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5232.0 - Australian National Accounts: Financial Accounts, Mar 2006  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 29/06/2006   
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MARCH KEY FIGURES

Credit market outstandings at end
Demand for credit during
Other changes during
Credit market outstandings at end
Dec Qtr 2005
Mar Qtr 2006
Mar Qtr 2006
Mar Qtr 2006



Non-financial domestic sectors
$b
$b
$b
$b

Non-financial corporations
Private
1 427.0
21.9
60.3
1 509.2
National public
39.2
0.9
-1.2
38.8
State and local public
46.4
0.5
0.0
46.9
General government
National
59.9
1.0
1.0
61.9
State and local
33.7
-0.6
0.0
33.1
Households
951.4
21.1
0.0
972.5
Total
2 557.5
44.7
60.1
2 662.4

Total demand for credit
Graph: Total demand for credit

Credit market outstandings
Graph: Credit market oustandings



MARCH KEY POINTS


SUMMARY

  • Total demand for credit by the non-financial domestic sectors for the March quarter 2006 was $44.7b, a decrease of $22.3b on the revised previous quarter estimate. The main demand for credit was by private non-financial corporations (raised $21.9b) and households (borrowed $21.1b).


NON-FINANCIAL CORPORATIONS
  • Private non-financial corporations raised a net $21.9b, with loans of $10.2b and share raisings of $6.4b.
  • National public non-financial corporations raised $0.9b and state and local public non-financial corporations raised a net $0.5b during the quarter.


GENERAL GOVERNMENT
  • National general government raised a net $1.0b. State and local general government repaid a net $0.6b.


HOUSEHOLDS
  • Households raised a net $21.1b during the March quarter 2006, down from the $26.7b raised during the December quarter 2005. Households borrowed $12.0b from banks (of which $5.4b was for owner-occupied housing and $2.6b for investment housing) down from $23.1b in the previous quarter.


NOTES

FORTHCOMING ISSUES

ISSUE (QUARTER) Release Date
June 2006 29 September 2006
September 2006 21 December 2006



CHANGES TO THIS ISSUE

There are no changes in this issue.



SIGNIFICANT EVENTS

There were no privatisations or other significant structural changes impacting the aggregates.



REVISIONS IN THIS ISSUE

The financial asset and liability data incorporate the results of quality assurance work undertaken with providers, as well as other revisions back to the June quarter 2004. There have been revisions to previously published March quarter 2006 Rest of World sector data (see Balance of Payments and International Investment publication cat. no. 5302.0), after analyses by the ABS. The net international investment position remains unchanged, but there are some offsetting changes to the components.



INQUIRIES

For further information about these and related statistics, contact the National Information and Referral Service on 1300 135 070 or Amanda Seneviratne on Canberra (02) 6252 5338.



ANALYSIS AND COMMENTS SECTORAL SUMMARY


INTERSECTORAL FINANCIAL FLOWS

During March Quarter 2006

Significant flows during the March quarter 2006 were the net $9.8b and $2.8b borrowed by non-financial corporations from financial corporations and rest of world, respectively. Financial corporations borrowed a net $15.7b from rest of world. General government repaid a net $8.1b to financial corporations.

Diagram: During March Quarter 2006



INTERSECTORAL FINANCIAL CLAIMS

At end of March Quarter 2006

At the end of March 2006, net claims on non-financial corporations stood at $614.7b from financial corporations, $318.8b from rest of world, $118.4b from general government and $187.1b from households. Financial corporations financed claims on other sectors from net claims of $621.5b by households and $238.7b by rest of world.

Diagram: At end of March Quarter 2006



ANALYSIS AND COMMENTS MARKET SUMMARY


FINANCIAL MARKET ANALYSIS

Selected Financial Instruments

Outstanding at end
Trans- actions during
Other changes during
Outstanding at end
Dec Qtr 2005
Mar Qtr 2006
Mar Qtr 2006
Mar Qtr 2006
Selected Financial Instruments
$b
$b
$b
$b

Currency and deposits
925.7
16.3
2.1
944.0
Short term debt securities
392.9
17.9
2.0
412.8
Long term debt securities
764.5
51.5
2.1
818.1
Derivatives
134.8
-6.9
28.9
156.9
Loans and placements
2 034.8
63.3
-0.4
2 097.7
Listed shares
1 121.7
6.9
83.9
1 212.4
Unlisted shares
990.1
17.8
42.2
1 050.1
Reserves of life offices and pension funds
851.6
12.7
40.7
905.1
General insurance prepayments and reserves
63.6
-0.2
0.0
63.4


Deposit liabilities increased to $944.0b at the end of March 2006, following transactions of $16.3b during the quarter, compared with transactions of $50.2b in the previous quarter. Banks accepted $6.8b (down $24.3b on that accepted last quarter), other depository corporations accepted $5.5b (up $3.1b) and the central bank accepted $4.2b (down $3.2b).


Short term security liabilities increased to $412.8b at the end of March 2006. There were issues of $17.9b, comprised of $2.4b in bills of exchange and $15.5b in one name paper issued. Total long term debt security liabilities increased to $818.1b at the end of March 2006, following issues of $51.5b during the quarter. Banks issued $26.8b, of which $17.0b was issued offshore and $9.8b was issued domestically. Rest of world issued $13.5b of which $7.5b was issued domestically and $5.9b issued offshore. Financial intermediaries n.e.c. (mainly securitisation vehicles) issued $4.3b.


The value of derivative contracts on issue at the end of March 2006 increased by $22.1b to $156.9b. Components of the increase were net settlements of $6.9b and valuation increases of $28.9b.


Loan liabilities rose to $2,097.7b at the end of March 2006, following transactions of $63.3b during the quarter. Borrowing by pension funds was $24.0b, while households borrowed $20.7b and financial intermediaries borrowed $10.0b.


The listed share market increased by $90.7b to $1,212.4b at the end of March 2006, with valuation increases of $83.9b and transactions of $6.9b. Private non-financial corporations had issues of $5.3b and financial intermediaries n.e.c. issued $1.5b. The value of the unlisted share market increased by $60.0b to $1,050.1b at the end of March 2006. Valuation increases were $42.2b and transactions were $17.8b. Rest of the world had issues of $10.7b and financial intermediaries n.e.c. issued $5.6b.


At the end of March 2006, the reserves of life offices and pension funds were $905.1b following transactions during the quarter of $12.7b and valuation increases of $40.7b. General insurance prepayments and reserves were $63.4b.



SECTORAL ANALYSIS


NON-FINANCIAL CORPORATIONS

Summary

Private non-financial corporations raised a net $21.9b (excluding derivatives and accounts payable) during the March quarter 2006. They borrowed $10.2b in loans and made a net issue of $5.4b in debt securities. Share issues rose a net $6.4b during the quarter. These transactions resulted in total borrowings outstanding of $560.6b and total equity on issue of $948.7b.

PRIVATE NON-FINANCIAL CORPORATIONS, NET ISSUE OF EQUITY AND BORROWINGS
Graph: Private non-financial corporations, net issue of equity and borrowings



During the March quarter 2006, total liabilities of national public non-financial corporations decreased by $0.2b following increases in transactions of $1.5b and valuation decreases of $1.7b. Liabilities of state and local public non-financial corporations decreased by $3.8b to $138.2b.


Private non-financial corporations debt to equity ratio

From the end of March 2004 to the end of March 2006, the value of equity on issue increased by $276.3b. The value of debt outstanding rose $152.4b during the period. During the quarter, private non-financial corporation debt increased by $20.5b, while equities on issue increased by $70.2b. Over the March quarter 2006, the original debt to equity ratio fell from 0.76 to 0.72 and the adjusted ratio rose from 1.34 to 1.35. The adjusted ratio reflects the removal of price change from the original series.

DEBT TO EQUITY RATIO - JUNE 1995 BASE
Graph: DEBT TO EQUITY RATIO – JUNE 1995 BASE




FINANCIAL CORPORATIONS

Summary

During the March quarter 2006, financial corporations issued $62.4b liabilities on a consolidated basis. Issuers of liabilities were: banks, $37.3b; financial intermediaries n.e.c., $19.1b; pension funds, $16.1b; other depository corporations, $4.7b and the central bank $3.6b. Redeemers of liabilities were life insurance corporations $1.1b.


Banks

During the quarter, transactions of banks’ currency and deposits liabilities were $5.0b. They had issuance in bonds of $26.0b and one name paper of $9.8b. These were offset by a decrease in other accounts payable of $4.3b and net settlements of derivatives of $2.3b.


Transactions of financial assets of banks were $25.7b during the quarter. Banks loaned a net $20.6b, of which loans to households were $12.0b and private non-financial corporations were $9.5b. These loans were offset by repayments of $0.9b by financial intermediaries n.e.c. Transactions in bank holdings were: bonds, $3.9b; other accounts receivable, $3.7b; and bills of exchange, $1.9b. These were offset by redemptions of derivatives $5.0b and equities $0.5b.


Other depository corporations

Transactions of other depository corporations liabilities increased by $4.7b during the March quarter 2006, driven mainly by transactions in currency and deposits of $6.7b. This was partially offset by net settlements of derivatives of $1.7b and bond redemptions of $1.5b. Transactions in financial assets included decreases in holdings of one name paper of $2.1b and derivatives of $1.8b, offset by net increases in loans and placements of $1.1b, other accounts receivable of $0.9b and bonds of $0.9b.


Life insurance corporations

At the end of March quarter 2006, the financial assets of life insurance corporations stood at $230.5b, an increase of $9.2b from the previous quarter. Net transactions were -$1.1b and valuation increases were $10.3b. During the quarter, there were increases in holdings of equities of $5.9b, one name paper of $2.3b, bonds of $1.0b, and of bills of exchange of $0.1b. This was partially offset by a decrease to other accounts receivable of $0.2b. Pension fund claims against the reserves of life offices increased by $7.1b following net transactions of -$0.4b and valuation increases of $7.5b. Households claims against the reserves of life offices increased by $0.5b following net transactions of -$2.1b and valuation increases of $2.6b.


Pension funds

Net equity in reserves of pension funds was $853.1b at the end of the March quarter 2006, an increase of $52.9b. This follows net transactions of $14.8b and valuation increases of $38.1b during the quarter. Assets increased due to transactions in bonds of $7.8b, one name paper of $2.3b, currency and deposits of $2.1b, loans and placements of $1.7b, other accounts receivable of $1.1b and holdings of bills of exchange of $0.9b, partially offset by sale of equities of $1.2b.


Other insurance corporations

During the March quarter 2006, net liability transactions of other insurance corporations were $0.2b, with other accounts payable contributing $0.3b. Net transactions in financial assets of other insurance corporations were $4.4b during the March quarter. Bonds were the main driver of the increase, contributing $3.2b, with other accounts receivable partially offsetting this increase contributing -$1.1b.


Central borrowing authorities

Total liabilities of central borrowing authorities was $115.6b at the end of the March quarter 2006. During the quarter, the authorities had a net issue of bonds within Australia of $3.8b and a net issue of bonds offshore of $1.1b. This was partially offset by a decrease in one name paper issued in Australia of $0.8b.


Financial intermediaries n.e.c.

At the end of the March quarter 2006, net liabilities of financial intermediaries n.e.c. were $507.9b, with unlisted shares of $167.4b on issue. Net liability transactions of financial intermediaries n.e.c. were $19.1b during the quarter, with loans and placements of $8.8b and unlisted shares of $4.3b. During the March quarter 2006, transactions in financial assets were $31.6b, with equities of $13.6b and loans and placements of $12.0b.


Net flow of currency and deposits to banks

Transactions in currency and deposit liabilities of banks during the March quarter 2006 were $5.0b. The transactions in currency and deposit assets of households were $4.3b, private non-financial corporations $1.0b and pension funds $1.9b. These were offset by reductions in bank deposits by rest of the world of $3.3b and financial intermediaries n.e.c. $1.5b.

CURRENCY AND DEPOSITS LIABILITIES, BANKS
Graph: Net flow of currency and deposits to banks



Financial asset portfolio of life insurance corporations and pension funds at end of quarter

At the end of the March quarter 2006, life insurance corporations held $144.1b in shares and other equity (63% of their financial assets), of which $119.5b was in resident companies and $24.6b was in non-resident companies; $41.3b in bonds (18% of their financial assets), of which $34.6b was in Australian bonds and $6.7b in non-resident bonds; and $21.5b in short term securities (9% of their financial assets).


At the end of the March quarter 2006, pension funds held $430.9b in shares and other equity (52% of their financial assets), of which $303.1b was in resident companies and $127.8b was in non-resident companies. They held $152.9b of the net equity in life office reserves (19% of their financial assets); and $108.1b in bonds (13% of their financial assets), of which $50.5b were Australian bonds and $57.6b were non-resident bonds.

Graph: Financial asset portfolio of life insurance corporations and pension funds at end of quarter


Financial claims between households, life insurance companies, pension funds and investment managers at end of quarter

At the end of the March quarter 2006, households had claims against the reserves of life insurance corporations of $52.0b and pension funds of $853.1b. Pension funds had claims against the reserves of life insurance corporations of $152.9b. Life insurance corporations invested $143.9b of their financial assets through investment managers, and pension funds invested $391.9b through investment managers. Note that the financial claims between households, life insurance companies and pension funds have been revised back to March 2004.

Diagram: Financial claims between households, life insurance companies, pension funds and investment managers at end of quarter


Financial asset portfolio of other insurance corporations at end of quarter

The graph below shows that at the end of the March quarter 2006, other insurance corporations held $38.0b in shares and other equity (34% of total financial assets), of which $30.5b was in resident corporations. Other insurance corporations also held $32.1b in bonds (29% of total financial assets), of which $29.8b was issued by resident corporations and $2.3b by non-resident corporations.

Graph: Other insurance corporations, assets


Central borrowing authorities net issue of debt securities

During the March quarter 2006, central borrowing authorities made a net issue of bonds of $4.9b, and a net redemption of one name paper of $0.5b.

Graph: Central borrowing authorities - net issue of debt securities


Financial intermediaries n.e.c. net issue of debt securities

During the March quarter 2006, financial intermediaries n.e.c. made a net issue of bonds of $1.8b and a net issue of short term paper of $2.8b.

Graph: Financial intermediaries n.e.c. - net issue of debt securities



GENERAL GOVERNMENT

Summary

During the March quarter 2006, consolidated general government transactions resulted in a net change in financial position of $5.3b (see table 33, March quarter 2006).


The net change in financial position for national general government was -$2.2b. The liability transactions of national general government during the March quarter were $6.3b. Main contributors were an increase of $4.7b in accounts payable and a $1.0b increase in bonds issued in Australia.


During the March quarter, asset transactions for national general government were $4.1b. Main contributors were a $5.9b increase in currency and deposits, partially offset by a decrease in accounts receivable of $1.5b. At the end of March 2006, national general government had total liabilities of $188.0b and total financial assets of $120.8b.


Transactions in state and local general government financial assets were $7.8b in the March quarter 2006, while transactions in total liabilities were $0.3b, resulting in a change in financial position of $7.5b. At the end of the quarter, state and local general government had total liabilities of $100.0b and total financial assets of $140.6b.


Change in financial position

Graph: Change in financial position, general government



National government issue of debt securities

The accompanying graph illustrates the national general government’s bond issuance. The net issue of treasury bonds was $1.0b during the quarter.

Graph: National general government - net issue of debt securities



HOUSEHOLDS

Summary

Households change in financial position was -$5.4b during the March quarter 2006. Borrowing, mainly through bank loans, was $24.3b. This was partly offset by an increase of $18.9b in assets, mainly in the form of net equity in reserves of pension funds.


Households purchased a net $2.2b in equities during the quarter, the major contributors being the purchase of $3.0b of financial intermediaries n.e.c. shares. These were partly offset by $1.2b sale of bank shares and $0.7b sale of other insurance corporation shares.


At the close of the quarter, households' stock of financial assets was $1,966.6b. This was up $96.1b from the previous quarter number, following net transactions of $18.9b and valuation increases of $77.2b. Major asset holdings were net equity in reserves of life insurance corporations and pension funds of $905.1b, currency and deposits of $402.7b, equities of $395.8b, and unfunded superannuation claims of $154.4b.


Household net borrowing and debt to liquid asset ratio

Of the net $24.3b borrowed by households during the March quarter 2006, bank loans accounted for $12.0b. Of the bank loans, $5.4b was borrowed for owner occupied housing and $2.6b for investment housing. There was also an increase of $9.9b in borrowing from financial intermediaries n.e.c.


The graph below illustrates that the debt to liquid assets ratio at the end of March 2006 was at 116.9%, a decrease of 2.3 percentage points from the revised December quarter ratio. The ratio was influenced by an overall increase from the previous quarter of 2.2 % in total outstanding household borrowings and an increase in total liquid assets of 4.3 % (of which the major contributors were deposits and equities).

Graph: Household debt to liquid assets ratio


Insurance and pension claims

During the March quarter 2006, households' net equity in reserves of pension funds increased $52.9b, made up of $14.8b transactions and $38.1b valuation increases, bringing household net equity in pension funds to $853.1b. Net equity in reserves of life insurance corporations increased $0.5b, made up of -$2.1b transactions and $2.6b valuation changes, bringing the household net equity in life insurance to $52.0b. Net transactions in households' unfunded superannuation claims were $1.5b during the quarter. Prepayments of premiums and claims against reserves in general insurance corporations decreased $0.1b.



REST OF THE WORLD

Summary

Non-residents invested a net $13.4b in Australian financial assets during the March quarter 2006.


The value of Australian financial assets held by non-residents at the end of the quarter was up $70.2b from the December quarter to $1,317.9b in the March quarter 2006, including $56.8b valuation increases. There were net purchases of bonds of $18.3b (of which $18.8b was issued by banks), one name paper of $13.3b, equity of $9.0b, bills of exchange of $2.5b and loans and placements of $2.4b. These were partially offset by a reduction in currency and deposits of $3.6b and net settlements of derivatives in an asset position of $1.6b.


Australian residents increased their holdings of foreign financial assets by a net $24.6b during the March quarter 2006. The total value of foreign assets held by Australian residents increased to $749.8b at the end of the quarter, after taking into account a valuation increase of $36.0b. Residents made net purchases of $11.5b in debt securities from non-residents, purchases of $10.7b in equity, and provided $2.3b in loans and placements. These were partially offset by net settlements of derivatives in a net asset position of $1.1b and a decrease in placements of currency and deposits of $0.4b with non-residents.


Net purchases of equities

During the March quarter 2006 non-residents acquired a net $9.0b in equities, a decrease of $3.3b compared with the December quarter 2005.

Graph: Net purchases of equities by non-residents


Net purchases of bonds

Non-residents purchased $18.3b of Australian bonds during the March quarter 2006, an increase of $7.5b compared with the December quarter 2005.

Graph: Net purchases of bonds

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