SECTORAL ANALYSIS
NON-FINANCIAL CORPORATIONS
Summary
Private non-financial corporations raised a net $46.0b (excluding derivatives and accounts payable) during the September quarter 2007. They borrowed $19.2b in loans and made a net issue of $6.6b in debt securities. Net issuance of shares during the quarter were $20.3b. These transactions resulted in total borrowings outstanding of $712.0b and total equity on issue of $1,322.2b.
PRIVATE NON-FINANCIAL CORPORATIONS, NET ISSUE OF EQUITY AND BORROWINGS
During the September quarter 2007, total liabilities of national public non-financial corporations increased by $0.8b following transaction increases of $0.4b. Liabilities of state and local public non-financial corporations decreased by $3.7b to $141.0b.
Private non-financial corporations debt to equity ratio
From the end of September 2005 to the end of September 2007, the value of equity on issue increased by $487.7b. The value of debt outstanding rose $233.9b during the same period. During the quarter, private non-financial corporation debt increased by $41.5b, while equities on issue increased by $54.5b. Over the September quarter 2007, the original debt to equity ratio increased from 0.64 to 0.65 and the adjusted ratio decreased from 1.67 to 1.66. The adjusted ratio reflects the removal of general price change from the original series.
DEBT TO EQUITY RATIO - JUNE 1995 BASE
FINANCIAL CORPORATIONS
Summary
During the September quarter 2007, financial corporations had $42.7b liability transactions on a consolidated basis. The liability transactions were: banks, $67.9b; pension funds, $16.7b; other depository corporations, $8.8b; central borrowing authorities, $8.4b; financial intermediaries n.e.c., $5.7b; other insurance corporations, $2.7b; life insurance corporations, $2.4b; central bank, -$11.5b.
Banks
Transactions of financial assets of banks were $83.0b during the quarter. Banks loaned a net $38.5b, of which loans to private non-financial corporations were $26.7b and households were $20.2b. Other major transactions in bank assets holdings were: currency and deposits of $15.4b, of which deposits with rest of world were $11.8b; one name paper, $11.9b, of which $7.2b were issued by financial intermediaries n.e.c. and bonds, $11.6b.
During the quarter, transactions of banks’ currency and deposits liabilities were $31.2b, one name paper of $19.1b, bonds of $10.4b, loans of $6.1b, derivatives of $2.5b and equities of $1.9b. These were offset by a decrease to bills accepted of $3.0b and net repayment of other accounts payable of $0.2b.
Other depository corporations
Transactions of other depository corporations liabilities were $8.8b during the September quarter 2007, driven mainly by currency and deposits of $11.6b. This was partially offset by the net redemption of one name paper of $4.1b and net repayment of loans of $2.7b. Transactions of assets during the quarter were $9.1b, the main contributor being currency and deposits of $3.6b, accounts receivable of $4.2b and loans and placements of $1.7b.
Life insurance corporations
At the end of September quarter 2007, the financial assets of life insurance corporations stood at $256.7b, an increase of $4.3b from the previous quarter. Net transactions were $2.6b and valuation increases were $1.7b. During the quarter, there were increases in holdings of equities, $8.0b, one name paper, $0.4b, and loans and placements, $0.1b. These were partially offset by net redemptions of bonds of $4.1b and net withdrawals of currency and deposits of $2.7b. Pension fund claims against the reserves of life offices increased by $2.0b following net transactions of -$2.3b and valuation increases of $4.3b. Households' claims against the reserves of life offices increased by $4.8b following net transactions of $3.4b and valuation increases of $1.4b.
Pension funds
Net equity in reserves of pension funds was $1,151.6b at the end of the September quarter 2007, an increase of $30.5b. This follows net transactions of $17.7b and valuation increases of $12.8b during the quarter. Asset holdings increased by $27.1b to $1,111.2 b due to transactions in equities of $16.0b and bonds of $5.4b.
Other insurance corporations
Net transactions in financial assets of other insurance corporations were $2.3b during the September quarter 2007. The main contributors were currency and deposits of $2.3b, equities of $1.0b, and loans and placements of $0.6b. These were offset by the net redemptions of bonds of $0.5b, one name paper of $0.3b and bills of $0.3b. During the September quarter, net liability transactions of other insurance corporations were $2.7b, driven mainly by prepayments of premiums and reserves of $2.1b.
Central borrowing authorities
Total liabilities of central borrowing authorities was $132.2b at the end of the September quarter 2007. During the quarter, the authorities issued one name paper, $6.3b, bonds, $0.8.b; borrowed through loans, $0.9b. The net asset transactions of central borrowing authorities during the quarter were $3.6b, the main contributors being the issuance of loans and placements, $2.6b and bills, $1.0b. These were offset by the net redemptions of one name paper, $0.9b.
Financial intermediaries n.e.c.
At the end of the September quarter 2007, net liabilities of financial intermediaries n.e.c. were $614.8b, with shares of $252.9b on issue and borrowings in the form of loans and placements of $135.9b. Net liability transactions of financial intermediaries n.e.c. were $5.7b during the quarter, through the issuance of one name paper of $5.2b and equities of $10.9b. These were offset by the net redemption of bonds of $6.6b, and net repayments of loans of $2.9b. During the quarter, transactions in financial assets were -$9.2b, major contributors were one name paper of -$6.3b and loans and placements of -$2.6b.
Net flow of currency and deposits to banks
Transactions in currency and deposit liabilities of banks during the September quarter 2007 were $31.2b. There were transactions in currency and deposit assets of households, $18.0b; private non-financial corporations, $7.4b; other depository corporations, $3.5b and rest of world, $2.0b. These were partially offset by withdrawal of bank deposits by pension funds, $1.5b and life insurance corporations, $1.3b.
CURRENCY AND DEPOSITS LIABILITIES, BANKS
Financial asset portfolio of life insurance corporations and pension funds at end of quarter
At the end of the September quarter 2007, life insurance corporations held $166.8b in shares and other equity (65% of their financial assets), of which $137.0b was in resident companies and $29.8b was in non-resident companies; $46.5b in bonds (18% of their financial assets), of which $37.0b was in bonds issued by domestic institutions and $9.5b in bonds issued by non-residents; and $18.4b in short term securities (7% of their financial assets).
At the end of the September quarter 2007, pension funds held $629.4b in shares and other equity (57% of their financial assets), of which $455.6b was in resident companies and $173.8b was in non-resident companies. They held $178.5b of the net equity in life office reserves (16% of their financial assets); and $93.6b in bonds (8% of their financial assets), of which $47.3b were bonds issued by domestic institutions and $46.3b 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 September quarter 2007, households had claims against the reserves of life insurance corporations of $62.0b and pension funds of $1,151.6b. Pension funds had claims against the reserves of life insurance corporations of $178.5b. Life insurance corporations invested $148.7b of their financial assets through investment managers, and pension funds invested $549.4b through investment managers.
Financial asset portfolio of other insurance corporations at end of quarter
The graph below shows that at the end of the September quarter 2007, other insurance corporations held $49.9b in shares and other equity (37% of total financial assets), of which $36.9b was in resident corporations; $33.8b in bonds (25% of total financial assets), of which $29.7b was issued by resident corporations; and $10.7b of short-term securities (8% of total financial assets).
Central borrowing authorities net issue of debt securities
During the September quarter 2007, central borrowing authorities made net issues of one name paper of $6.3b and bonds of $0.8b.
Financial intermediaries n.e.c. net issue of debt securities
During the September quarter 2007, financial intermediaries n.e.c. made a net issue of one name paper of $5.2b and had redemption of bonds of $6.6bn.
GENERAL GOVERNMENT
Summary
During the September quarter 2007, consolidated general government transactions resulted in a net change in financial position of $1.3b.
The net change in financial position for national general government was $8.6b. The liability transactions of national general government during the quarter were -$4.5b, with the main contributors being accounts payable of -$6.2b and unfunded superannuation claims of $0.9b. During the September quarter 2007, asset transactions for national general government were $4.2b. At the end of the quarter, national general government had total liabilities of $193.4b and total financial assets of $149.5b.
Transactions in state and local general government financial assets were -$4.1b in the September quarter 2007, while transactions in total liabilities were $3.3b, resulting in a change in financial position of -$7.3b. At the end of the quarter, state and local general government had total liabilities of $117.9b and total financial assets of $137.7b.
Change in financial position
National government issue of debt securities
The graph below illustrates the national general government’s bond issuance. The net issuance of treasury bonds was $0.7b during the quarter.
HOUSEHOLDS
Summary
Households change in financial position was $11.3b during the September quarter 2007. During the quarter, households borrowed a total of $19.0b in the form of loans. On the asset side, householders' transactions in currency and deposits were $19.4b, of which $18.0b were bank deposits. Net contributions to life insurance and pension fund reserves were $21.0b while net claims on unfunded superannuation were $1.3b.
Households sold a net $0.9b in equities during the September quarter 2007, the major contributors being the sale of $1.6b of financial intermediaries n.e.c. and $0.3b of life insurance shares. These were offset by the purchase of private non-financial corporation and bank shares, $0.6b and $0.3b respectively.
At the close of the quarter, households' stock of financial assets was $2,420.0b. This was an increase of $59.9b from the previous quarter number, following net transactions of $35.9b and valuation increases of $24.0b. Major asset holdings were net equity in reserves of life insurance corporations and pension funds of $1,213.6b, equities of $450.2b, currency and deposits of $466.6b and unfunded superannuation claims of $178.8b.
Household net borrowing and debt to liquid asset ratio
Of the net $19.0b borrowed by households during the September quarter 2007, households took out bank loans worth $20.2b and repaid loans to financial intermediaries n.e.c. of $2.0b. Of the bank loans, $13.2b was borrowed for owner occupied housing and $5.0b for investment housing.
The graph below illustrates that the debt to liquid assets ratio at the end of September 2007 was at 123.8%, an increase of 2.1 percentage points from the June quarter 2007 ratio. The ratio was influenced by an increase from the previous quarter of 4.8% in total outstanding household borrowings and an increase in total liquid assets of 3.0%. Major contributors to liquid assets were holdings of equities (up 4.9%) and currency and deposits (up 1.1%).
Insurance and pension claims
During the September quarter 2007, households' net equity in reserves of pension funds increased $30.5b, made up of $17.7b transactions and $12.8b valuation increases, bringing household net equity in pension funds to $1,151.6b. Net equity in reserves of life insurance corporations increased $4.8b, made up of $3.4b transactions and $1.4b valuation increases, bringing the household net equity in life insurance to $62.0b. Net transactions in households' unfunded superannuation claims were $1.3b and prepayments of premiums and claims against reserves in general insurance corporations was $1.2b during the quarter.
REST OF THE WORLD
Summary
Non-residents invested a net $19.0b in Australian financial assets during the September quarter 2007, resulting in $1,643.5b of Australian financial assets held by non-residents, up $34.8b from the June quarter 2007 (of which $15.8b were valuation increases). There were net investments in all asset classes except bills and loans, of which there were net settlements of $3.0b and $9.9b, respectively. The major contributors were the purchases of bonds, $12.2b (of which $11.3b was issued by banks), equity, $8.7b (of which $7.0b was issued by private non-financial corporations), and the acceptance of currency and deposits, $4.2b.
Australian residents purchased foreign financial assets worth $1.6b during the September quarter 2007. The total value of foreign assets held by Australian residents increased to $984.7b at the end of the quarter, up $23.7b from the June quarter 2007 (of which $22.1b were valuation increases). Residents made net purchases of equity, $21.1b and bonds of $7.3b. These were offset by net withdrawals of currency and deposits, $16.0b. and settlement of loans, $10.5b.
Net purchases of equities
During the September quarter 2007 non-residents acquired a net $8.7b in equities, a decrease of $4.9b compared with the June quarter 2007 estimate.
Net purchases of bonds
Non-residents purchased $12.2b of Australian bonds during the September quarter 2007, a decrease of $7.1b compared with the June quarter 2007 estimate.
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