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HOUSEHOLD SECTOR SUMMARY
HOUSEHOLD ACCUMULATION OF WEALTH
At the end of September quarter 2016, household net worth was $9,061.7b, comprised predominantly of $6,137.8b of land and dwelling assets and $4,574.6b of financial assets, less $2,270.1b of household liabilities. During the quarter, household net worth increased by $197.6b, driven by real holding gains of $183.5b.
Real holding gains on net worth were largely driven by land and dwellings ($109.8b), which recovered following three quarters of subdued growth. Real holding gains on financial assets remained steady at $76.9b after several fluctuating quarters. The strength of real holding gains on net worth was offset by weakness in neutral holding gains.
Transactions contributed $30.8b to net worth, driven by financial assets, in particular deposits ($23.7b) and net equity in reserves of pension funds ($13.8b). Transactions in liabilities ($19.3b) were by long term loans ($22.4b) and partially offset by repayments of short term loans ($1.8b) and maturities in short term debt securities ($1.0b).
Graph 1. Components of Household balance sheet
Household assets (2.0%) outgrew liabilities (0.9%) during September quarter 2016, resulting in a 2.2% quarterly growth in household net worth. Movements in net worth have been primarily driven by holding gains for the past 13 quarters (since September quarter 2013).
Household residential land and dwellings grew by 1.9% ($106.9b) in September quarter 2016. In percentage terms, this quarter’s growth of residential land and dwellings equalled the average quarterly growth over the previous 16 quarters. Households non-residential land assets grew by 2.0% ($5.7b) in September quarter 2016.
HOUSEHOLD SECTOR FINANCIAL RATIOS
The financial ratios graphs presented here are derived from the household balance sheet, financial account and income account (Australian National Accounts: National Income, Expenditure and Product (cat. no. 5206.0)).
Graph 2. Interest payable to income ratio
The interest payable to income ratio represents the proportion of household gross disposable income that is required to meet interest payments. Interest payable in the graph is the "un-adjusted interest payable". It includes financial intermediation services indirectly measured (FISIM) on dwelling loans plus dwelling interest payable from the household income account. It therefore represents the total nominal amounts of interest paid by the household sector. The interest payable to income ratio is relatively volatile in the short term, however long term trends may be observed. After a period of volatility during the Global Financial Crisis, the ratio stabilised from March quarter 2010 onwards, displaying gradual downward trend. This decline has flattened over the past three years, maintaining a ratio of between 9.7% and 10.9% over this period. The ratio at September quarter 2016 fell to 9.9%, from the June quarter ratio of 10.9%.
Graph 3. Gearing ratios
Source(s): Table 51. Financial Accounts Summary of Loan Outstandings to Households for Housing by Type of Lending Institution ($ million); Table 34. Household Balance Sheet, Current prices ($ billion)
The mortgage debt to residential land and dwellings ratio shows the extent to which household residential real estate assets are geared. The ratio declined 0.1% in September quarter 2016 to 27.5%, indicating that the value of residential real estate owned by households grew slightly faster than mortgage debt.
The debt to assets ratio gives an indication of the extent to which the overall household balance sheet is geared. That is, the degree to which assets are dependent on debt. At 30 September 2016, household debt equalled 20.0% of assets, decreasing from 20.2% on 30 June 2016.
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 following are classified as liquid assets: currency and deposits, short and long term debt securities, and equities. The ratio of household debt to liquid assets decreased from 127.3% at 30 June 2016 to 125.4% at 30 September 2016, indicating holdings of liquid assets outgrew liabilities during the quarter. The growth in liquid assets was driven by increases in deposits and equities. This ratio averaged 143.0% in the period from December quarter 2008 to June quarter 2012. Since then the ratio has averaged 127.0% as the value of household deposits and equities have increased relatively more than household debt.
ANALYTICAL MEASURES OF INCOME, CONSUMPTION AND WEALTH
Graph 4. Household net saving
Household net saving was $29.2b in September quarter 2016, increasing from $8.3b in June quarter 2016. With the inclusion of other changes in real net wealth, commonly known as the wealth effect, net saving increased from $107.7b to $220.7b in September quarter 2016, largely due to real holding gains on land and dwelling assets ($109.8b) and financial assets ($76.9b).
Graph 5. Gross disposable income
The addition of $191.5b in other changes in real net wealth (wealth effects) to household disposable income, increased household income from $300.6b to $492.1b in September quarter 2016. This is the strongest quarterly wealth effect since March quarter 2015.
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