Balance sheets are important economic analysis tools that provide an overview of the non-financial assets and financial resources of the Australian economy. This spotlight focuses on the balance sheet of non-financial corporations and how it has evolved over the last 30 years. Underlying trends in capital investment, their funding, and the value of Australia’s mineral and energy resources which are mined by some non-financial corporations are examined.
Investment in produced non-financial assets (known as gross fixed capital formation), such as mining infrastructure, requires current production and generates future productive activity. As such the level of investment in these assets is an important contributor to GDP and to related employment and productivity.
Historically, the household sector has been the biggest holder of excess financial assets, such as deposits, shares and superannuation. The majority of these household financial assets are issued through the financial sector, which uses these funds to provide financial resourcing to non-financial corporations to invest in productive capital.
In the past, capital investment by non-financial corporations has generally been financed through both saving and borrowing mainly facilitated through equity markets and loan borrowings. Over the last couple of years borrowing by non-financial corporations has slowed, especially for private non-financial corporations. In 2020, private non-financial corporations funded investment through saving, lending their excess saving to other sectors, and became a net lender.