SECTORAL ANALYSIS


NON-FINANCIAL CORPORATIONS

Summary

Private non-financial corporations raised a net $10.3b (excluding derivatives and accounts payable) during the March quarter 2009. They repaid $15.0b in loans and issued $18.1b in shares. Net issuance of debt securities during the quarter was $7.3b. These transactions resulted in total borrowings outstanding of $899.2b and total equity on issue of $861.6b.

During the March quarter 2009, total liabilities of national public non-financial corporations decreased by $0.1b. Liabilities of state and local public non-financial corporations increased by $2.1b to $136.7b.


Private non-financial corporations debt to equity ratio

From the end of March 2007 to the end of March 2009, the value of equity on issue decreased by $321.3b whereas the value of debt outstanding rose by $272.5b. During the March quarter 2009, private non-financial corporation debt decreased by $12.6b and equities on issue decreased by $10.1b. The original debt to equity ratio remained constant at 1.28 and the adjusted ratio decreased from 1.58 to 1.52. The adjusted ratio reflects the removal of price change from the original series.

FINANCIAL CORPORATIONS

Summary

During the March quarter 2009, financial corporations had -$0.9b of liability transactions on a consolidated basis. The liability transactions were: central bank, -$35.6b; financial intermediaries n.e.c., -$23.7b; banks, -$11.1b; other depository corporations, -$8.6b; life insurance corporations, -$3.7b; pension funds, $8.8b; central borrowing authorities, $3.6b; and other insurance corporations, $1.0b.


Banks

Transactions of financial assets of banks were net -$5.6b during the quarter. Major transactions in bank assets holdings were: loans, net $20.3b, of which $22.5b were lent to households; bonds, net $9.6b of which $11.0b were issued by financial intermediaries n.e.c.; derivatives, net -$23.9, of which $15.9 were settled by the rest of the world; deposits, net -$15.0b, of which $17.7 were withdrawn from the central bank and $3.2b were accepted by the rest of the world;

During the quarter, liability transactions of banks were currency and deposits of $30.2b, bonds issuance of $16.1b and equities issuance of $4.5b. These were offset by redemptions of one name paper, net $45.7b, net settlement of derivatives of $22.1b and net repayment of other accounts payable of $2.0b


Other depository corporations

Transactions of other depository corporations liabilities were net -$8.6b during the March quarter 2009. Main contributors were deposits of $4.3b. These were offset by net settlement of derivatives of $10.4b and net redemptions of one name paper of $1.6b.

Transactions of assets during the quarter were net -$2.5b. The main contributors were the settlement of derivative contracts, net $10.3b and redemption of one name paper, net $6.4b. These were offset by increase in holdings of bills of exchange of, $2.5b, deposits, $2.4b and purchases of bonds, $1.9b.


Life insurance corporations

At the end of March quarter 2009, the financial assets of life insurance corporations were $209.0b, a decrease of $6.1b from the previous quarter. Net transactions were -$3.3b and valuation decreases were $2.8b. During the quarter, there were decreases in the value of equities outstanding by $5.4b. This was offset by increases in the amounts of bonds, $0.9b. Pension fund claims against the reserves of life offices decreased by $4.3b following net transactions of -$2.6b and valuation decreases of $1.7b.

Households' claims against the reserves of life offices decreased by $0.9b following net transactions of -$0.2b and valuation decreases of $0.7b.


Pension funds

Net equity in reserves of pension funds was $920.5b at the end of the March quarter 2009, a decrease of $15.2b. This follows net transactions of $8.6b and valuation decreases of $23.8b during the quarter. Asset holdings decreased by $15.5b to $863.5b following net transactions of $6.7b and valuation decreases of $22.2b.


Other insurance corporations

Net redemptions of financial assets of other insurance corporations were $5.9b during the March quarter 2009. The main contributor was a decrease in holdings of bonds of $4.9b, loans of $0.8b and currency and deposits of $0.4b. This was offset by an increase in holdings of one name paper, $1.2b. During the March quarter, net liability transactions of other insurance corporations were $1.0b, driven mainly by prepayments of premiums and reserves of $1.3b.


Central borrowing authorities

Total liabilities of central borrowing authorities was $171.4b at the end of the March quarter 2009. During the quarter, the authorities issued bonds of $4.1b, one name paper of $1.9b, and borrowed $0.7b of loans. Net asset transactions during the quarter were $10.6b, the main contributors being issuance of loans, $6.9b and new deposits of, $5.5b. This was offset by the settlement of derivatives of $2.6b and bonds of $0.9b.


Financial intermediaries n.e.c.

At the end of the March quarter 2009, net liabilities of financial intermediaries n.e.c. were $519.3b, with shares and bonds on issue of $136.4b and $273.7b respectively, and loan borrowings of $65.4b. Net liability transactions of financial intermediaries n.e.c. were -$23.7b during the quarter, driven by the net redemption of bonds of $17.7b and net redemption of one name paper of $3.6b. During the quarter, transactions in financial assets were -$21.5b. Major contributors were an decrease in net loans of $10.4b, net redemption of bonds of $5.2b. These were offset by net purchases of equities of $1.7b.


Net flow of currency and deposits to banks

Transactions in currency and deposit liabilities of banks during the March quarter 2009 were net $27.8b. There were transactions in currency and deposit assets of households, $9.4b; rest of world, $6.4; pension funds, $6.3b; other depository corporations, $1.9b and private non-financial corporations, $1.3b. These were offset by withdrawals by banks, $2.4b, financial intermediaries n.e.c., $1.6b and other insurance corporations, $0.4b.

Financial asset portfolio of life insurance corporations and pension funds at end of quarter

At the end of the March quarter 2009, life insurance corporations held $119.5b in shares and other equity (57.2% of their financial assets), of which $97.8b was in resident companies and $21.7b was in non-resident companies; $48.5b in bonds (23.2% of their financial assets), of which $39.0b was in bonds issued by domestic institutions and $9.5b in bonds issued by non-residents; and $13.2b in short term securities (6.3% of their financial assets).

At the end of the March quarter 2009, pension funds held $404.9b in shares and other equity (46.9% of their financial assets), of which $265.5b was in resident companies and $139.4b was in non-resident companies. They held $138.1b of the net equity in life office reserves (16.0% of their financial assets); and $97.9b in bonds (11.3% of their financial assets), of which $57.5b were bonds issued by domestic institutions and $40.4b were bonds issued by non-residents.

Financial claims between households, life insurance companies, pension funds and investment managers at end of quarter

At the end of the March quarter 2009, households had claims against the reserves of life insurance corporations of $56.7b and pension funds of $920.5b. Pension funds had claims against the reserves of life insurance corporations of $138.1b.

Financial asset portfolio of other insurance corporations at end of quarter

The graph below shows that at the end of the March quarter 2009, other insurance corporations held $32.1b in shares and other equity (26.2% of their financial assets), of which $23.5b was in resident corporations; $36.5b in bonds (29.8% of their financial assets), of which $32.6b was issued by resident corporations; and $13.0b of short-term securities (10.6% of total financial assets).

Central borrowing authorities net issue of debt securities

During the March quarter 2009, central borrowing authorities issued bonds of $4.1b and one name paper of $1.9b.

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

During the March quarter 2009, financial intermediaries n.e.c. had net redemption of bonds of $17.7b and a net redemption of one name paper of $3.6b.

GENERAL GOVERNMENT

Summary

During the March quarter 2009, consolidated general government transactions resulted in a net change in financial position of -$2.6b.

The net change in financial position for national general government was -$4.9b. The liability transactions of national general government during the quarter were $6.6b, with the main contributors being other accounts payable of $3.9b and one name paper of $3.4b. During the quarter asset transactions for national general government were $1.7b, with the main contributor being currency and deposits of $5.7b. These were offset by the sale of one name paper of $3.3b. At the end of the quarter, national general government had total liabilities of $213.5b and total financial assets of $219.6b.

Transactions in state and local general government financial assets were $2.9b in the March quarter 2009, while transactions in total liabilities were $0.6b, resulting in a change in financial position of $2.3b. At the end of the quarter, state and local general government had total liabilities of $137.0b and total financial assets of $94.4b.


Change in financial position


National government issue of debt securities

The graph below illustrates the national general government’s bond issuance. There was no net issue of bonds during the quarter.

HOUSEHOLDS

Summary

Households change in financial position was -$7.5b during the March quarter 2009. During the quarter, households borrowed a total of $14.3b in the form of loans. On the asset side, householders' transactions in currency and deposits were $10.4b, of which $9.4b were bank deposits. Net contributions to life insurance and pension fund reserves were $8.4b while net claims on unfunded superannuation were $1.8b.

Households sold a net $6.3b in equities during the March quarter 2009, major contributors were private non-financial corporations, $5.6b and financial intermediaries n.e.c., $0.8b.

At the close of the quarter, households' stock of financial assets was $2,093.0b. This was a decrease of $23.6b from the previous quarter, following net transactions of $8.0b and valuation decreases of $31.6b. Major asset holdings were net equity in reserves of life insurance corporations and pension funds of $977.2b, currency and deposits of $594.3b, equities of $236.2b and unfunded superannuation claims of $179.2b.


Household net borrowing and debt to liquid asset ratio

Of the net $14.3b loans borrowed by households during the March quarter 2009, bank loans accounted for $22.5b and financial intermediaries n.e.c., -$9.0b. This is in contrast to household borrowing last quarter from financial intermediaries n.e.c of $74.9b and being offset by banks of $63.3b. This arose from the sale of mortgages by banks to securitisers. March quarter 2009 has seen less internal securitisation hence a reversal of last quarters net lending by these two sectors. For detail on the ABS treatment of internal securitisation, refer to page 6 of the December quarter 2008 publication.

The graph below illustrates that the debt to liquid assets ratio at the end of March 2009 was at 153.9%, an increase of 3.2 percentage points on the previous quarter. The ratio was influenced by an increase of 1.2% in total outstanding household borrowings and a decrease in total liquid assets of 0.9%. The major contributors to the decline in liquid assets were equities, down 5.4%. This was offset by increases in currency and deposits of 1.8%.

Insurance and pension claims

During the March quarter 2009, households' net equity in reserves of pension funds decreased by $15.2b, made up of $8.6b in transactions and $23.8b in valuation decreases, bringing household net equity in pension funds to $920.5b. Net equity in reserves of life insurance corporations decreased by $0.9b, made up of -$0.2b transactions and $0.7b valuation decreases, bringing the household net equity in life insurance to $56.7b. Net transactions in households' unfunded superannuation claims were $1.8b and prepayments of premiums and claims against reserves in other insurance corporations were $0.7b during the quarter.


REST OF THE WORLD

Summary

Non-residents had net transactions of $3.9b in Australian financial assets during the March quarter 2009, resulting in $1,758.8b of Australian financial assets being held by non-residents, down $17.7b from the December quarter 2008. Valuation decreases were $21.6b. The main contributors were net purchases of bonds, $29.0b, of which $24.2b was issued by banks and net purchases of equities, $20.0b. These were offset by settlement of derivatives of $15.1b, withdrawals of currency and deposits of $11.3b and net sales of one name paper of $8.5b.

Australian residents had net transactions of $0.2b in foreign financial assets during the March quarter 2009. The total value of foreign assets held by Australian residents decreased to $1,024.2b at the end of the quarter. Of this, $38.7b were valuation decreases. The main contributors were accounts receivable, $7.6b and net transactions in currency and deposits, $4.2b. These were offset by net settlement of derivatives, $16.8b.


Net purchases of equities

During the March quarter 2009, non-residents acquired a net $20.0b in equities, a decrease of $3.2b compared with the December quarter 2008.

Net purchases of bonds

Non-residents acquired $29.0b of Australian bonds during the March quarter 2009, an increase of $12.2b compared with the December quarter 2008 estimate.