5232.0 - Australian National Accounts: Finance and Wealth, Jun 2018 Quality Declaration 
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 27/09/2018   
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HOUSEHOLD SECTOR SUMMARY

HOUSEHOLD ACCUMULATION OF WEALTH



Amount outstanding at end
Transactions during
Other changes in volume during (a)
Holding gains (+)/losses (-) during
Amount outstanding at end
Mar Qtr 2018
Jun Qtr 2018
Jun Qtr 2018
Jun Qtr 2018
Jun Qtr 2018
$b
$b
$b
$b
$b

Non-financial assets
Land and dwellings
6 911.7
12.1
8.3
-28.4
6 903.8
Other non-financial assets
657.8
1.2
-
2.7
661.7
Financial assets
5 053.1
55.3
-
82.7
5 191.1
Liabilities
2 369.0
29.4
-
0.7
2 399.1
Net worth
10 253.7
39.2
8.3
56.3
10 357.5
Memorandum item
Consumer durables (b)
380.5
3.2
-
-0.3
383.4

- nil or rounded to zero (including null cells)
(a) Not all other changes in volume are separately identifiable. Some have been shown as holding gains.
(b) Consumer durables are not included in net worth.

Household net worth was $10,357.5b at the end of June quarter 2018, mainly compromising of land and dwelling assets, financial assets, and household liabilities. During the quarter, household net worth increased by $103.8b driven by holding gains (real and neutral) of $56.3b.

Holding gains on financial assets were $82.7b in June quarter 2018, driven by valuation increases in insurance technical reserves, and the equities market. Holding losses on land and dwellings were $28.4b. Households recorded real holding losses on land and dwellings this quarter of $50.7b, the second consecutive loss after March quarter 2018 reported a real holding loss of $69.2b. Real holding losses occur when the increase in the value of assets is less than the general price increase.

Household transactions in net worth were $39.2b. Net capital formation recorded $13.3b, driven by net acquisitions of land and dwellings. Net acquisition of financial assets were $55.3b, the major contributors of which were net equities in reserves of pension funds. Net incurrence of liabilities were $29.4b driven by transactions in liabilities of long term loans.
Graph 1. Components of Household balance sheet

Graph 1 shows 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

Graph 2 shows 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

Graph 3 shows 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.


ANALYTICAL MEASURES OF INCOME, CONSUMPTION AND WEALTH

Graph 4. Household net saving

Graph 4 shows 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

Graph 5 shows 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.