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5232.0 - Australian National Accounts: Financial Accounts, Dec 2008  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 27/03/2009   
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SECTORAL ANALYSIS


NON-FINANCIAL CORPORATIONS

Summary

Private non-financial corporations raised a net $41.2b (excluding derivatives and accounts payable) during the December quarter 2008. They borrowed $10.2b in loans and issued $19.8b in shares. Net issuance of debt securities during the quarter was $11.2b. These transactions resulted in total borrowings outstanding of $882.1b and total equity on issue of $872.6b.

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 2008, total liabilities of national public non-financial corporations increased by $1.1b. Liabilities of state and local public non-financial corporations decreased by $3.2b to $134.6b.


Private non-financial corporations debt to equity ratio

From the end of December 2006 to the end of December 2008, the value of equity on issue decreased by $194.6b whereas the value of debt outstanding rose by $321.7b. During the December quarter 2008, private non-financial corporation debt increased by $45.8b, while equities on issue decreased by $175.2b. The original debt to equity ratio increased from 1.00 to 1.25 and the adjusted ratio decreased from 1.59 to 1.57. 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 2008, financial corporations had $21.8b of liability transactions on a consolidated basis. The liability transactions were: financial intermediaries n.e.c., $54.2b; central bank, $35.4b; pension funds, $4.5b; central borrowing authorities, $3.4b; banks, $3.3b; other insurance corporations, $2.7b; and life insurance corporations, $2.0b.


Banks

Transactions of financial assets of banks were net -$20.4b during the quarter. Major transactions in bank assets holdings were: deposits, net $24.2b, of which $11.7 were accepted by the central bank and $7.5b were accepted by other depository corporations; bonds, net $20.3b of which $23.5b were issued by financial intermediaries n.e.c.; bills of exchange, $4.7b; loans, net -$46.7b, of which $8.4b were lent to private non-financial corporations. Loans to households decreased by $66.7b, arising from the sale of mortgages to securitisers. For more detail, see the note on page 6.

During the quarter, liability transactions of banks were currency and deposits of $48.8b, bonds issuance of $18.7b, equities issuance of $18.5b, net incurrence of other accounts payable of $2.8b and net issues of derivatives of $2.2b. These were offset by redemptions of short term debt securities, net $84.7b and loan repayments of $3.0b .


Other depository corporations

Transactions of other depository corporations liabilities were net -$4.1b during the December quarter 2008. Main contributors were deposits of $12.3b. These were offset by net redemptions of one name paper of $8.3b and net redemptions of bonds of $2.9b. Transactions of assets during the quarter were net -$6.2b. The main contributors were redemption of short term debt securities, net $9.8b and the settlement of derivative contracts, net $3.0b. These were offset by the issuance of loans, $1.0b and purchases of bonds, $0.3b.


Life insurance corporations

At the end of December quarter 2008, the financial assets of life insurance corporations were $214.2b, a decrease of $19.7b from the previous quarter. Net transactions were $0.2b and valuation decreases were $19.9b. During the quarter, there were decreases in the value of equities outstanding by $23.7b. This was offset by increases in the amounts of currency and deposits, $2.1b. Pension fund claims against the reserves of life offices decreased by $17.4b following net transactions of -$3.8b and valuation decreases of $13.6b. Households' claims against the reserves of life offices decreased by $1.9b following net transactions of $3.4b and valuation decreases of $5.3b.


Pension funds

Net equity in reserves of pension funds was $931.1b at the end of the December quarter 2008, a decrease of $93.9b. This follows net transactions of $6.1b and valuation decreases of $100.0b during the quarter. Asset holdings decreased by $96.2b to $873.9b following net transactions of $0.8b and valuation decreases of $97.0b.


Other insurance corporations

Net redemptions of financial assets of other insurance corporations were -$2.6b during the December quarter 2008. The main contributor was a decrease in holdings of one name paper of $2.2b, currency and deposits of $1.4b and equities of $1.0b. This was offset by an increase in holdings of bills of exchange, $1.1b. During the December quarter, net liability transactions of other insurance corporations were $2.7b, driven mainly by equity issuance of $2.3b.


Central borrowing authorities

Total liabilities of central borrowing authorities was $168.0b at the end of the December quarter 2008. During the quarter, the authorities issued bonds of $6.0b, one name paper of $1.5b, and repaid $2.8b of loans. Net asset transactions during the quarter were $5.3b, the main contributors being issuance of loans, $10.3b. This was offset by the sales of one name paper of $4.6b and bills of exchange of $0.9b.


Financial intermediaries n.e.c.

At the end of the December quarter 2008, net liabilities of financial intermediaries n.e.c. were $535.9b, with shares and bonds on issue of $143.5b and $281.4b respectively, and loan borrowings of $67.8b. Net liability transactions of financial intermediaries n.e.c. were $54.2b during the quarter, driven by issuance of bonds of $59.0b. For more detail on the treatment of internally securitised paper, see note on page 6. These were offset by the buy back of shares of $4.6b and net maturity of one name paper $0.5b. During the quarter, transactions in financial assets were $79.8b. Major contributors were an increase in net loans of $74.5b, and net purchases of equities of $6.8b and one name paper of $2.6b. These were offset by a decrease in holdings of currency and deposits of $2.3b and maturities of bonds of $0.4b.


Net flow of currency and deposits to banks

Transactions in currency and deposit liabilities of banks during the December quarter 2008 were net $56.7b. There were transactions in currency and deposit assets of households, $32.1b; private non-financial corporations, $14.0b; pension funds, $8.2b; banks, $8.0b; and other depository corporations, $4.6b. These were offset by withdrawals by rest of world, $8.9b and other insurance corporations, $1.5b.

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 2008, life insurance corporations held $123.7b in shares and other equity (57.8% of their financial assets), of which $99.4b was in resident companies and $24.3b was in non-resident companies; $47.5b in bonds (22.2% of their financial assets), of which $38.1b was in bonds issued by domestic institutions and $9.4b in bonds issued by non-residents; and $14.5b in short term securities (6.8% of their financial assets).

At the end of the December quarter 2008, pension funds held $418.4b in shares and other equity (47.9% of their financial assets), of which $263.8b was in resident companies and $154.6b was in non-resident companies. They held $141.7b of the net equity in life office reserves (16.2% of their financial assets); and $100.2b in bonds (11.5% of their financial assets), of which $56.0b were bonds issued by domestic institutions and $44.2b 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 2008, households had claims against the reserves of life insurance corporations of $55.2b and pension funds of $931.1b. Pension funds had claims against the reserves of life insurance corporations of $141.7b.

Diagram: Financial claims between households, life insurance companies, pension funds and investment managers


Financial asset portfolio of other insurance corporations at end of quarter

The graph below shows that at the end of the December quarter 2008, other insurance corporations held $34.5b in shares and other equity (26.0% of total financial assets), of which $25.7b was in resident corporations; $43.1b in bonds (32.4% of total financial assets), of which $39.0b was issued by resident corporations; and $11.7b of short-term securities (8.8% of total financial assets).

Graph: Other insurance corporations, assets


Central borrowing authorities net issue of debt securities

During the December quarter 2008, central borrowing authorities issued bonds of $6.0b and one name paper of $1.5b.

Graph: Central borrowing authorities - net issue of debt securities


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

During the December quarter 2008, financial intermediaries n.e.c. had net issue of bonds of $59.0b and a net redemption of one name paper of $0.5b. For more detail on internally securitised paper, see note on page 6.

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


GENERAL GOVERNMENT

Summary

During the December quarter 2008, consolidated general government transactions resulted in a net change in financial position of -$1.6b.

The net change in financial position for national general government was $5.7b. The liability transactions of national general government during the quarter were -$4.8b, with the main contributors being derivatives of -$3.7b and other accounts payable of -$2.5b. During the quarter asset transactions for national general government were $0.9b, with the main contributors being purchases of bonds of $10.2b and equities of $4.3b. These were offset by sales of one name paper of $13.5b and withdrawals of currency and deposits of $6.8b. At the end of the quarter, national general government had total liabilities of $204.7b and total financial assets of $215.5b.

Transactions in state and local general government financial assets were -$2.5b in the December quarter 2008, while transactions in total liabilities were $4.9b, resulting in a change in financial position of -$7.3b. At the end of the quarter, state and local general government had total liabilities of $136.4b and total financial assets of $96.0b.


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. There was no net issue of bonds during the quarter.

Graph: National government issue of debt securities


HOUSEHOLDS

Summary

Households change in financial position was $29.2b during the December quarter 2008. During the quarter, households borrowed a total of $8.2b in the form of loans. On the asset side, householders' transactions in currency and deposits were $34.8b, of which $32.1b were bank deposits. Net contributions to life insurance and pension fund reserves were $9.6b while net claims on unfunded superannuation were $2.1b.

Households sold a net $4.7b in equities during the December quarter 2008, the major contributors being the sale of private non-financial corporations shares, $4.4b and financial intermediaries n.e.c $1.3b.

At the close of the quarter, households' stock of financial assets was $2,101.0b. This was a decrease of $112.7b from the previous quarter, following net transactions of $44.0b and valuation decreases of $156.7b. Major asset holdings were net equity in reserves of life insurance corporations and pension funds of $986.3b, currency and deposits of $583.2b, equities of $243.7b and unfunded superannuation claims of $177.4b.


Household net borrowing and debt to liquid asset ratio

Of the net $8.2b loans borrowed by households during the December quarter 2008, loans from financial intermediaries n.e.c. were $75.3b. This was offset by a reduction of $66.7b in loans, arising from the sale of mortgages by banks to securitisers. For more detail, see the note on page 6.

The graph below illustrates that the debt to liquid assets ratio at the end of December 2008 was at 151.5%, an increase of 5.6 percentage points on the previous quarter. The ratio was influenced by an increase of 0.7% in total outstanding household borrowings and a decrease in total liquid assets of 3.0%. The major contributors to the decline in liquid assets were equities, down 19.7%. This was offset by increases in currency and deposits of 6.4%.

Graph: Household net borrowing and debt to liquid asset ratio


Insurance and pension claims

During the December quarter 2008, households' net equity in reserves of pension funds decreased by $93.9b, made up of $6.1b in transactions and $100.0b in valuation decreases, bringing household net equity in pension funds to $931.1b. Net equity in reserves of life insurance corporations decreased by $1.9b, made up of $3.4b transactions and $5.3b valuation decreases, bringing the household net equity in life insurance to $55.2b. Net transactions in households' unfunded superannuation claims were $2.1b and prepayments of premiums and claims against reserves in other insurance corporations were $0.3b during the quarter.


REST OF THE WORLD

Summary

Non-residents had net transactions of $7.0b in Australian financial assets during the December quarter 2008, resulting in $1,778.2b of Australian financial assets being held by non-residents, down $2.6b from the September quarter 2008. Valuation decreases were $9.6b. The main contributors were net purchases of equities, $23.7b, of which $16.7b was in equities issued by private non-financial corporations, net purchases of bonds, $16.5b and currency and deposits of $14.4b. These were offset by net sales of one name paper of $48.4b.

Australian residents had net transactions of -$0.1b in foreign financial assets during the December quarter 2008. The total value of foreign assets held by Australian residents decreased to $1,064.4b at the end of the quarter. Of this, $6.6b were valuation decreases. The main contributors were the issuance of loans and placements, $9.1b and net transactions in currency and deposits, $8.8b. These were offset by net settlement of derivatives, $7.1b and net redemption of rest of the world bonds issued in Australia, $4.2b.


Net purchases of equities

During the December quarter 2008, non-residents acquired a net $23.7b in equities, an increase of $9.1b compared with the September quarter 2008.

Graph: Net purchases of equities by non-residents


Net purchases of bonds

Non-residents acquired $16.5b of Australian bonds during the December quarter 2008, an increase of $36.4b compared with the September quarter 2008 estimate.

Graph: Net purchases of bonds


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