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5232.0 - Australian National Accounts: Financial Accounts, Mar 2008  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 27/06/2008   
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SECTORAL ANALYSIS


NON-FINANCIAL CORPORATIONS

Summary

Private non-financial corporations raised a net $26.9b (excluding derivatives and accounts payable) during the March quarter 2008. They borrowed $11.3b in loans and issued $9.8b in shares. Net issuance of debt securities during the quarter was $6.0b. These transactions resulted in total borrowings outstanding of $756.8b and total equity on issue of $1,199.0b.

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


During the March quarter 2008, total liabilities of national public non-financial corporations increased by $0.2b. Liabilities of state and local public non-financial corporations increased by $1.0b to $147.1b.


Private non-financial corporations debt to equity ratio

From the end of March 2006 to the end of March 2008, the value of equity on issue increased by $273.2b. The value of debt outstanding rose $263.2b during the same period. During the quarter, private non-financial corporation debt increased by $19.1b, while equities on issue decreased by $133.3b. Over the March quarter 2008, the original debt to equity ratio increased from 0.69 to 0.78 and the adjusted ratio remained constant at 1.58. 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 March quarter 2008, financial corporations had $81.9b liability transactions on a consolidated basis. The liability transactions were: banks, $65.7b; other depository corporations, $15.2b; pension funds, $13.5b; financial intermediaries n.e.c., $1.4b; other insurance corporations, $1.0b; central bank, -$0.6b; life insurance corporations, -$2.2b and central borrowing authorities, -$3.9b.


Banks

Transactions of financial assets of banks were $72.5b during the quarter. Banks loaned a net $42.1b, of which loans to households were $17.4b and private non-financial corporations were $15.6b. Other major transactions in bank assets holdings were: deposits, $15.7b, of which $12.1b were accepted by other depository corporations and bills of exchange, $3.9b, of which $3.0b were issued by private non-financial corporations.

During the quarter, liability transactions of banks’were, bonds issuance of $35.0b, one name paper issuance of $24.3b, currency and deposits liabilities of $10.5b, equities issuance of $1.5b and loans of $0.7b. These were offset by redemptions of bills accepted of $0.4b, net settlement of derivatives of $1.0b and repayment of other accounts payable of $4.8b.


Other depository corporations

Transactions of other depository corporations liabilities were $15.2b during the March quarter 2008, driven mainly by deposits of $17.9b. This was offset by repayments of loans of $1.8b and net redemptions of bonds of $1.6b. Transactions of assets during the quarter were $11.0b, the main contributors were issuance of loans, $6.0b and bonds, $2.9b.


Life insurance corporations

At the end of March quarter 2008, the financial assets of life insurance corporations stood at $238.9b, a decrease of $21.6b from the previous quarter. Net transactions were -$2.6b and valuation decreases were $19.0b. During the quarter, there were decreases in holdings of equities, $18.2b, one name paper, $1.2b and currency and deposits, $0.5b. Pension fund claims against the reserves of life offices decreased by $13.6b following net transactions of -$0.4b and valuation decreases of $13.2b. Households' claims against the reserves of life offices decreased by $3.9b following net transactions of $0.7b and valuation decreases of $4.6b.


Pension funds

Net equity in reserves of pension funds was $1,058.9b at the end of the March quarter 2008, a decrease of $87.9b. This follows net transactions of $13.4b and valuation decreases of $101.3b during the quarter. Asset holdings decreased by $89.8b to $1,016.4b following net transactions of $11.8b and valuation decreases of $101.6b.


Other insurance corporations

Net transactions in financial assets of other insurance corporations were $1.0b during the March quarter 2008. The main contributor was currency and deposits of $1.9b. These were offset by repayment of loans of $0.9b. During the March quarter, net liability transactions of other insurance corporations were $1.0b, driven mainly by prepayments of premiums and reserves of $0.5b.


Central borrowing authorities

Total liabilities of central borrowing authorities was $140.2b at the end of the March quarter 2008. During the quarter, the authorities redeemed bonds of $2.1b, one name paper of $2.4b, and borrowed $0.9b through loans. The net asset transactions of central borrowing authorities during the quarter were $3.3b, the main contributor being issuance of loans, $4.3b. These were offset by the sales of one name paper of $0.9b and bills of exchange of $0.9b.


Financial intermediaries n.e.c.

At the end of the March quarter 2008, net liabilities of financial intermediaries n.e.c. were $558.0b, with shares of $207.0b on issue and borrowings in the form of loans and placements of $134.5b. Net liability transactions of financial intermediaries n.e.c. were $1.4b during the quarter, driven by the issuance of loans of $4.6b and of bonds of $3.3b. These were offset by net maturity of one name paper of $5.3b and buy back of shares of $0.9b. During the quarter, transactions in financial assets were $5.8b, major contributors were net purchases of one name paper of $2.7b, equities of $2.7b and loan issuance of $2.7b. These were offset by withdrawals of currency and deposits of $2.1b and sale of bonds of $1.5b.


Net flow of currency and deposits to banks

Transactions in currency and deposit liabilities of banks during the March quarter 2008 were $8.7b. There were transactions in currency and deposit assets of households, $8.6b; pension funds, $2.9b; other depository corporations, $2.1b and other insurance corporations, $1.1b. These were partially offset by withdrawal of bank deposits by rest of world, $4.1b; banks, $1.8b and financial intermediaries n.e.c., $1.7b.

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 March quarter 2008, life insurance corporations held $162.5b in shares and other equity (68% of their financial assets), of which $136.4b was in resident companies and $26.1b was in non-resident companies; $39.8b in bonds (17% of their financial assets), of which $30.0b was in bonds issued by domestic institutions and $9.8b in bonds issued by non-residents; and $16.1b in short term securities (7% of their financial assets).

At the end of the March quarter 2008, pension funds held $544.8b in shares and other equity (54% of their financial assets), of which $391.1.1b was in resident companies and $153.7b was in non-resident companies. They held $165.2b of the net equity in life office reserves (16% of their financial assets); and $97.6b in bonds (10% of their financial assets), of which $57.7b were bonds issued by domestic institutions and $39.9b 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 March quarter 2008, households had claims against the reserves of life insurance corporations of $56.5b and pension funds of $1,058.9b. Pension funds had claims against the reserves of life insurance corporations of $165.2b. Life insurance corporations invested $142.8b of their financial assets through investment managers, and pension funds invested $523.1b 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 March quarter 2008, other insurance corporations held $41.5b in shares and other equity (33% of total financial assets), of which $31.7b was in resident corporations; $34.6b in bonds (27% of total financial assets), of which $30.7b was issued by resident corporations; and $12.2b of short-term securities (10% of total financial assets).

Graph: Other insurance corporations, assets


Central borrowing authorities net issue of debt securities

During the March quarter 2008, central borrowing authorities redeemed bonds of $2.1b and one name paper of $2.4b.

Graph: Central borrowing authorities - net issue of debt securities


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

During the March quarter 2008, financial intermediaries n.e.c. made a net issue of bonds of $3.3b and had redemptions of one name paper of $5.3bn.

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


GENERAL GOVERNMENT

Summary

During the March quarter 2008, consolidated general government transactions resulted in a net change in financial position of $5.4b.

The net change in financial position for national general government was $2.4b. The liability transactions of national general government during the quarter were $2.1b, with the main contributors being unfunded superannuation claims of $0.8b and bonds issued in Australia of $0.7b. During the March quarter 2008, asset transactions for national general government were $4.5b. At the end of the quarter, national general government had total liabilities of $196.9b and total financial assets of $174.1b.

Transactions in state and local general government financial assets were $3.1b in the March quarter 2008, while transactions in total liabilities remained unchanged, resulting in a change in financial position of $3.1b. At the end of the quarter, state and local general government had total liabilities of $119.6b and total financial assets of $141.9b.


Change in financial position
Graph: Change in financial position


National government issue of debt securities

The graph below illustrates the national general government’s bond issuance. The net issuance of treasury bonds was $0.8b during the quarter.

Graph: National government issue of debt securities


HOUSEHOLDS

Summary

Households change in financial position was -$5.0b during the March quarter 2008. During the quarter, households borrowed a total of $20.5b in the form of loans. On the asset side, householders' transactions in currency and deposits were $8.4b, of which $8.6b were bank deposits. Net contributions to life insurance and pension fund reserves were $14.1b while net claims on unfunded superannuation were $1.3b.

Households sold a net $2.1b in equities during the March quarter 2008, the major contributors being the sale of financial intermediaries n.e.c. shares, $1.9b and life insurance corporations, $0.3b. These were offset by the purchase of other insurance corporations shares, $0.2b.

At the close of the quarter, households' stock of financial assets was $2,262.7b. This was a decrease of $159.8b from the revised previous quarter number, following net transactions of $21.0b and valuation decreases of $180.8b. Major asset holdings were net equity in reserves of life insurance corporations and pension funds of $1,115.5b, currency and deposits of $493.9b, equities of $355.7b and unfunded superannuation claims of $181.5b.


Household net borrowing and debt to liquid asset ratio

Of the net $20.5b loans borrowed by households during the March quarter 2008, bank loans accounted for $17.4b and financial intermediaries n.e.c, $2.2b. Of the bank loans, $12.5b was borrowed for owner occupied housing and $4.6b for investment housing.

The graph below illustrates that the debt to liquid assets ratio at the end of March 2008 was at 138.1%, an increase of 12.1 percentage points from the December quarter 2007 ratio. The ratio was influenced by an increase from the previous quarter of 1.8% in total outstanding household borrowings and a decrease in total liquid assets of 7.1%. Major contributors to liquid assets were holdings of equities (down 17.8%), this was partially offset by increased holdings of currency and deposits (up 1.7%) and one name paper (up 19.9%).

Graph: Household net borrowing and debt to liquid asset ratio


Insurance and pension claims

During the March quarter 2008, households' net equity in reserves of pension funds decreased $87.9b, made up of $13.4b transactions and $101.3b valuation decreases, bringing down household net equity in pension funds to $1,058.9b. Net equity in reserves of life insurance corporations decreased $3.9b, made up of $0.7b transactions and $4.2b valuation decreases, bringing the household net equity in life insurance to $56.5b. Net transactions in households' unfunded superannuation claims were $1.3b and prepayments of premiums and claims against reserves in general insurance corporations was $0.3b during the quarter.


REST OF THE WORLD

Summary

Non-residents had net transactions of $54.9b in Australian financial assets during the March quarter 2008, resulting in $1,650.2b of Australian financial assets being held by non-residents,down $4.2b from the December quarter 2007 (valuation decreases were $59.1b). The main contributors were net purchases of bonds of $37.1b (of which $29.0b was issued by banks), short term securities, $19.9b and equities, $4.3b (of which $4.9b was issued by private non-financial corporations). These were offset by repayments of loans and placements of $8.2b and net settlements of derivatives of $0.8b.

Australian residents had net transactions of $38.4b in foreign financial assets during the March quarter 2008. The total value of foreign assets held by Australian residents decreased to $922.7b at the end of the quarter, down $8.6b from the December quarter 2007 (of which $47.0b were valuation decreases). Residents had net transactions in currency and deposits of $11.7b, purchases of unlisted shares and other equity of $10.4b, loans and placements, $8.3b and other accounts receivable of $7.9b. These were partially offset by net settlement of derivatives of $1.3b


Net purchases of equities

During the March quarter 2008 non-residents acquired a net $4.3b in equities, a decrease of $0.9b compared with the December quarter 2007 estimate.

Graph: Net purchases of equities by non-residents


Net purchases of bonds

Non-residents purchased $37.1b of Australian bonds during the March quarter 2008, an increase of $26.6b compared with the December quarter 2007 estimate.

Graph: Net purchases of bonds


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