table 33, March Quarter 2004). National general government increased its liabilities by $4.7b during the March quarter 2004 and increased its financial assets by $3.2b to record a net change in financial position of –$1.4b. Assets increased due to a $4.7b rise in other accounts receivable, offset by a rise in other accounts payable of $3.6b. At the end of March 2004, national general
government had total liabilities of $178.0b and total financial assets of $90.8b.
Transactions in state and local general government financial assets were $4.2b in the March quarter 2004, while transactions in total liabilities were $1.7b resulting in an increase in financial position of $2.4b. At the end of the quarter, state and local general government had total liabilities of $101.9b and total financial assets of $131.1b.
Change in financial position
National government issue of debt securities
The accompanying graph illustrates the national general government’s bond issuance, with a net increase of $0.9b in treasury bonds during the quarter.
Households borrowed a total of $24.6b during the quarter in the form of loans. Deposit assets increased by $3.3b, of which bank deposits accounted for $2.3b. Net contributions to life insurance and pension fund reserves were $7.0b while net contributions to unfunded superannuation schemes were $2.3b.
Households purchased a net $4.1b in equities during the March quarter 2004, the major contributors being purchases of $1.8b of private non-financial corporation shares, $1.2b of financial intermediaries n.e.c shares and $0.9b in life insurance companies. These were offset by the sale of $0.2b of other insurance corporations shares.
At the close of the quarter, households' stock of financial assets was $1,438.8b. This was up $31.3b from the revised previous quarter number, following net transactions of $13.4b and valuation increases of $17.9b. Major asset holdings were net equity in reserves of life insurance corporations and pension funds of $599.5b, currency and deposits of $346.2b, equities of $259.7b, and unfunded superannuation claims of $145.9b.
Household net borrowing and debt to liquid asset ratio
Of the net $24.6b borrowed by households, bank loans accounted for $10.9b and these were mainly for the purpose of housing. Of the bank housing loans, $3.3b were borrowed for owner occupied housing and $3.7b for investment housing. This borrowing raised household bank loan liabilities to $543.8b and total household liabilities to $766.2b at the end of the quarter. The graph below illustrates that the debt to liquid asset ratio at 31 March 2004 was 120.1%, an increase of 1% from the revised December quarter ratio. During the March quarter, the ratio was influenced by an overall increase of 3% in household borrowing for the quarter and a 3% increase in liquid assets, of which the major contributors were deposits and equities.
Insurance and pension claims
During the March quarter 2004, households' net equity in reserves of pension funds increased $19.0b, made up of $10.1b net contributions and $8.9b valuation increases, bringing household net equity in pension funds to $561.3b. Net equity in reserves of life insurance corporations decreased by $2.8b, made up of $3.1b net withdrawals and $0.3b valuation increases, bringing the household net equity in life insurance to $38.2b. Households' unfunded superannuation claims increased by $2.3b during the quarter. Prepayments of premiums and claims against reserves in general insurance corporations decreased by $0.2b.
Net purchases of bonds
The accompanying graph shows that non-residents purchased $25.5b of Australian bonds during the March quarter 2004, an increase of $15.5b compared with the December quarter 2003.
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