DECEMBER KEY FIGURES
Credit market outstandings at end
Demand for credit during
Other changes during
Credit market outstandings at end
Sep Qtr 2004
Dec Qtr 2004
Dec Qtr 2004
Dec Qtr 2004
|State and local public|
|State and local|
Total demand for credit
Credit market outstandings
DECEMBER KEY POINTS
- Total demand for credit by the non-financial domestic sectors for the December quarter 2004 was $52.4b, an increase of $14.6b on the revised previous quarter. Increased raisings by private non-financial corporations (up $8.8b), borrowing by households (up $4.0b) and raisings by national general government (up $3.5b) were the main contributors to the rise.
- Private non-financial corporations raised a net $26.3b, with share raisings of $17.8b. These changes were affected by the changed residency status of a large corporation, see note on page 2. Loans were $5.7b (down $1.4b).
- National public non-financial corporations raised $0.2b and state and local public non-financial corporations raised $1.1b during the quarter.
- National general government raised a net $0.1b during the quarter. State and local general government repaid a net $0.9b.
- Households raised a net $25.5b during the quarter, an increase of $4.0b on the previous quarter, to bring their outstandings to $840.3b at the end of December 2004. Households borrowed $21.9b from banks (of which $13.6b was for owner occupied and $4.9b for investment housing), an increase of $9.6b from the previous quarter. Borrowing from other depository corporations was $2.0b and financial intermediaries n.e.c. was $1.5b during the quarter, a decrease of $7.1b from the previous quarter.
CHANGES TO THIS ISSUE
There are no changes in this issue.
A large listed corporation changed from resident to non-resident status during the December quarter 2004 and this has impacted the classification of data in a number of series. ABS has treated this event and the related classification changes as transactions.
Survey response rates for managed funds institutions were lower than expected for the December quarter 2004. This reflected a significant amount of merger activity in the unit trust industry and public reporting cycles for listed entities.
REVISIONS IN THIS ISSUE
The financial asset and liability data incorporate the results of quality assurance work undertaken with providers and other revisions back to March quarter 2003. Generally the size of revisions is small, with the exception of the correction of a significant double-count in the equity data for September quarter 2004.
There have been significant revisions to the distribution of net saving between Non-financial and Financial Corporations for June and September quarters 2004 in Table 33 as a result of improved survey data becoming available.
For further information about these and related statistics, contact the National Information and Referral Service on 1300 135 070 or Derick Cullen on Canberra (02) 6252 6244.
ANALYSIS AND COMMENTS SECTORAL SUMMARY
INTERSECTORAL FINANCIAL FLOWS
During December Quarter 2004
Significant flows during the December quarter 2004 were the net $5.2b borrowed by households from financial corporations and the net $12.5b borrowed by non-financial corporations from rest of world. General government repaid a net $4.5b to financial corporations and received a net $3.0b from households.
INTERSECTORAL FINANCIAL CLAIMS
At end of December Quarter 2004
At the end of December 2004, net claims on non-financial corporations stood at $471.5b from financial corporations, $315.2b from rest of world, $138.4b from general government and $116.1b from households. Financial corporations financed claims on other sectors from net claims of $466.1b by households and $221.8b by rest of world.
ANALYSIS AND COMMENTS MARKET SUMMARY
FINANCIAL MARKET ANALYSIS
Outstanding at end
Trans- actions during
Other changes during
Outstanding at end
Sep Qtr 2004
Dec Qtr 2004
Dec Qtr 2004
Dec Qtr 2004
|Selected Financial Instruments|
|Currency and deposits|
|Short term debt securities|
|Long term debt securities|
|Loans and placements|
|Reserves of life offices and pension funds|
|General insurance prepayments and reserves|
Deposit liabilities increased to $815.0b at the end of December 2004, following transactions of $36.8b during the quarter, compared with transactions of $11.1b in the previous quarter. Transactions in deposits of private non financial corporations were $14.9b, up $12.7b from the previous quarter. Transactions in deposits of other depository corporations were -$1.6b, down from the $2.2b recorded during the September quarter.
Short term security liabilities increased to $365.3b at the end of December 2004. There were issues of $9.7b, comprised of $7.4b in one name paper and $2.3b in bills of exchange.
Total bond liabilities increased to $627.5b at the end of December 2004, following issues of $11.8b during the quarter. Banks issued $3.0b, of which $9.1b was issued offshore and $6.1b was redeemed domestically. Financial intermediaries n.e.c. (mainly securitisation vehicles) redeemed $2.3b, of which $0.9b was redeemed domestically and $1.4b was redeemed offshore. Issues by non-residents and held by residents were $7.4b (up $4.1b), of which $2.1b was issued in the Australian market
The value of derivative contracts on issue at the end of December 2004 increased by $48.4b to $177.0b. Components of the increase were net settlements of -$14.0b and valuation changes of $62.4b.
Loan liabilities rose to $1730.2b at the end of December 2004 following transactions of $60b during the quarter. Borrowing by households continued to be strong, raising $25.0b, while pension funds borrowed $17.1b and banks borrowed $5.2b during the quarter. Non residents borrowed $2.1b.
The listed share market increased by $34.0b to $933.4b at the end of December 2004, through valuation increases of $88.0b, and despite change of residency status and listing arrangements for a large corporation (see note on page 2). These changes also impacted unlisted equity results.
At the end of December 2004, the reserves of life offices and pension funds were $685.6b following transactions during the quarter of $9.6b and valuation increases of $23.3b. General insurance prepayments and reserves were $59.6b.
Private non-financial corporations raised a net $26.3b (excluding derivatives and accounts payable) during the December quarter 2004. They borrowed $5.7b in loans and made a net issue of $2.8b in debt securities. New share issues raised a net $17.8b during the quarter following the change in residency status of a large corporation (see note on page 2). These transactions resulted in total borrowings outstanding of $450.5b and total equity on issue of $787.5b.
PRIVATE NON-FINANCIAL CORPORATIONS, NET ISSUE OF EQUITY AND BORROWINGS
During the December quarter 2004, total liabilities of national public non-financial corporations increased by $3.8b following transactions of $0.2b and valuation increases of $4.0b. Issue of debt securities was $0.9b and listed shares and other equity decreased by $0.8b. Liabilities of state and local public non-financial corporations decreased by $1.5b to $144.6b.
Private non-financial corporations debt to equity ratio
From the end of December 2002 to the end of December 2004 the value of equity on issue increased by $224.3b. The value of debt outstanding rose $43.9b during the period. During the quarter, private non-financial corporation debt increased by $13.8b, while equities on issue increased by $59.5b. Over the December quarter 2004, the original debt to equity ratio fell from 0.75 to 0.71 and the adjusted ratio fell from 1.12 to 1.10. The adjusted ratio reflects the removal of price change from the original series.
DEBT TO EQUITY RATIO - JUNE 1995 BASE
During the December quarter 2004, financial corporations issued $56.2b liabilities on a consolidated basis. Issuers of liabilities were: the central bank $7.4b, banks $31.4b, other depository corporations $4.6b, life insurance corporations $3.8b, pension funds $11.4b, central borrowing authorities $2.8b and financial intermediaries n.e.c. $5.9b. Other insurance corporations redeemed $1.3b of their liabilities.
During the quarter, transactions of banks' currency and deposits liabilities were $26b. They had issuance in loans and placements of $5.2b, one name paper, $3.9b and bonds, $3.6b. These were offset by net settlements of other accounts payable of $6.1b and derivatives, $3.0b.
Transactions of financial assets of banks were $30.3b during the quarter, banks loaned a net $27.5b, of which loans to households were $21.9b and private non-financial corporations were $5.2b. The transactions in their holdings of bills of exchange was $2.2, one name paper, $2.1b, bonds, $1.9b, derivatives in an asset position and other accounts receivable, $0.1b. These were offset by net reductions of currency and deposits of $2.4b and equities $1.2b.
Other depository corporations
Net liability transactions of other depository corporations were $4.6b during the December quarter 2004 driven mainly by transactions in currency and deposits of $8.5b and partially offset by net settlements of derivatives in a net liability position of $5.0b. Net transactions in financial asset were -$5.4b, with net settlements of derivatives in a net asset position of $7.2b the main contributor. This decrease was offset somewhat by transactions in loans and placements of $3.8b.
Life insurance corporations
At the end of December 2004, the financial assets of life insurance corporations stood at $205.1b, an increase of $7.5b from the previous quarter with net transactions of $3.8b and valuation increases of $3.7b. During the quarter there were net purchases of equity of $3.3b, currency and deposits increased by $0.9b and other accounts receivable by $0.7b. There were net repayments of loans and placements of $0.5b and redemptions of bonds of $0.5b. Pension fund claims against the reserves of life offices increased by $7.3b following net transactions of $4.9b and valuation increases of $2.4b. Households claims against the reserves of life offices decreased by $0.9b following net transactions of -$1.6b and valuation increases of $0.7b.
Net equity in reserves of pension funds was $641.4b at the end of the December quarter 2004, an increase of $33.8b (6%), following net transactions of $11.2b and $22.6b valuation increases during the quarter. Most asset classes experienced increases during the quarter, with pension funds increasing their net equities in life office reserves by $4.9b, transactions in equities of $3.7b, currency and deposits of $2.5b, long term debt securities of $1.7b and loans and placements of $1.3b. During the quarter, pension funds reduced their holdings of short term debt securities by $3.8b.
Other insurance corporations
During the December quarter 2004, net liability transactions of other insurance corporations were -$1.3b, of which prepayments of premiums and reserves contributed -$1.0b. Net transactions in financial assets of other insurance corporations were -$3.9b during the December quarter, of which net decreases in other accounts receivable of $2.8b, and net sales of bonds of $2.4b were the main contributors.
Central borrowing authorities
Total liabilities of central borrowing authorities was $108.3b at the end of the December quarter 2004. During the quarter, the authorities had a net issue in one name paper of $1.0b, borrowings through loans of $1.0b and a net issue in bonds of $0.8b. These were partially offset by a reduction in accounts receivable of $0.1b.
Financial intermediaries n.e.c.
Net liability transactions of financial intermediaries n.e.c. were $5.9b during the quarter, mainly through loans and placements of $2.9b, a net issue of listed shares and equity of $2.2b and a net issue in one name paper of $1.9b. During the quarter net financial asset transactions were $22.9b, mainly through equity in rest of world of $13.0b, see note on page 2.
Net flow of currency and deposits to banks
There was an increase of $26b in currency and deposit liabilities of banks during the December quarter 2004. The transactions in currency and deposit assets of private non-financial corporations were $10.4b, households, $7.9b, rest of the world, $5.4b, pension funds, $2.5b and financial intermediaries n.e.c, $0.9b. These were offset by other depository corporations and other insurance corporations reducing their bank deposits by $1.4b and $0.6b respectively.
Bank deposit liability flows
Asset portfolio of life insurance corporations and pension funds at end of quarter
At the end of December quarter 2004 life insurance corporations held $122.0b in shares and other equity (59% of their financial assets), of which $102.1b was in resident companies and $19.9b was in non-resident companies; $43.5b in bonds (21% of their financial assets), of which $38.5b was in Australian bonds and $5.0b in non-resident bonds; and $19.2b in short term securities (9% of their financial assets).
Financial claims between households, life insurance companies, pension funds and investment managers at end of quarter
At the end of December quarter 2004 households had claims against the reserves of life insurance corporations of $44.2b and pension funds of $641.4b. Pension funds had claims against the reserves of life insurance corporations of $143.1b. Life insurance corporations invested $141.9b of their financial assets through investment managers and pension funds invested $265.6b through investment managers.
Asset portfolio of other insurance corporations at end of quarter
The graph below shows that at the end of December quarter 2004 other insurance corporations held $28.3b in shares and other equity (31% of total financial assets), of which $22.8b was in resident corporations. Other insurance corporations held $23.1b in bonds (25% of total financial assets), of which $21.7b was issued by resident corporations and $1.4b by non-resident corporations.
Central borrowing authorities net issue of debt securities
Central borrowing authorities had net issues of bonds of $0.8b and of one name paper of $1.0b in the December quarter 2004.
Financial intermediaries n.e.c. net issue of debt securities
During the December quarter 2004 financial intermediaries n.e.c. made a net redemption of bonds of $1.2b and a net issue of short term paper of $2.1b.
At the end of December quarter 2004 pension funds held $318.0b in shares and other equity (52% of their financial assets), of which $233.0b was in resident companies and $85.0b was in non-resident companies. They held $143.1b of net equity in life office reserves (23% of their financial assets); and $60.0b in bonds (10% of their financial assets), of which $32.5b were Australian bonds and $27.5b were non-resident bonds.
During the December quarter 2004, consolidated general government transactions resulted in a net change in financial position of $1.2b (see table 33, December quarter 2004). The liability transactions of national general government during the December quarter were $0.6b. Main contributors were a -$1.0b change in balances for accounts payable and a $1.5b rise in unfunded superannuation claims. During the December quarter, asset transactions were $0.1b. Main contributors were a $1.0b change in balances for accounts receivable, net settlements of derivatives in a net asset position of $0.2b and the repayment of $0.3b by households of their outstanding loans. The net change in financial position for national general government during the December 2004 quarter was -$0.5b. At the end of December 2004, national general government had total liabilities of $175.0b and total financial assets of $94.3b.
Transactions in state and local general government financial assets were $1.8b in the December quarter 2004, while transactions in total liabilities were $0.2b, resulting in a change in financial position of $1.6b. At the end of the quarter, state and local general government had total liabilities of $99.1b and total financial assets of $137.1b.
National government issue of debt securities
The accompanying graph illustrates the national general government’s bond issuance, there was a net issue of $0.1b in treasury bonds during the quarter.
Change in financial position
Households borrowed a total of $25.0b during the quarter in the form of loans. Net transactions of deposit assets were $10.4b, of which bank deposits accounted for $7.9b. Net contributions to life insurance and pension fund reserves were $9.6b while net transactions in unfunded superannuation schemes were $2.5b.
Households purchased a net $0.6b in equities during the December quarter 2004, the major contributors being purchases of $2.3b of financial intermediaries and $1.0b of rest of the world shares. These were offset by the $1.1b sale of national public non-financial corporation shares, the $0.5b sale of private non-financial corporations shares and $1.1b sale of bank, life insurance and general insurance shares.
At the close of the quarter, households' stock of financial assets was $1,592.6b. This was up $72.4b from the revised previous quarter number, following net transactions of $22.7b and valuation increases of $49.7b. Major asset holdings were net equity in reserves of life insurance corporations and pension funds of $685.6b, currency and deposits of $375.5b, equities of $293.7b, and unfunded superannuation claims of $146.6b.
Household net borrowing and debt to liquid asset ratio
Of the net $25.0b borrowed by households during the period, bank loans accounted for $21.9b. Of the bank loans, $13.6b was borrowed for owner occupied housing and $4.9b for investment housing. This borrowing raised household bank loan liabilities to $601.0b and total household liabilities to $843.1b at the end of the quarter.
Insurance and pension claims
During the December quarter 2004 households' net equity in reserves of pension funds increased $33.8b, made up of $11.2b net contributions and $22.6b valuation increases, bringing household net equity in pension funds to $641.4b. Net equity in reserves of life insurance corporations decreased $0.9b, made up of a $1.6b net withdrawal and a $0.7b valuation increase, bringing the household net equity in life insurance to $44.2b. Net transaction in households' unfunded superannuation claims were $2.5b.
The graph below illustrates that the debt to liquid assets ratio at the end of December 2004 was at 120.4%, a decrease of 1.9 percentage points from the revised September quarter ratio. The ratio was influenced by an overall increase from the previous quarter of 5 percentage points in total liquid assets held (of which the major contributors were deposits and equities) while total outstanding household borrowings only rose 3 percentage points.
REST OF THE WORLD
Non-residents invested a net $16.1b in Australian financial assets during the December quarter 2004. There were purchases of equity of $15.0b, purchases of bonds $13.8b (of which $10.0 was issued by banks), placements of currency and deposits of $5.4b, loans of $4.2b and purchases of one name paper of $3.5b. These were offset by net settlements of derivatives in an asset position of $6.1b and reduction of accounts receivable of $0.6b. Overall, the value of Australian financial assets held by non-residents at the end of the quarter was up $68.7b from the September quarter, after taking into account $52.6b valuation increases.
Australian residents purchased foreign financial assets worth net $21.4b during the December quarter 2004. Residents purchased equity $22.0b, debt securities $6.2b and loaned $2.1b. There was a settlement of derivatives in a net asset position (to residents) of $6.3b, a reduction in accounts receivable of $1.1b, and withdrawal of currency and deposits of $1.0b. Overall, the total value of foreign assets held by Australian residents rose to $618.1b at the end of the quarter, after taking into account $21.5b valuation changes.
Net purchases of bonds
The accompanying graph shows that non-residents purchased $13.8b of Australian bonds during the December quarter 2004, a decrease of $6.9b compared with the September quarter 2004.
Net purchases of equities
The accompanying graph shows that during the December quarter 2004 non-residents purchased a net $15.0b in equities, a increase of $14.4b compared with the September quarter 2004, see note on page 2.