5232.0 - Australian National Accounts: Financial Accounts, Dec 2003
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 26/03/2004
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DECEMBER QUARTER 2003 KEY FIGURES
SYMBOLS AND OTHER USAGES
NOTES ON ESTIMATES
Late in the December 2003 quarter a major financial institution demerged foreign subsidiaries and this publication has taken the demerger transactions into account. Details of the demerger transactions became available after the close off for the Balance of Payments and International Investment Position (cat. no. 5302.0) December 2003 release. The demerger transactions do not impact the value of the international investment position or balance on financial account. However, the components of international investment flows during the quarter and position at the end of the quarter in this publication are slightly different to the Balance of Payments as a result. Revisions due to the demerger transactions will be reflected in the next Balance of Payments release.
Also the treatment of some of the demerger transactions in accordance with statistical standards has resulted in some differences with how the demerger transactions appeared in ASX data.
Revisions in this issue
The data incorporate the results of quality assurance work undertaken with providers and other revisions back to March 2002 quarter. In consultation with the Australian Prudential Regulatory Authority (APRA) and the Reserve Bank, some improvements have been made to statistics of Registered Financial Corporations (finance companies and money market corporations).
For more information about the statistics in this publication and the availability of related unpublished statistics, contact:
Derick Cullen on ph. (02) 6252 6244, or email email@example.com
ANALYSIS AND COMMENTS : Sectoral Summary
INTERSECTORAL FINANCIAL FLOWS
Flows during December Quarter 2003
Significant flows during the December quarter 2003 were the net $10.8b borrowed by households and $6.8b borrowed by non-financial from financial corporations. Financial corporations borrowed $10.3b from the rest of world and general government repaid $6.2b to financial corporations.
Claims at end of December Quarter 2003
At the end of December 2003, claims on non-financial corporations stood at $388.3b from financial corporations, $260.6b from rest of the world, $131.8b from general government and $102.7b from households. Financial corporations financed claims on other sectors from net claims by households, $393.5b, and by rest of world, $204.8b.
ANALYSIS AND COMMENTS : Market Summary
FINANCIAL MARKET ANALYSIS
Deposit liabilities increased to $740.3b at 31 December 2003, following net transactions of $29.1b during the quarter, compared with transactions of $12.5b in the previous quarter. Transactions in bank deposits were $23.0b, up from the $1.5b recorded during September. Most sectors withdrew funds during the quarter except private non-financial corporations who deposited $9.9b and households who deposited $9.7b.
Short term security liabilities increased to $332.1b at 31 December 2003, with net issuance of $22.7b and valuation increases of $1.8b during the quarter. $20.0b in one name paper was issued, of which banks issued $14.7b. Net offshore issuance was $11.0b for the quarter. There was a net increase of bills of exchange on issue of $2.7b for the quarter.
Total bond liabilities decreased to $527.8b at 31 December 2003 following net issues of $12.0b during the quarter. Banks issued a net $10.5b, of which $7.0b issued offshore and $3.5b issued in Australia. Financial intermediaries n.e.c, mainly securitisation vehicles, issued $1.4b, of which $4.4b was issued in Australia and $2.9 redeemed offshore. Other depository corporations and National general government redeemed $2.9b and $1.3b respectively.
The value of derivative contracts on issue at 31 December 2003 increased by $18.3b to $161.3b. Components of the increase were net settlements of $8.0b and valuation changes of $26.3b.
Loan liabilities rose to $1,507.0b at 31 December 2003 following net transactions of $58.7b during the quarter. Borrowing by households continued to be strong, raising $31.8b, while private non-financial corporations borrowed $11.4b during the quarter. In both cases the increase in borrowing was offset somewhat by increases in deposit assets negating significant undrawn loan amounts.
The listed share market increased by $51.9b to $801.0b at 31 December 2003, with net issues of $13.1b and valuation increases of $38.8b. Private non-financial corporations had net issues of $14.0b and financial intermediaries n.e.c had issues of $0.6b.
The value of the unlisted share market increased by $21.0b to $790.2b at 31 December 2003. There were net issues of $19.4b, with issues by financial intermediaries n.e.c of $2.9b, and Australian investment overseas of $16.4b. Valuation increases amounted to $1.6b.
At 31 December 2003 the reserves of life offices and pension funds were $570.4b following net transactions during the quarter of $4.7b and valuation increases of $13.6b. General insurance prepayments and reserves were $58.4b.
Private non-financial corporations raised a net $25.7b (excluding derivatives and accounts payable) in the December quarter 2003. They increased loan liabilities by $11.4b and made a net issue of $0.1b in debt securities. New share issues raised a net $14.1b during the quarter. These transactions resulted in total borrowings outstanding of $407.0b and total equity on issue of $650.4b.
During the December quarter 2003 total liabilities of national public non-financial corporations decreased by $0.8b to $89.0b. There was net issuance of debt securities of $0.7b and accounts payable decreased by $0.3b. Liabilities of state and local public non-financial corporations increased by $0.5b to $138.9b.
Private non-financial corporations debt to equity ratio
From 31 December 2001 to 31 December 2003 the value of equity on issue increased by $64.7b. The value of debt outstanding rose $20.7b from 31 December 2001. During the quarter, private non-financial corporation debt increased by $5.2b, while equities on issue increased by $50.3b. Over the December quarter 2003, the original debt to equity ratio fell and the adjusted ratio was almost constant. The adjusted ratio reflects the removal of price change from the original series.
During the December quarter 2003, financial corporations issued $56.2b liabilities on a consolidated basis. Net issuers of liabilities were: banks $48.9b, private non-financial corporations $26.9b, households $32.4b, rest of the world $23.2b, financial intermediaries n.e.c. $13.8b and pension funds $9.2b. Net redeemers were: life insurance corporations $2.4b, national-general government $1.3 and other depository corporations $1b.
During the quarter, banks increased their currency and deposits liabilities by $25.5b. They had net issuance in bonds of $8.7b, one name paper of $11.1b, and acceptance of bills of exchange of $0.8b. They increased their loans and placements liabilities by $5.5b, and decreased net settlements of derivatives by $3.4b.
Banks had an increase of $51.5b in financial assets during the quarter. Banks loaned a net $39.3b, with notable increases in loans to households of $23.1b, and private non-financial corporations of $12.9b. They also increased their holdings of bills of exchange by $2.6b, equities by $4.7b and bonds by $4.0b. They reduced their holdings of derivatives by $2.1b and other accounts receivable by $0.2b.
Other depository corporations
Funding of other depository corporations decreased by $1.0b during the December quarter 2003 as a result of net redemptions in bonds of $3.1b, and derivatives of $1.2b, partially offset by net issuance of one name paper of $3.9b. Financial assets decreased by $3.1b, through decreases in loans and placements of $3.6b, and holdings of bills of exchange of $1.1b. These reductions were offset somewhat by increases in currency and deposits of $1.2b, and other accounts receivable of $0.8b.
Life insurance corporations
At 31 December 2003, the financial assets of life insurance corporations stood at $183.2b, a decrease of $3.3b (2%) from the previous quarter with net transactions of -$2.5b and valuation decreases of $0.8b. This was reflected in decreases in all asset classes except currency and deposits which increased by $1.9b. Pension fund claims against the reserves of life insurance corporation increased by $2.5b following withdrawals of $0.1b and valuation increases of $2.6b. Other claims against the reserves of life insurance offices decreased by $3.7b following withdrawals of $4.5b and valuation increases of $0.8b.
Net equity in reserves of pension funds was $533.3b at the end of the December quarter 2003, an increase of $22.0b (4%), following net transactions of $9.2b and $12.8b valuation increases during the quarter. All asset classes experienced increases during the quarter. Transactions in financial assets were $10.1b, due to increases in equities of $3.5b, long term debt securities of $2.5b, short term debt securities of $1.8b, loans and placements of $1.3b and currency and deposits of $1.1b.
Other insurance corporations
At 31 December 2003, liabilities of other insurance corporations stood at $102.2b, unchanged from the September quarter. Liability transactions were $-1.0b, with the main contributor to this decrease being the net decrease in loans and placements of $0.4b. Transactions in financial assets of other insurance corporations were $1.2b due mainly to net purchases of bonds of $2.3b and one name paper of $1.3b. These increases were partially offset by a decrease in other
accounts receivable of $2.4b.
Central borrowing authorities
Total liabilities of central borrowing authorities was $102.3b at the end of the December quarter 2003. The authorities had net issue in bonds of $1.2b and a net redemption in one name paper of $1.1b. They increased their loans and placements liabilities by $1.6b, and increased their holdings of one name paper by $1.0b.
Financial intermediaries n.e.c.
Financial intermediaries n.e.c. increased their liabilities by $13.8b during the quarter, mainly through an increased issue of domestic bonds ($7.6b) and loans and placements ($4.0b). Financial assets increased by $9.7b, mainly through loans to households which increased by $6.4b and purchases of equity issued by private non-financial corporations ($4.3b). This increase was offset somewhat by the sale of bonds ($2.5b).
Net flows of currency and deposits to banks
Net transactions in currency and deposit liabilities of banks during the December quarter 2003 were $25.5b. Sectors that significantly increased currency and deposit assets during the quarter included households $9.7b, private non-financial corporations $9.9b and rest of world $4.2b. Central borrowing authorities reduced their bank deposits by $0.2b.
Asset portfolio of life insurance corporations and pension funds at end of quarter
At the end of December quarter 2003 life insurance corporations held $107.3b in shares and other equity (59% of their financial assets), of which $87.1b was in resident companies and $20.2b was in non-resident companies; $35.7b in bonds (20% of their financial assets), of which $31.6b was in Australian bonds and $4.1b in non-resident bonds; and $17.6b in short term securities (10% of their financial assets).
At the end of December quarter 2003 pension funds held $253.2b in shares and other equity (50% of their financial assets), of which $184.2b was in resident companies and $69.0b was in non-resident companies. They held $127.0b of net equity in life office reserves (25% of their financial assets); and $43.1b in bonds (8% of their financial assets), of which $31.6b were Australian bonds and $11.5b were non-resident bonds.
Financial claims between households, life insurance corporations, pension funds and investment managers at end of quarter
At the end of December quarter 2003 households had claims against the reserves of life insurance corporations of $37.1b and pension funds of $533.3b. Pension funds had claims
against the reserves of life insurance corporations of $127.0b. Life insurance corporations invested $137.9b of their financial assets through investment managers and
pension funds invested $195.3b through investment managers.
Asset portfolio of other insurance corporations at end of quarter
The graph below shows that at the end of December quarter 2003 other insurance corporations held $28.2b in bonds (32% of total financial assets), of which $27.0b were issued domestically. Other insurance corporations also held $21.0b in shares and other equity (24% of total financial assets), of which $18.4b was in resident corporations and $2.6b in non-resident corporations.
Central borrowing authorities net issue of debt securities
Central borrowing authorities had net issue of bonds of $1.2b and a net redemption in one name paper of $1.1b in the December 2003 quarter.
Financial intermediaries n.e.c. net issue of debt securities
During the December quarter 2003 financial intermediaries n.e.c. made a net issuance of bonds of $4.7b and a net issuance of short term paper of $1.3b.
During the December quarter 2003, general government transactions resulted in a net increase in financial position of $3.2b; see table 33H. National general government decreased its liabilities by $1.3b in the December quarter 2003 and increased its financial assets by $0.4b to record a net change in financial position of $1.7b. Assets increased mostly due to a $0.5b rise in loans and placements. The decrease in liabilities was mainly due to a fall in bonds issued in Australia of $1.3b. At the end of December 2003, national general government had total liabilities of $172.6b and total financial assets of $93.5b.
Transactions in state and local general government financial assets were $1.1b in the December quarter 2003, while transactions in total liabilities were -$0.4b resulting in an increase in financial position of $1.5b. At the end of the quarter, state and local general government had total liabilities of $94.6b and total financial assets of $124.9b.
Change in financial position
National government net issue of debt securities
The accompanying graph illustrates the national general government’s bond issuance, with a net decrease of $1.3b in treasury bonds during the quarter.
Households borrowed a total of $31.8b during the quarter in the form of loans. Deposit assets increased by $11.2b, of which bank deposits accounted for $9.7b. Net contributions to life insurance and pension fund reserves were $4.7b while net contributions to unfunded superannuation schemes were $1.3b.
Households purchased a net $6.6b in equities during the December quarter 2003, the major contributors being purchases of $2.6b of private non-financial corporation shares, $1.8b of financial intermediaries n.e.c shares and $1.4b in bank shares. These were offset by the $0.6b sale of national public non-financial corporations shares.
At the close of the quarter, households' stock of financial assets was $1,397.0b. This was up $49.5b from the revised previous quarter number, following net transactions of $27.4b and valuation increases of $22.1b. Major asset holdings were net equity in reserves of life insurance corporations and pension funds of $570.4b, currency and deposits of $349.8b, equities of $249.3b, and unfunded superannuation claims of $137.9b.
Household net borrowing and debt to liquid asset ratio
Of the net $31.8b borrowed by households, bank loans accounted for $23.1b and these were mainly for the purpose of housing. Of the bank housing loans, $11.9b was borrowed for owner occupied housing and $8.5b for investment housing. This borrowing raised household bank loan liabilities to $532.8b and total household liabilities to $742.6b at the end of the quarter.
The graph below illustrates that the debt to liquid asset ratio at 31 December 2003 was at 118%, virtually unchanged from the revised September quarter ratio. During the December quarter the ratio was influenced by an overall increase of 4% in household borrowing for the quarter and a 5% increase in liquid assets, of which the major contributors were deposits and equities.
Insurance and Pension Claims
During the December quarter 2003 households' net equity in reserves of pension funds increased $22.0b, made up of $9.2b net contributions and $12.8b valuation increases, bringing household net equity in pension funds to $533.3b. Net equity in reserves of life insurance corporations decreased by $3.7b, made up of $4.5b net withdrawals and $0.8b valuation increases, bringing the household net equity in life insurance to $37.1b. Households' unfunded superannuation claims increased by $1.3b during the quarter. Prepayments of premiums and claims against reserves in general insurance corporations decreased by $0.1b.
REST OF THE WORLD
Non-residents invested a net $35.3b in Australian financial assets during the December quarter 2003. There were net increases in purchases of one name paper ($9.7b, of which $7.0b was issued by banks), borrowing through loans and placements ($9.0b), purchases of bonds ($7.4b, of which $8.0b was issued by banks), purchases of equities ($6.9b) and holdings of currency and deposits ($3.9b). These were offset by non- residents reducing their holding of derivative contracts by $2.4b. Overall, the value of Australian financial assets held by non-residents at the end of the quarter was up $36.0b from the September
quarter, after taking into account $0.7b valuation increases.
Australian residents purchased foreign financial assets worth $23.2b during the December quarter 2003. There were net increases by residents in purchases of equity ($16.4b), holdings of currency and deposits ($4.1b), purchases of debt securities ($3.4b) and holdings of loans and placements ($2.1b). These were offset by residents reducing their holdings of derivative contracts by $2.4b. Overall, the total value of foreign assets held by Australian residents increased to $519.6b at the end of the quarter.
Net purchases of equities
The accompanying graph shows that during the December quarter 2003 non-residents purchased a net $6.9b in equities, a decrease of $1.0b compared with the September quarter 2003.
Net purchases of bonds
The accompanying graph shows that non-residents purchased $7.4b of Australian bonds during the December quarter 2003, a decrease of $7.1b compared with the September quarter 2003.
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