HOUSEHOLD SECTOR SUMMARY

HOUSEHOLD ACCUMULATION OF WEALTH

		Amount outstanding at end	Transactions during	Other changes in volume during (a)	Holding gains (+)/losses (-) during	Amount outstanding at end
		Mar Qtr 2016	Jun Qtr 2016	Jun Qtr 2016	Jun Qtr 2016	Jun Qtr 2016
		$b	$b	$b	$b	$b
Non-financial assets
	Land and dwellings	5 880.7	13.3	7.8	112.2	6 013.9
	Other non-financial assets	665.7	1.3	-	5.3	672.3
Financial assets		4 308.1	44.7	-	90.8	4 443.5
Liabilities		2 194.8	39.3	-	4.5	2 238.6
Net worth		8 659.7	19.9	7.8	203.8	8 891.2
Memorandum item
	Consumer durables (b)	331.1	2.4	-	0.7	334.3
- nil or rounded to zero (including null cells) (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.

At the end of June quarter 2016, household net worth was $8,891.2b, comprised predominantly of $6,013.9b of land and dwelling assets and $4,443.5b of financial assets, less $2,238.6b of household liabilities. During the quarter, household net worth increased by $231.5b, driven by holding gains (real and neutral) of $203.8b.

Land and dwellings ($112.2b) drove holding gains this quarter, recovering from March quarter 2016 holding losses of $58.5b. Financial assets contributed $90.8b in holding gains in June quarter 2016, driven by valuation increases in insurance technical reserves (superannuation) of $86.3b.

Transactions in net worth were driven by net capital formation of $14.6b, of which net acquisitions of land and dwellings were $13.3b and other non-financial assets were $1.3b. Net financial transactions were $5.4b, of which net acquisition of financial assets were $44.7b and net incurrence of liabilities were $39.3b. The major contributors to financial assets transactions were net equity in reserves of pension funds ($29.8b) and deposits ($8.9b) despite the transaction in net equity in reserves of pension funds being unseasonally low for a June quarter. Households incurred liabilities predominately through long term loan borrowings ($30.1b).

Graph 1. Components of Household balance sheet


While both household assets and liabilities grew during June quarter 2016, stronger growth in assets resulted in 2.7% growth in household net worth. Financial assets increased by 3.1% ($135.4b), driven by growth in insurance technical reserves - superannuation (5.1%) predominantly as a result of holding gains ($86.3b).

Household land and dwelling assets are primarily residential. Household residential land and dwellings grew by 2.4% ($131.9b) to $5,737.3b in June quarter 2016. This strong growth in residential land and dwelling assets followed subdued growth in the previous 2 quarters (March quarter 2016 (-0.7%) and December quarter 2015 (0.8%)). Non-residential land assets include commercial and rural land owned by households and unincorporated businesses.


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 patterns may be observed. After a period of volatility during the Global Financial Crisis, the ratio stabilised from March 2010 onwards, displaying gradual downward trend. This decline has slowed over the past two years, maintaining a ratio between 9.3% and 10.5% over this period. The ratio at June quarter 2016 was 10.3%, a decrease from the March quarter ratio of 10.4%.

Graph 3. Gearing ratios


The mortgage debt to residential land and dwellings ratio shows the extent that household residential real estate assets are geared. The ratio declined to 28.6% in June quarter 2016 from 28.7% in March quarter 2016, 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 2016, household debt equalled 20.1% of assets, decreasing from 20.2% in March quarter 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 increased from 125.3% at 31 March 2016 to 126.8% at 30 June 2016, driven by an increase in long term loan borrowings. This ratio averaged 143.1% in the period 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 $12.3b in June quarter 2016, decreasing from $17.1b in March quarter 2016. With the inclusion of other changes in real net wealth, commonly known as the wealth effect, net saving increased from -$77.5b to $121.7b in June quarter 2016. This was largely driven by real holding gains in land and dwelling assets ($43.0b) and financial assets ($39.5b), of which insurance technical reserves (superannuation) was the main contributor.

Graph 5. Gross disposable income


The addition of $109.4b in other changes in real net wealth (wealth effects) to household disposable income, increased household income from $275.4b to $384.8b in June quarter 2016. This follows negative wealth effects in March quarter 2016 (-$94.6b) which was driven by real holding losses in land and dwelling assets and financial assets. Both assets recovered in June quarter 2016, resulting in positive impacts on real household wealth.