5232.0 - Australian National Accounts: Finance and Wealth, Jun 2019 Quality Declaration
Latest ISSUE Released at 11:30 AM (CANBERRA TIME) 26/09/2019
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Household sector summary
(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 wealth gains strength
Household net worth (wealth) increased $165.7b (1.6%) in June quarter 2019, driven by a $202.4b increase in total assets, partly offset by a $36.7b increase in total liabilities.
The increase in total assets was driven by record holding gains on financial assets, mainly in superannuation assets, which are made up of reserves of pension funds and unfunded superannuation claims. Reserves of pension funds were the main contributor to holding gains as 72.4% of reserve assets were invested in shares, which were influenced by positive revaluations in the Australian stock market over the quarter. The valuation increases in unfunded superannuation claims represent changes in actuarial assumptions due to falls in the discount rate, which reflect decreasing bond yields during the quarter.
The value of residential land and dwellings fell 0.1%, driven by holding losses of $26.5b. While detracting from growth in household wealth for a fifth consecutive quarter, the rate of decrease in the value of residential land and dwellings slowed. Through the year, household wealth increased 0.5%, a turn around from the negative March quarter result. Similarly, household wealth per capita increased $4,965.8 to $411,491.7, following three consecutive quarters of falls. The turn around reflects the second consecutive quarter of record high holding gains on financial assets, combined with June quarter 2019 having the smallest holding loss on residential land and dwellings for 2018-19.
The percentage point contributions to the change in household wealth were:
Graph 1. Household net worth through the year growth
Total financial assets increased 3.9% driven by real holding gains on pension fund assets. While holdings in pension fund assets has increased to a high of 55% of total household financial assets, the share of deposits has reduced to a nine year low of 20.1%, reflecting record low interest rates. Net transactions in deposits ($2.5b) for the quarter was the second lowest result since June quarter 2007.
Household liabilities grew 1.5% and is the strongest increase since June quarter 2017. Total household sector liabilities were $2,493b, 91% of which were long term loans. The increase in household liabilities was driven by net transactions in long term loans with securitisers ($14.4b) and banks ($8.9b). Long term loans from national general government also contributed to the increase in household liabilities during the quarter with positive revaluations of $6.6b. These long term loans are predominantly Higher Education Loan Program loans, with the valuation increases representing changes in actuarial assumptions due to falls in the discount rate, which reflect decreasing bond yields during the quarter. Short term loans (-0.8%) detracted from growth in total household liabilities, driven by households paying off their short term loans with banks.
Household transactions in net worth were $18.5b. Financial transactions were the largest component contributing $10.3b, driven by a net acquisition of financial assets of $38.9b, and partly offset by a net incurrence of liabilities of $28.6b. Net capital formation contributed $8.1b to household transactions in net worth and was driven by land and dwellings ($9.4b), partly offset by other non-financial assets (-$1.3b).
Household debt to assets ratios
The household debt to assets ratio gives an indication of the extent to which the overall household balance sheet is geared. The household debt to assets ratio remained at 19.3, as growth in household assets (1.6%) and household debt (1.5%) was similar this quarter.
The mortgage debt to residential land and dwellings ratio increased from 28.7 to 29.0, indicating mortgage debt grew faster than the value of residential land and dwellings. The rate of increase in the ratio has slowed, due to the inverse relationship with the value of residential land and dwellings, which continued to fall, though at a slower rate relative to previous quarters. Quarterly growth in mortgage debt (1.1%) showed strength compared to March quarter 2019, however through the year growth has reduced to its slowest pace since September quarter 2013.
The household debt to liquid assets ratio reflects the ability of households to quickly extinguish debts using liquid assets (currency and deposits, short and long term debt securities, and equity). The household debt to liquid asset ratio increased from 112.5 to 112.7, as growth in household debt (1.5%) outweighed growth in household liquid assets (1.3%). Growth in liquid assets was driven by increases in household equity assets which contributed 1.2 percentage points to the 1.3% increase. Growth in household debt was driven by a 1.4% increase in long term loan borrowing.
Graph 2. Mortgage debt to residential land and dwellings ratio breakdown
The wealth effect
Household net saving reduced from $10.7b to -$9.2b in June quarter 2019. The $19.9b decrease was driven by a decrease in gross disposable income ($10.2b), combined with increases in final consumption expenditure ($9.4b) and consumption of fixed capital ($0.3b). The fall in gross disposable income was driven by a $9.2b fall in dividends received and a $8.1b increase in income tax payable.
Household gross disposable income adjusted for other changes in real net wealth (wealth effect) increased from $289.7b to $387.6b and household net saving adjusted for other changes in real net wealth increased from -$3.1b to $85.1b. The increases in gross disposable income and household net saving when adjusted for other changes in net wealth are due to total real holding gains of $84.5b, the first positive result of 2018-19.
Graph 3. Net saving plus other changes in real net wealth, original
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