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The $169.6b increase in financial corporations' assets was driven by increases in shares and other equity ($60.0b), derivatives ($49.2b) and loans and placements ($48.4b), while the $203.1b increase in liabilities was driven by revaluations in derivatives ($76.9b) and acceptance of deposits ($31.2b).
Authorised deposit taking institutions deposit funding decreases
ADIs largest funding source, deposits, decreased to 57.7% this quarter, the lowest it has been since June quarter 2016, partly reflecting record low interest rates. Funding through equity remained steady at 14.2%, financing through short-term debt securities continued to decline, falling this quarter to 7.4%, and funding through long-term debt securities fell slightly to 13.2%.
Graph 3. ADIs liabilities as a proportion of their financial assets
Household loan balances continued to slow
Growth in long term loans to households continues to slow, reflecting tighter lending conditions and a recovering but still weak housing market. Long term loans from ADIs and securitisers to households increased $3.3b this quarter. The increase was driven by strength in lending to households from securitisers, which increased $11.4b, mostly driven by internal securitisation. Balances of ADIs' long term loans to households decreased (-$8.1b) for the first time since December quarter 2014, as households paid off debt this quarter. Through the year growth in long term loan balances has fallen to a new historic low of 2.9%.
Both ADIs and securitisers need to be considered when assessing movements in loans assets of ADIs. Securitisers are trusts or corporations that pool various types of assets, such as property loans or credit card debt, and package them as collateral backing for bonds or short-term debt securities. Graph 4 includes both 'on market' and internal securitisation. 'On market' securitisation is used by ADIs as a way to move loan assets off their balance sheets to fund their lending business, while the purpose of internal securitisation is to use the securities as collateral with the RBA in its repurchase agreement program.
Graph 4. Long term loans and placements from ADIs and securitisers to households
Superannuation assets continue to rise
Pension fund (superannuation) assets rose $62.9b driven by valuation increases in shares and other equity ($42.8b) which remain the largest financial asset held by pension funds (77.1%).
Graph 5. Financial assets of pension funds
Pensions funds are also indirectly exposed to equities and debt securities through non-money market financial investment funds (NMMF). Pension funds holdings in NMMF equity represent 42.7% of their total investment in equities. This quarter NMMF held $672.2b in shares and other equity (66.2% of total financial assets) and $238.2b in debt securities (23.5% of total financial assets).
Households claims on net equity in reserves of superannuation (pension funds) was $2,622.8b at the end of the quarter.
National general government debt issuance increases for the second consecutive quarter
Net issuance increased $12.3b this quarter. Despite this, annual growth to September quarter remains at historically low levels post the global financial crisis and is driven by national general government gross saving remaining high. The majority of bond issuances this quarter was purchased by the rest of the world ($13.0b) and ADIs ($6.3b), offset by repurchase agreement activity by the central bank (-$5.3b) and maturities of bonds held by non-money market investment funds ($3.7b).
Total liabilities increased $32.9b, as falling bonds yields resulted in large valuation increases for a third consecutive quarter.
Graph 6. Annualised national general government net bond issuance and gross saving
State and local general government continue to borrow for capital investment
State and local general government continued to borrow this quarter, with long term loan borrowings in 2019 the highest since 2012-13, partly reflecting increased financing requirements with strong capital investment on infrastructure through the year. Balances of loans and placements with central borrowing authorities grew 18% through the year, with September quarter 2019 increasing 6.0% ($9.3b). The rise this quarter follows loan borrowings from central borrowing authorities of $6.6b in June quarter 2019 and $4.5b in March quarter.
Graph 7. State and local general government loan borrowings with central borrowing authorities
REST OF WORLD
Rest of world continues to borrow
The net financial position of rest of world at the end of September 2019 was $976.0b. This $22.0b decrease from the previous quarter was due to valuation decreases of $14.2b and net transactions (net change in financial position) of -$7.7b, resulting in the second consecutive quarter of net lending by Australia.
Rest of word investment in Australia was low, recording just $74m in transactions with valuations making up most of the movement ($114.8b), resulting in an increase in rest of world holdings of Australian assets to $3,954.0b. The weakness in transactions was driven by settlements of derivative contracts with domestic ADIs. The valuation increases to rest of world assets were driven by long term debt securities.
Rest of world increased their liabilities to Australia, recording transactions of $7.8b and valuations of $129.1b, resulting in a total of $2,978.1b in liabilities to Australian residents. Positive transactions were driven by loans, equity and accounts payable, partly offset by settlements of derivative contracts and maturity of one name paper issued offshore. The valuation increase was driven by long term debt securities, derivatives and unlisted equity.
Graph 8. Rest of world's net change in financial position with Australia
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