SECTORAL ANALYSIS
NON-FINANCIAL CORPORATIONS
Summary
Private non-financial corporations raised a net $39.9b (excluding derivatives and accounts payable) during the March quarter 2007. They borrowed $13.4b in loans and made a net issue of $11.1b in debt securities. Net issuance of shares during the quarter were $15.3b. These transactions resulted in total borrowings outstanding of $659.3b and total equity on issue of $1173.4b.
PRIVATE NON-FINANCIAL CORPORATIONS, NET ISSUE OF EQUITY AND BORROWINGS
During the March quarter 2007, total liabilities of national public non-financial corporations decreased by $72.1b following valuation decreases of $72.0b. Liabilities of state and local public non-financial corporations increased by $4.1b to $141.4b.
Private non-financial corporations debt to equity ratio
From the end of March 2005 to the end of March 2007, the value of equity on issue increased by $336.8b. The value of debt outstanding rose $212.5b during the same period. During the quarter, private non-financial corporation debt increased by $45.0b, while equities on issue increased by $93.2b. Over the March quarter 2007, the original debt to equity ratio decreased from 0.69 to 0.68 and the adjusted ratio increased from 1.47 to 1.48. The adjusted ratio reflects the removal of price change from the original series.
Debt to Equity ratio - June 1995 Base
FINANCIAL CORPORATIONS
Summary
During the March quarter 2007, financial corporations had $68.2b liability transactions on a consolidated basis. The liability transactions were: banks, $31.2b; financial intermediaries n.e.c., $26.8b; pension funds, $18.5b; life insurance corporations, $3.5b; the central bank, $8.5b; and other insurance corporations, $0.1b. Redeemers of liabilities were: other depository corporations, $7.2b; and central borrowing authorities, $1.7b.
Banks
Transactions of financial assets of banks were $44.9b during the quarter. Banks loaned a net $35.6b, of which loans to households were $13.9b and private non-financial corporations were $21.5b. These loans were offset by repayments of $0.4b by financial intermediaries n.e.c. Other transactions in bank assets holdings were: bills of exchange, $3.0b; equities, $11.6b; and currency and deposits $1.4b. These were offset by redemptions of one name paper of $3.5b and derivatives of $4.8b.
During the quarter, transactions of banks' currency and deposits liabilities were $12.6b, bonds of $16.9b, and bills of exchange were $2.0b. These were offset by net repayments in loans of $0.6b, derivatives of $5.2b, and other accounts payable of $2.5b. There were no net issues of one name paper for the quarter.
Other depository corporations
Transactions of other depository corporations liabilities were -$7.2b during the March quarter 2007, driven mainly by net settlement of derivatives of $3.3b and accounts payable of $4.1b. This was partially offset by currency and deposits of $2.1b. Transactions of assets during the quarter were -$8.4b, the main contributors being the redemption of bonds of $4.3b, derivatives of $3.0b, and currency and deposits of $1.6b.
Life insurance corporations
At the end of March quarter 2007, the financial assets of life insurance corporations stood at $246.8b, an increase of $9.1b from the previous quarter. Net transactions were $2.7b and valuation increases were $6.5b. During the quarter, they increased their holdings of equities by $7.1b. Pension fund claims against the reserves of life offices increased by $5.0b following net transactions of $1.1b and valuation increases of $3.9b. Households' claims against the reserves of life offices increased by $2.5b following net transactions of $1.1b and valuation increases of $1.4b.
Pension funds
Net equity in reserves of pension funds was $1008.0b at the end of the March quarter 2007, an increase of $46.5b. This follows net transactions of $18.5b and valuation increases of $28.0b during the quarter. Asset holdings increased due to transactions in bonds of $2.1b, currency and deposits of $5.2b, equities of $4.6b, and loans of $1.7b.
Other insurance corporations
Net transactions in financial assets of other insurance corporations were $5.3b during the March quarter 2007. The main contributors were the issuance of equities of $2.9b and bonds of $2.3b. These were offset by the redemption of holdings of currency and deposits by $0.9b. During the March quarter, net liability transactions of other insurance corporations were $0.1b.
Central borrowing authorities
Total liabilities of central borrowing authorities was $122.7b at the end of the March quarter 2007. During the quarter, the authorities issued bonds, $0.6b; loans, $0.4b and redeemed one name paper, $2.3b. During the quarter, net asset transactions of central borrowing authorities were $2.0b, the main contributor being holdings of one name paper of $1.7b.
Financial intermediaries n.e.c.
At the end of the March quarter 2007, net liabilities of financial intermediaries n.e.c. were $650.7b, with unlisted shares of $201.8b on issue and borrowings in the form of loans and placements of $132.1b. Net liability transactions of financial intermediaries n.e.c. were $26.8b during the quarter, through the issuance of bonds of $15.0b and loans and placements of $6.9b. During the quarter, transactions in financial assets were $13.9b, major contributors were loans and placements of $9.4b, currency and deposits of $1.8b, and equities of $1.4b.
Net flow of currency and deposits to banks
Transactions in currency and deposit liabilities of banks during the March quarter 2007 were $10.0b. There were transactions in currency and deposit assets of non-financial corporations, $6.6b, households, $3.9b, pension funds, $2.9b, and financial intermediaries n.e.c., $1.7b. These were offset by redemptions in bank deposits by rest of world of $0.8b.
CURRENCY AND DEPOSITS LIABILITIES, BANKS
Financial asset portfolio of life insurance corporations and pension funds at end of quarter
At the end of the March quarter 2007, life insurance corporations held $157.4b in shares and other equity (64% of their financial assets), of which $130.5b was in resident companies and $26.9b was in non-resident companies; $47.6b in bonds (19% of their financial assets), of which $37.9b was in bonds issued by domestic institutions and $9.7b in bonds issued by non-residents; and $17.0b in short term securities (7% of their financial assets).
At the end of the March quarter 2007, pension funds held $565.5b in shares and other equity (58% of their financial assets), of which $408.5b was in resident companies and $157.0b was in non-resident companies. They held $169.4b of the net equity in life office reserves (17% of their financial assets); and $85.2b in bonds (9% of their financial assets), of which $55.2b were bonds issued by domestic institutions and $30.0b were bonds issued by non-residents.
Financial claims between households, life insurance companies, pension funds and investment managers at end of quarter
At the end of the March quarter 2007, households had claims against the reserves of life insurance corporations of $58.8b and pension funds of $1007.9b. Pension funds had claims against the reserves of life insurance corporations of $169.4b. Life insurance corporations invested $149.2b of their financial assets through investment managers, and pension funds invested $462.3b through investment managers.
Financial asset portfolio of other insurance corporations at end of quarter
The graph below shows that at the end of the March quarter 2007, other insurance corporations held $47.5b in shares and other equity (39% of total financial assets), of which $35.7b was in resident corporations; $30.7b in bonds (25% of total financial assets), of which $26.2b was issued by resident corporations; and $10.5b of short-term securities (9% of total financial assets).
Central borrowing authorities net issue of debt securities
During the March quarter 2007, central borrowing authorities made net issues of bonds of $0.6b, and a net redemption of one name paper of $2.3b.
Financial intermediaries n.e.c. net issue of debt securities
During the March quarter 2007, financial intermediaries n.e.c. made a net issue of bonds of $15.0b and net issue of $1.0b of one name paper.
GENERAL GOVERNMENT
Summary
During the March quarter 2007, consolidated general government transactions resulted in a net change in financial position of $1.2b.
The net change in financial position for national general government was $1.7b. The liability transactions of national general government during the quarter were $3.0b. Main contributor was accounts payable of $4.3b. This was offset by redemption of bonds issued in Australia of $1.7b.
During the March quarter 2007, asset transactions for national general government were $4.7b. Main contributors were currency and deposits of $6.9b and loans and placements of $1.1b. At the end of the quarter, national general government had total liabilities of $195.4b and total financial assets of $144.8b.
Transactions in state and local general government financial assets were -$1.5b in the March quarter 2007, while transactions in total liabilities were -$1.0b, resulting in a change in financial position of -$0.5b. At the end of the quarter, state and local general government had total liabilities of $101.2b and total financial assets of $145.0b.
Change in financial position
National government issue of debt securities
The graph below illustrates the national general government's bond issuance. The net redemption of treasury bonds was $1.7b during the quarter.
HOUSEHOLDS
Summary
Households change in financial position was -$0.9b during the March quarter 2007. During the quarter, households borrowed a total of $21.1b in the form of loans. On the asset side, householders' transactions in currency and deposits were $4.8b, of which $3.9b were bank deposits. Net contributions to life insurance and pension fund reserves were $18.5b while net claims on unfunded superannuation were $1.5b.
Households purchased a net $0.6b in equities during the March quarter 2007, the major contributors being purchases of $3.3b of private non-financial corporation, $2.0b of life insurance corporation, and $0.9b of financial intermediaries n.e.c. shares. These were offset by the $5.7b sale of other insurance corporation shares.
At the close of the quarter, households' stock of financial assets was $2,210.1b. This was up $68.6b from the revised previous quarter number, following net transactions of $25.4b and valuation increases of $43.1b. Major asset holdings were net equity in reserves of life insurance corporations and pension funds of $1066.7b, currency and deposits of $443.2b, equities of $430.2b, and unfunded superannuation claims of $166.7b.
Household net borrowing and debt to liquid asset ratio
Of the net $26.0b borrowed by households during the March quarter 2007, bank loans were $13.9b and borrowing from financial intermediaries n.e.c. was $5.2b. Of the bank loans, $5.2b was borrowed for owner occupied housing and $3.0b for investment housing.
The graph below illustrates that the debt to liquid assets ratio at the end of March 2007 was at 120.7%, an increase of 0.6 percentage points from the revised December quarter 2006 ratio. The ratio was influenced by an increase from the previous quarter of 2.0 % in total outstanding household borrowings and an increase in total liquid assets of 1.6%. Major contributors to liquid assets were holdings of equities (up 2.0%) and loans and placements (up 2.4%).
Insurance and pension claims
During the March quarter 2007, households' net equity in reserves of pension funds increased $46.5b, made up of $17.1b transactions and $29.4b valuation increases, bringing household net equity in pension funds to $1007.9b. Net equity in reserves of life insurance corporations increased $2.5b, made up of $1.1b transactions and $1.4b valuation increases, bringing the household net equity in life insurance to $58.8b. Net transactions in households' unfunded superannuation claims were $1.5b and prepayments of premiums and claims against reserves in general insurance corporations was -$0.5b during the quarter.
REST OF THE WORLD
Summary
Non-residents invested a net $42.2b in Australian financial assets during the March quarter 2007, resulting in $1529.1b of Australian financial assets held by non-residents, up $58.7b from the December quarter 2006 (of which $16.5b were valuation increases). There were net purchases of bonds, $38.9b (of which, $17.7b was issued by financial intermediaries n.e.c) and equity, $18.0b (of which $11.0b was issued by private non-financial corporations). These were partially offset by loans and placements of $9.2b and derivatives in an asset position of $4.8b.
Australian residents purchased foreign financial assets worth $27.0b during the March quarter 2007. The total value of foreign assets held by Australian residents increased to $905.1b at the end of the quarter, up $40.6b from the December quarter 2006 (of which $13.6b were valuation increases). Residents made net purchases of equity, $15.0b, and provided loans and placements of $3.7b. These were partially offset by net settlements of derivatives of $3.9b and debt securities of $1.2b.
Net purchases of equities
During the March quarter 2007 non-residents acquired a net $18.0b in equities, an increase of $4.6b compared with the revised December quarter 2006 estimate.
Net purchases of bonds
Non-residents purchased $38.9b of Australian bonds during the March quarter 2007, a decrease of $19.2b compared with the revised December quarter 2006 estimate.
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