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HOUSEHOLD SECTOR SUMMARY
Graph 1. Components of Household balance sheet
Household net worth increased by 1.0% during June quarter 2018, recovering from a 0.6% decline last quarter. Financial assets were the largest contributor to the increase in household net worth, contributing 1.35 percentage points to growth. In contrast, land and dwellings, and liabilities detracted 0.08 and 0.29 percentage points from growth, respectively. Net worth per person increased to $414,463.0 in the June quarter from the March quarter of $411,820.7.
HOUSEHOLD SECTOR FINANCIAL RATIOS
Graph 2. Interest payable to income ratio
The interest payable to income ratio at June quarter 2018 increased to 11.0%, from the March quarter 2018 ratio of 10.7%. This indicates that the proportion of household gross disposable income required to meet interest payments increased slightly in the June quarter.
Graph 3. Gearing ratios
The mortgage debt to residential land and dwellings ratio rose to 26.9% from the March quarter 2018 result of 26.5%, indicating that mortgage debt grew faster than the value of residential real estate owned by households.
The debt to assets ratio gives an indication of the extent to which the overall household balance sheet is geared. Household debt equalled 18.8% of assets in June quarter 2018, unchanged from the 18.8% seen in March quarter 2018. The ratio has remained stable over recent quarters, reporting results between 18.5% and 19.0% since September quarter 2016. The consistency in the ratio highlights the degree to which households have been reliant on debt in recent years.
The debt to liquid assets ratio reflects the ability of the household sector to extinguish debts in a short period of time using their readily available, or liquid assets. The ratio of household debt to liquid assets increased slightly from 114.8% in the March quarter 2018 to 114.9% in the June quarter 2018, indicating holdings of debt outgrew liquid assets during the quarter. The growth in debt was driven by increases in loans. Household debts have exceeded 100% of liquid assets since September 2002, peaking at 129.8% in June 2011. Although the ratio continues to fall from this high, it remains at an elevated level, indicating households may not be able to hurriedly extinguish debt if required.
Graph 4. Household net saving
Household net saving was -$8.9b in June quarter 2018, decreasing from $4.9b in March quarter 2018. When other changes in real net wealth, commonly known as the wealth effect, is added to net saving, the value increases from -$101.7b in March quarter 2018 to $23.2b in June quarter 2018. This was largely driven by real holding gains in financial assets.
Graph 5. Gross disposable income
Household gross disposable income fell from $289.6b to $285.0b in June quarter 2018. However, household gross disposable income adjusted for changes in real net wealth rose from $183.0b to $317.1b, driven by real holding gains in financial assets. This contrasts with March quarter 2018, which saw a negative wealth effect on household incomes.
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