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5232.0 - Australian National Accounts: Financial Accounts, Dec 2006  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 30/03/2007   
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SECTORAL ANALYSIS


NON-FINANCIAL CORPORATIONS

Summary

Private non-financial corporations raised a net $37.2b (excluding derivatives and accounts payable) during the December quarter 2006. They borrowed $17.2b in loans and made a net issue of $7.8b in debt securities. Net issuance of shares during the quarter was $12.3b. These transactions resulted in total borrowings outstanding of $619.7b and total equity on issue of $1081.3b.

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



During the December quarter 2006, total liabilities of national public non-financial corporations increased by $5.4b following transactions of $0.4b and valuation increases of $5.0b. Liabilities of state and local public non-financial corporations decreased by $3.8b to $137.2b.


Private non-financial corporations debt to equity ratio

From the end of December 2004 to the end of December 2006, the value of equity on issue increased by $262.4b. The value of debt outstanding rose $178.0b during the same period. During the quarter, private non-financial corporation debt increased by $32.3b, while equities on issue increased by $99.3b. Over the December quarter 2006, the original debt to equity ratio decreased from 0.73 to 0.69 and the adjusted ratio increased from 1.46 to 1.47. 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 December quarter 2006, financial corporations had $89.9b liability transactions on a consolidated basis. The liability transactions were: banks, $40.5b; financial intermediaries n.e.c., $29.4b; pension funds, $19.5b; other depository corporations, $12.4b; the central bank, $8.2b; and central borrowing authorities, $4.9b. Redeemers of liabilities were life insurance corporations, $3.8b.


Banks

Transactions of financial assets of banks were $40.1b during the quarter. Banks loaned a net $30.8b, of which loans to households were $21.0b and private non-financial corporations were $9.5b. Other transactions in bank assets holdings were: bills of exchange, $5.1b; one name paper, $3.2b, derivatives $2.8b, equities, $1.8b and currency and deposits $0.2b. These were offset by redemptions of bonds $4.0b.


During the quarter, transactions of banks’ currency and deposits liabilities were $31.7b, bonds of $15.1b, loans of $1.0b, and derivatives of $1.0b. These were offset by net settlements of bills of exchange of $3.5b, one name paper of $1.9b, and other accounts payable of $2.9b.


Other depository corporations

Transactions of other depository corporations liabilities was $12.4b during the December quarter, driven mainly by holdings of currency and deposits of $8.3b and issues of one name paper of $1.8b. Transactions of assets during the quarter were $10.9b, the main contributors being borrowings of loans and placements of $10.6b, bonds of $2.2b and holdings of currency and deposits of $0.6b. These transactions were partially offset by a net settlement of derivatives of $1.2b and holdings of bills of exchange of $1.1b.


Life insurance corporations

At the end of December quarter 2006, the financial assets of life insurance corporations stood at $238.4b, an increase of $6.8b from the previous quarter. Net transactions were -$3.8b and valuation increases were $10.6b. During the quarter, they sold their holdings of equities by $5.2b. Pension fund claims against the reserves of life offices increased by $7.7b following net transactions of -$0.5b and valuation increases of $8.2b. Households claims against the reserves of life offices decreased by $1.1b following net transaction of -$3.9b and valuation increases of $2.8b.


Pension funds

Net equity in reserves of pension funds was $963.3b at the end of the December quarter 2006, an increase of $57.5b. This follows net transactions of $19.5b and valuation increases of $38.0b during the quarter. Asset holdings increased due to transactions in bonds of $7.9b, currency and deposits of $4.4b, equities of $3.9b, and loans of $2.4b.


Other insurance corporations

Net transactions in financial assets of other insurance corporations were -$0.9b during the December quarter 2006. The main contributors were the sale of bonds of $1.0b and the redemption of accounts receivable of $1.0b. These were offset by transactions in holdings of currency and deposits by $0.8b.


Central borrowing authorities

Total liabilities of central borrowing authorities was $124.4b at the end of the December quarter 2006. During the quarter, the authorities issued bonds, $2.2b, loans, $1.4b and one name paper, $0.8b. During the December quarter, net asset transactions of central borrowing authorities were $2.5b, main contributors being increased holdings of currency and deposits of $0.8b, one name paper of $0.7b and loans of $0.5b.


Financial intermediaries n.e.c.

At the end of the December quarter 2006, net liabilities of financial intermediaries n.e.c. were $608.7b, with unlisted shares of $198.0b on issue and borrowings in the form of loans and placements of $126.3b. Net liability transactions of financial intermediaries n.e.c. were $29.4b during the quarter, through the issuance of equity of $16.9b, loans and placements of $6.8b, and of bonds of $6.6b. During the December quarter 2006, transactions in financial assets were $26.1b, major contributors were equities of $20.5b and loans and placements of $2.1b.


Net flow of currency and deposits to banks

Transactions in currency and deposit liabilities of banks during the December quarter 2006 were $32.3b. There were transactions in currency and deposit assets of non-financial corporations, $13.3b, households, $10.2b, pension funds, $4.8b, rest of world of $1.7b and other depository corporations of $0.5b.

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 December quarter 2006, life insurance corporations held $150.8b in shares and other equity (63% of their financial assets), of which $125.8b was in resident companies and $25.0b was in non-resident companies; $46.2b in bonds (19% of their financial assets), of which $36.8b was in bonds issued by domestic institutions and $9.4b in bonds issued by non-residents; and $17.2b in short term securities (7% of their financial assets).


At the end of the December quarter 2006, pension funds held $536.1b in shares and other equity (58% of their financial assets), of which $389.1b was in resident companies and $147.0b was in non-resident companies. They held $164.6b of the net equity in life office reserves (18% of their financial assets); and $83.2b in bonds (9% of their financial assets), of which $54.1b were bonds issued by domestic institutions and $29.1b were bonds issued by non-residents.

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 December quarter 2006, households had claims against the reserves of life insurance corporations of $57.0b and pension funds of $963.3b. Pension funds had claims against the reserves of life insurance corporations of $164.6b. Life insurance corporations invested $147.2b of their financial assets through investment managers, and pension funds invested $439.0b 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 December quarter 2006, other insurance corporations held $43.5b in shares and other equity (38% of total financial assets), of which $33.4b was in resident corporations; $28.5b in bonds (25% of total financial assets), of which $24.6b was issued by resident corporations and $11.0b of short-term securities (9% of total financial assets).

Graph: Other insurance corporations, assets


Central borrowing authorities net issue of debt securities

During the December quarter 2006, central borrowing authorities made a net issue of bonds of $2.2b, and a net issue of one name paper of $0.8b.

Graph: Central borrowing authorities - net issue of debt securities


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

During the December quarter 2006, financial intermediaries n.e.c. made a net issue of bonds of $6.6b and net redemption of $0.1b of short term paper.

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



GENERAL GOVERNMENT

Summary

During the December quarter 2006, consolidated general government transactions resulted in a net change in financial position of $3.6b.


The net change in financial position for national general government was $4.4b. The liability transactions of national general government during the December quarter were -$6.8b. The main contributor was the repayment of bonds of $5.9b and other accounts payable $2.1b. This was offset by increased unfunded superannuation claims of $1.0b.


During the December quarter, asset transactions for national general government were -$2.4b. Main contributors were a sale of net equity assets, $7.9b, and repayments of loans and placements of $0.4b, which was partly offset by currency and deposits of $6.4b. At the end of December 2006, national general government had total liabilities of $191.6b and total financial assets of $135.7b.


Transactions in state and local general government financial assets were -$0.9b in the December quarter 2006, while transactions in total liabilities were -$0.1b, resulting in a change in financial position of -$0.8b. At the end of the quarter, state and local general government had total liabilities of $101.8b and total financial assets of $139.4b.


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 redemption of treasury bonds was $5.9b during the quarter.

Graph: National general government - net issue of debt securities



HOUSEHOLDS

Summary

Household change in financial position was -0.7b during the December quarter 2006. During the quarter households borrowed a total of $23.5b in the form of loans. On the asset side, householders transactions in currency and deposits were $13.3b, of which $10.2b were bank deposits. Net contributions to life insurance and pension fund reserves were $15.5b while net claims on unfunded superannuation were $1.6b.


Household purchased a net $3.3b in equities during the December quarter 2006, the major contributors being purchases of $2.6b of financial intermediaries n.e.c. equity and $1.0b of bank shares. These were partially offset by the $0.7b sale of national public non-financial corporations shares.


At the close of the quarter, households' stock of financial assets was $2,140.1b. This was up $112.9b from the previous quarter number, following net transactions of $28.1b and valuation increases of $84.8b. Major asset holdings were net equity in reserves of life insurance corporations and pension funds of $1,020.3b, currency and deposits of $435.3b, equities of $418.8b, and unfunded superannuation claims of $165.2b.


Household net borrowing and debt to liquid asset ratio

Of the net $23.5b borrowed by households during the December quarter 2006, bank loans were $21.0b and borrowing from other depository corporations was $1.6b. Of the bank loans, $12.9b was borrowed for owner occupied housing and $4.2b for investment housing.


The graph below illustrates that the debt to liquid assets ratio at the end of December 2006 was at 120.5%, a decrease of 5.5 percentage points from the revised September quarter ratio. The ratio was influenced by an increase from the previous quarter of 2.5 % in total outstanding household borrowings and an increase in total liquid assets of 7.2%. Major contributors to liquid assets were holdings of equities (up 12.2%) and deposits (up 3.1%).

Graph: Household debt to liquid assets ratio


Insurance and pension claims

During the December quarter 2006, households' net equity in reserves of pension funds increased $57.5b, made up of $19.5b transactions and $38.0b valuation increases, bringing household net equity in pension funds to $963.3b. Net equity in reserves of life insurance corporations decreased $1.1b, made up of -$3.9b transactions and $2.8b valuation increases, bringing the household net equity in life insurance to $57.0b. Net transactions in households' unfunded superannuation claims were $1.6b and prepayments of premiums and claims against reserves in general insurance corporations was -$0.7b during the quarter.



REST OF THE WORLD

Summary

Non-residents invested a net $37.2b in Australian financial assets during the December quarter 2006, resulting in $1,465.5b of Australian financial assets held by non-residents, up $69.8b from the September quarter (of which $32.6b were valuation increases). There were net purchases of bonds, $21.7b (of which, $13.9b was issued by banks), equity, $13.6b (of which $7.9b was issued by private non-financial corporations) and issuance of loan assets, $4.1b. These were partially offset by a net settlements of bills of exchange, $1.7b, and derivatives in an asset position of $0.7b.


Australian residents purchased foreign financial assets worth $22.5b during the December quarter 2006. The total value of foreign assets held by Australian residents increased to $858.6b at the end of the quarter, up $35.5b from the September quarter (of which $13.0b were valuation increases). Residents made net purchases of equity ($8.5b) and debt securities ($6.9b) and provided loans and placements ($4.7b). These were partially offset by net settlements of derivatives in a net asset position of $1.4b.


Net purchases of equities

During the December quarter 2006 non-residents acquired a net $13.6b in equities, an increase of $2.4b compared with the revised September quarter 2006 estimate.

Graph: Net purchases of equities by non-residents


Net purchases of bonds

Non-residents purchased $21.7b of Australian bonds during the December quarter 2006, a decrease of $11.6b compared with the September quarter 2006.

Graph: Net purchases of bonds

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