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5232.0 - Australian National Accounts: Financial Accounts, Mar 2005  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 30/06/2005   
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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 2004
Mar Qtr 2005
Mar Qtr 2005
Mar Qtr 2005
$b
$b
$b
$b

Non-financial corporations
Private
1,259.7
17.0
5.4
1,282.2
National public
46.6
0.4
0.8
47.8
State and local public
40.1
-0.1
0.0
39.9
General government
National
59.8
0.0
-0.7
59.1
State and local
35.7
-0.6
0.0
35.1
Households
839.8
17.5
0.0
857.3
Total
2,281.6
34.3
5.6
2,321.4

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 2005 was $34.3b, a decrease of $23.4b on the previous quarter. Decreased raisings by private non-financial corporations (down $14.5b) and borrowing by households (down $8.0b) were the main contributors to the fall.


NON-FINANCIAL CORPORATIONS
  • Private non-financial corporations raised a net $17.0b, with share raisings of $9.0b (down $9.1b) and loans of $6.2b (down $1.0b).
  • National public non-financial corporations raised $0.4b and state and local public non-financial corporations repaid a net $0.1b during the quarter.


GENERAL GOVERNMENT
  • National general government raised a net $0.0b during the quarter. State and local general government repaid a net $0.6b.


HOUSEHOLDS
  • Households raised a net $17.5b during the quarter, a decrease of $8.0b on the previous quarter, to bring their outstandings to $857.3b at the end of March 2005. Households borrowed $9.3b from banks (of which $3.7b was for owner occupied and $2.1b for investment housing), a decrease of $12.6b from the previous quarter. Borrowing from financial intermediaries n.e.c. was $5.6b during the quarter, an increase of $4.1b from the previous quarter.


NOTES

CHANGES TO THIS ISSUE

There are no changes in this issue.



SIGNIFICANT EVENTS

In the March quarter 2005, the method of compiling superannuation statistics in this publication changed to incorporate detailed data collected by the Australian Prudential Regulation Authority (APRA) from large superannuation funds as part its regulatory role. In addition, data for self-managed super funds (SMSF) supplied by the ATO were revised. APRA has not finalised data collection and quality assurance activities for the March quarter 2005, and therefore the results for superannuation funds in this publication should be considered preliminary and may be subject to revision.



REVISIONS IN THIS ISSUE

The financial asset and liability data incorporate the results of quality assurance work undertaken with providers and other revisions back to June quarter 2003. In particular revisions back to June 2003 have been made to superannuation funds.



INQUIRIES

For further information about these and related statistics, contact the National Information and Referral Service on 1300 135 070 or Derick Cullen on Canberra (02) 6252 6244.



ANALYSIS AND COMMENTS SECTORAL SUMMARY


INTERSECTORAL FINANCIAL FLOWS

During March Quarter 2005

Significant flows during the March quarter 2005 were the net $8.7b borrowed by non-financial corporations from rest of world and a net $8.0b borrowed by non-financial corporations from financial corporations. Financial corporations borrowed a net $4.0b from rest of the world and received a net $1.4b from households.

Diagram: Intersectoral financial flows during March quarter 2005



INTERSECTORAL FINANCIAL CLAIMS

At end of March Quarter 2005

At the end of March 2005, net claims on non-financial corporations stood at $489.6b from financial corporations, $330.3b from rest of world, $140.1b from general government and $122.9b from households. Financial corporations financed claims on other sectors from net claims of $480.9b by households and $217.6b by rest of world.

Diagram: Intersectoral financial claims at end of March quarter 2005



ANALYSIS AND COMMENTS MARKET SUMMARY


FINANCIAL MARKET ANALYSIS

Outstanding at end
Trans- actions during
Other changes during
Outstanding at end
Dec Qtr 2004
Mar Qtr 2005
Mar Qtr 2005
Mar Qtr 2005
Selected Financial Instruments
$b
$b
$b
$b

Currency and deposits
816.6
4.5
1.6
822.7
Short term debt securities
366.1
-11.1
-0.2
354.8
Long term debt securities
634.7
26.3
-10.4
650.5
Derivatives
177.3
-27.7
-1.8
147.8
Loans and placements
1,733.5
32.9
0.2
1,766.6
Listed shares
933.4
8.3
22.0
963.6
Unlisted shares
978.2
10.9
-11.2
977.9
Reserves of life offices and pension funds
686.7
17.7
6.4
710.8
General insurance prepayments and reserves
60.0
0.1
0.0
60.1


Deposit liabilities increased to $822.7b at the end of March 2005, following transactions of $4.5b during the quarter, compared with transactions of $35.8b in the previous quarter. Transactions in deposits assets of private non-financial corporations were -$2.8b, down $17.9b from the previous quarter. Transactions in deposits assets of other depository corporations were $0.7b, up from the -$1.3b recorded during the December quarter.


Short term security liabilities decreased to $354.8b at the end of March 2005. There were net redemptions of $11.2b, comprised of $12.4b in one name paper partially offset by a net issue of $1.3b in bills of exchange.


Total bond liabilities increased to $650.5b at the end of March 2005, following issues of $26.3b during the quarter. Banks issued $11.9b, of which $3.3b was issued offshore and $8.6b was issued domestically. Financial intermediaries n.e.c. (mainly securitisation vehicles) issued $6.2b, of which $4.0b was issued domestically and $2.2b was issued offshore. Net issues in the Australian market by non-residents was $3.4b (down $3.8b).


The value of derivative contracts on issue at the end of March 2005 decreased by $29.5b to $147.8b. Components of the decrease were net settlements of -$27.7b and valuation changes of -$1.8b.


Loan liabilities rose to $1,766.6b at the end of March 2005 following transactions of $32.9b during the quarter. Borrowing by households was $17.1b, while pension funds borrowed $5.8b and financial intermediaries n.e.c. borrowed $4.5b during the quarter. Non residents repaid $0.4b.


The listed share market increased by $30.2b to $963.6b at the end of March 2005, with issues of $8.3b and valuation increases of $22.0b. Private non-financial corporations and financial intermediaries n.e.c. had issues of $5.0b and $2.5b respectively. The value of the unlisted share market decreased by $0.3b to $977.9b at the end of March 2005. There were issues of $10.9b and valuation decreases amounted to -$11.2b.


At the end of March 2005, the reserves of life offices and pension funds were $710.8b following transactions during the quarter of $17.7b and valuation increases of $6.4b. General insurance prepayments and reserves were $60.1b.



SECTORAL ANALYSIS


NON-FINANCIAL CORPORATIONS

Summary

Private non-financial corporations raised a net $17.0b (excluding derivatives and accounts payable) during the March quarter 2004. They borrowed $6.2b in loans and made a net issue of $1.8b in debt securities. New share issues raised a net $9.0b during the quarter. These transactions resulted in total borrowings outstanding of $466.2b and total equity on issue of $816.0b.

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 2004, total liabilities of national public non-financial corporations increased by $3.5b following transactions of $1.5b and valuation increases of $2.0b. Issue of debt securities was $0.4b and there was no issue of listed shares and other equity. Liabilities of state and local public non-financial corporations increased by $0.6b to $144.4b.


Private non-financial corporations debt to equity ratio

From the end of March 2003 to the end of March 2005 the value of equity on issue increased by $269.9b. The value of debt outstanding rose $55.4b during the period. During the quarter, private non-financial corporation debt increased by $3.3b, while equities on issue increased by $14.3b. Over the March quarter 2005, the original debt to equity ratio fell from 0.70 to 0.69 and the adjusted ratio fell from 1.10 to 1.08. 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 2005, financial corporations issued $8.2b liabilities on a consolidated basis. Issuers of liabilities were: other depository corporations, $1.8b; pension funds, $21.2b; other insurance corporations, $1.5b; and financial intermediaries n.e.c., $12.6b. Redeemers of liabilities were: the central bank, $6.9b; banks, $5.0b; life insurance corporations, $0.3b; and central borrowing authorities, $1.3b.


Banks

During the quarter, transactions of banks’ currency and deposits liabilities were $3.4b. They had issuance in loans and placements of $0.9b and bonds, $10.2b. These were offset by redemptions of one name paper of $10.8b, net settlements of derivatives in a liabilities position of $13.3, and other accounts payable of $0.6b.


Transactions of financial assets of banks were $2.0b during the quarter. Banks loaned a net $9.2b, of which loans to households were $9.3b and private non-financial corporations were $2.4b. These loans were offset by repayments of $2.3b by the rest of the world. Transactions in bank holdings were: bills of exchange, $1.4b; bonds, $1.2b; equities, $0.9b; and other accounts receivable, $0.5b. These were offset by redemptions of one name paper of $0.4b, net settlements of derivatives in an asset position of $9.7m, and net reductions of currency and deposits of $1.1b.


Other depository corporations

Net liability transactions of other depository corporations were $1.8b during the March quarter 2005 driven mainly by transactions in currency and deposits of $3.7b and one name paper of $2.4b partially offset by net settlements of derivatives in a net liability position of $4.3b. Net transactions in financial asset were -$5.6b, with a decrease in holdings of one name paper of $6.4b and net settlements of derivatives in a net asset position of $6.2b the main contributors. These decreases were offset somewhat by transactions in loans and placements of $3.7b and holdings of bills of exchange of $2.1b.


Life insurance corporations

At the end of March quarter 2005, the financial assets of life insurance corporations stood at $205.6b, a decrease of $0.4b from the previous quarter with net transactions of $0.4b and valuation decreases of $0.8b. During the quarter there were net purchases of bonds of $1.9b, loans and placements increased by $0.1b and one name paper by $0.1b. There were decreases to accounts receivable of $0.7b, currency and deposits of $0.5b and equities by $0.3b. Pension fund claims against the reserves of life offices increased by $0.9b following net transactions of $2.6b and valuation decreases of $1.5b. Households claims against the reserves of life offices decreased by $0.7b following net transactions of -$3.2b and valuation increases of $3.9b.


Pension funds

Net equity in reserves of pension funds was $669.4b at the end of the March quarter 2005, an increase of $27.8b (4%), following net transactions of $20.9b and $6.9b valuation increases during the quarter. Most asset classes experienced increases during the quarter, with pension funds increasing their net equities in life office reserves by $2.6b, transactions in equities of $3.6b, currency and deposits of $5.7b, long term debt securities of $0.3b, loans and placements of $1.1b and holdings of short term debt securities of $4.4b. During the quarter, pension funds reduced their other accounts receivable by $0.3b.


Other insurance corporations

During the March quarter 2005, net liability transactions of other insurance corporations were $1.5b, of which the main contributors were other accounts payable of $0.8b and issuance of equities of $0.6b. Net transactions in financial assets of other insurance corporations were $1.7b during the March quarter, of which net purchases of bonds contributed $1.4b.


Central borrowing authorities

Total liabilities of central borrowing authorities was $103.3b at the end of the March quarter 2005. During the quarter, the authorities had a net redemption in one name paper of $1.4b, a net issue in bonds of $1.6b and a decrease in loans and placements liabilities of $0.4b.


Financial intermediaries n.e.c.

Net liability transactions of financial intermediaries n.e.c. were $12.6b during the quarter, mainly through a net issue of bonds of $6.7b, loans and placements of $4.2b and a net issue of listed shares and equity of $1.1b. During the quarter financial asset increased by $11.7b, mainly through loans and placement to households of $5.6b.


Net flow of currency and deposits to banks

There was an increase of $3.4b in currency and deposit liabilities of banks during the March quarter 2005. The transactions in currency and deposit assets of pension funds were $5.1b; households, $2.5b; other depository corporations, $0.7b; and rest of the world, $0.1b. These were offset by reductions in bank deposits by: private non-financial corporations, $3.2b; financial intermediaries n.e.c., $1.0b; and other insurance corporations, $0.2b.

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



Asset portfolio of life insurance corporations and pension funds at end of quarter

At the end of March quarter 2005 life insurance corporations held $122.9b in shares and other equity (60% of their financial assets), of which $101.6b was in resident companies and $21.3b was in non-resident companies; $44.0b in bonds (21% of their financial assets), of which $38.5b was in Australian bonds and $5.5b in non-resident bonds; and $19.1b in short term securities (9% of their financial assets).


At the end of March quarter 2005 pension funds held $331.5b in shares and other equity (52% of their financial assets), of which $244.6b was in resident companies and $86.9b was in non-resident companies. They held $144.0b of net equity in life office reserves (22% of their financial assets); and $58.5b in bonds (9% of their financial assets), of which $32.7b were Australian bonds and $25.8b were non-resident bonds.

Graph: 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 March quarter 2005 households had claims against the reserves of life insurance corporations of $41.4b and pension funds of $669.4b. Pension funds had claims against the reserves of life insurance corporations of $144.0b. Life insurance corporations invested $145.9b of their financial assets through investment managers and pension funds invested $271.4b through investment managers.

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


Asset portfolio of other insurance corporations at end of quarter

The graph below shows that at the end of March quarter 2005 other insurance corporations held $28.9b in shares and other equity (30% of total financial assets), of which $23.3b was in resident corporations. Other insurance corporations held $26.3b in bonds (28% of total financial assets), of which $24.9b was issued by resident corporations and $1.4b by non-resident corporations.

Graph: Other insurance corporations, assets


Central borrowing authorities net issue of debt securities

Central borrowing authorities had net issues of bonds of $1.6b and net redemption of one name paper of $1.4b in the March quarter 2005.

Graph: Central borrowing authorities - net issue of debt securities


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

During the March quarter 2005 financial intermediaries n.e.c. made a net issue of bonds of $6.7b and a net redemption of short term paper of $1.0b.

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



GENERAL GOVERNMENT

Summary

During the March quarter 2005, consolidated general government transactions resulted in a net change in financial position of $0.1b (see table 33, March quarter 2005). The liability transactions of national general government during the March quarter were $3.2b. Main contributors were a $2.6b change in balances for accounts payable and a $1.1b rise in unfunded superannuation claims. During the March quarter, asset transactions were $1.1b. Main contributors were a $1.0b change in balances for accounts receivable, net settlements of derivatives in a net asset position of $0.8b, and $0.7b increase in outstanding loans by households. The net change in financial position for national general government during the March 2005 quarter was -$2.1b. At the end of March 2005, national general government had total liabilities of $177.3b and total financial assets of $95.5b.


Transactions in state and local general government financial assets were $2.3b in the March quarter 2005, while transactions in total liabilities were $0.2b, resulting in a change in financial position of $2.1b. At the end of the quarter, state and local general government had total liabilities of $99.3b 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 zero during the quarter.

Graph: National general government - net issue of debt securities



HOUSEHOLDS

Summary

Households borrowed a total of $17.1b during the quarter in the form of loans, down significantly ($7.9b or 32%) on the previous quarter, and below the quarterly results for the last two years. Net contributions to life insurance and pension fund reserves were $17.7b while net transactions in unfunded superannuation schemes were $1.6b.


Households sold a net $0.2b in equities during the March quarter 2005, the major contributors being the sale of $1.4b of financial intermediaries n.e.c. shares, $0.6b of bank shares and $0.6b of private non-financial corporation shares. These were offset by the $1.8b purchase of national public non-financial corporation shares, the $0.4b purchase of life insurance shares and $0.3b purchase of general insurance shares.


At the close of the quarter, households' stock of financial assets was $1,630.6b. This was up $33.0b from the revised previous quarter number, following net transactions of $16.4b and valuation increases of $16.6b. Major asset holdings were net equity in reserves of life insurance corporations and pension funds of $710.8b, currency and deposits of $376.5b, equities of $303.3b, and unfunded superannuation claims of $148.3b.


Household net borrowing and debt to liquid asset ratio

Of the net $17.1b borrowed by households, bank loans accounted for $9.3b. Of the bank loans, $3.7b was borrowed for owner occupied housing down $9.9b from the revised December quarter figure, and $2.1b for investment housing down $2.7b from the revised December quarter figure. There was an increase of $5.6b in borrowing from financial intermediaries n.e.c.


The graph below illustrates that the debt to liquid assets ratio at the end of March 2005 was at 121.8%, an increase of 1.4 percentage points from the revised December quarter ratio. The ratio was influenced by an overall increase from the previous quarter of 2 percentage points in total outstanding household borrowings while total liquid assets only rose 1 percentage point (of which the major contributors were deposits and equities).

Graph: Household debt to liquid assets ratio


Insurance and pension claims

During the March quarter 2005 households' net equity in reserves of pension funds increased $27.8b, made up of $20.9b net contributions and $6.9b valuation increases, bringing household net equity in pension funds to $669.4b. Net equity in reserves of life insurance corporations decreased $0.7b, made up of a $3.2b net withdrawal and a $2.5b valuation increase, bringing the household net equity in life insurance to $41.4b. Net transaction in households' unfunded superannuation claims were $1.6b during the quarter. Prepayments of premiums and claims against reserves in general insurance corporations increased $0.1b.



REST OF THE WORLD

Summary

Non-residents invested a net $13.3b in Australian financial assets during the March quarter 2005. There were purchases of equity of $8.7b, purchases of bonds of $16.6b (of which $5.1b was issued by banks), placements of currency and deposits of $0.2b, loans of $0.9b and accounts receivable of $2.9b. These were offset by net settlements of derivatives in an asset position of $7.5b and reduction of purchases of one name paper of $9.2b. Overall, the value of Australian financial assets held by non-residents at the end of the quarter was up $1.3b from the December quarter, after taking into account $9.0b valuation decreases.


Australian residents sold foreign financial assets worth net $3.0b during the March quarter 2005. Residents purchased equity of $5.0b and debt securities of $1.3b. Residents repaid loans and placements of $0.4b. There was a settlement of derivatives in a net asset position (to residents) of $7.1b, an increase in accounts receivable of $1.2b, and a withdrawal of currency and deposits of $3.1b. Overall, the total value of foreign assets held by Australian residents fell to $625.1b at the end of the quarter, after taking into account a valuation reduction of $9.2b.


Net purchases of equities

The accompanying graph shows that during the March quarter 2005 non-residents purchased a net $8.7b in equities, a reduction of $5.5b compared with the December quarter 2004.

Graph: Net purchases of equities by non-residents


Net purchases of bonds

The accompanying graph shows that non-residents purchased $16.6b of Australian bonds during the March quarter 2005, a decrease of $0.4b compared with the December quarter 2004.

Graph: Net purchases of bonds

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