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HOUSEHOLD ACCUMULATION OF WEALTH
At the end of June quarter 2015, household net worth was $8,416.8b, comprised predominantly of $5,732.2b of land and dwelling assets and $4,218.3b of financial assets, less $2,168.7b of household liabilities. During the quarter, household net worth increased by $225.5b, driven by holding gains of $203.7b. Land and dwellings ($240.1b) was the driver of holding gains this quarter, recording the largest quarterly holding gain since December quarter 2009. The holding gains in land and dwellings were partially offset by holding losses in financial assets ($37.7b). This was driven by net equity in reserves (-$53.2b) and equities (-$5.3b), offset by unfunded superannuation claims ($20.6b).
The $14.9b of transactions in net worth was driven by transactions of $11.7b in net capital formation of land and dwellings; and net financial transactions of $2.2b, of which transactions in financial assets were $46.0b and liabilities were $43.8b. The June quarter 2015 transactions in financial assets were driven by $28.7b of transactions in net equity in reserves of pension funds and $8.0b of transactions in deposits. Transactions in liabilities in June quarter 2015 were driven by transactions of $38.1b in long term loan borrowing and $6.8b in other accounts payable.
Graph 1. Components of Household balance sheet
Both household assets and liabilities grew over June quarter 2015, resulting in 2.8% growth in household net worth. Net worth has continued to grow over the last fifteen quarters, with June quarter 2015 recording the same percentage growth as March quarter 2015 (2.8%).
Household residential land and dwellings grew faster than both financial assets and financial liabilities, growing by 5.0% ($258.9b), 0.2% ($8.9b) and 2.2% ($46.8b) respectively. Household residential land and dwellings recorded its largest quarterly growth, in both percentage and dollar value terms, since the December quarter 2009 growth of 7.7% ($292.7b).
HOUSEHOLD SECTOR FINANCIAL RATIOS
The financial ratios graphs presented here are derived from the household balance sheet, financial account and income account (Australian National Accounts: National Income, Expenditure and Product (cat. no. 5206.0)).
Graph 2. Interest payable to income ratio
The interest payable to income ratio represents the proportion of household gross disposable income that is required to meet interest payments. Interest payable in the graph is the "adjusted interest payable". It includes the financial intermediation services indirectly measured (FISIM) on the dwelling loan plus the dwelling interest payable from the household income account. It therefore represents the total nominal amounts paid as interest by the household sector. The interest payable to income ratio is relatively volatile in the short term, however some long term trends may be observed. After a period of volatility during the Global Financial Crisis, the ratio stabilised from March 2010 onwards, settling into a gradual downward trend. The ratio at June quarter 2015 was 10.7%, a decrease of 4p.p from the March quarter ratio of 11.1%.
Graph 3. Gearing ratios
Source(s): Table 51. Financial Accounts Summary of Loan Outstandings to Households for Housing by Type of Lending Institution ($ million); Table 34. Household Balance Sheet, Current prices ($ billion)
The mortgage debt to residential land and dwellings ratio shows the extent that household residential real estate assets are geared. The ratio has declined to 28.4% in June quarter 2015 from 29.1% in March quarter 2015, indicating that the value of residential real estate owned by households grew faster than mortgage debt.
The debt to assets ratio gives an indication of the extent that the overall household balance sheet is geared. That is the degree to which assets are dependent on debt. At 30 June 2015, household debt equalled 20.5% of assets, recording its third consecutive decrease.
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 rose from 125.9% at 31 March 2015 to 128.2% at 30 June 2015, largely driven by an increase in long term loans liabilities.
ANALYTICAL MEASURES OF INCOME, CONSUMPTION AND WEALTH
Graph 4. Household net saving
Household net saving was $14.6b for the quarter, decreasing from $16.2b in the March quarter. Despite the decrease in net saving, household net worth increased by $225.5b to $8,416.8b in June quarter 2015. With the inclusion of real net wealth effects, net saving decreased from $209.3b to $132.1b in June quarter 2015.
Other changes in net wealth was $117.5b in June quarter 2015, down from $193.1b in March quarter 2015. The largest driver of this decrease was real holding gains, which contributed $75.5b to the $75.6b decrease. Real holding gains for land and dwellings were $177.0b increasing $123.3b, recording the largest holding gain since December quarter 2009. These gains were offset by real holding losses of $86.0b and $22.4b respectively in financial assets and liabilities. Real holding losses in financial assets were driven by net equities in reserves of pension funds and equities. The June quarter losses in financial assets followed a record high real holding gain of $131.3b in the previous quarter.
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