HOUSEHOLD ACCUMULATION OF WEALTH

		Amount outstanding at end	Transactions during	Other changes in volume during (a)	Holding gains (+)/losses (-) during	Amount outstanding at end
		Sep Qtr 2015	Dec Qtr 2015	Dec Qtr 2015	Dec Qtr 2015	Dec Qtr 2015
		$b	$b	$b	$b	$b
Non-financial assets
	Land and dwellings	5 827.8	13.3	7.7	10.9	5 859.6
	Other non-financial assets	650.2	6.7	-	2.1	659.0
Financial assets		4 209.1	29.2	-	73.7	4 312.0
Liabilities		2 184.1	25.0	-	-0.9	2 208.3
Net worth		8 502.9	24.2	7.7	87.4	8 622.3
Memorandum item
	Consumer durables (b)	324.5	5.2	-	-1.8	327.9
- 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 December quarter 2015, household net worth was $8,622.3b, comprised predominantly of $5,859.6b of land and dwelling assets and $4,312.0b of financial assets, less $2,208.3b of household liabilities. During the quarter, household net worth increased by $119.4b, driven by holding gains (real and neutral) of $87.4b.

Transactions in net worth were driven by net capital formation of $20.0b, of which net acquisitions of land and dwellings were $13.3b and other non-financial assets were $6.7b. Net financial transactions were $4.2b, of which net acquisition of financial assets were $29.2b and net incurrence of liabilities were $25.0b. The main contributor to transactions in liabilities was long term loans ($27.4b).The major contributors to financial assets transactions were net equity in reserves of pension funds ($24.1b) and deposits ($18.9b), offset by other accounts receivable (-$9.6b) and equities (-$6.4b).

Holding gains on financial assets were $73.7b in December quarter 2015, driven by valuation increases in the listed equities market ($17.3b) and insurance technical reserves (driven by superannuation assets) of $35.4b. Holding gains on land and dwellings were $10.9b. December quarter 2015 recorded a real holding loss on land and dwellings (-$10.1b) for the first time since September quarter 2012. Real holding losses occur when the increase in the value of assets is less than the general price increase.

Graph 1. Components of Household balance sheet


Both household assets and liabilities grew over December quarter 2015, resulting in 1.4% growth in household net worth. Net worth has continued to grow over the last seventeen quarters, passing $8.6 trillion in December quarter 2015.

Household land and dwelling assets are primarily residential. Household residential land and dwellings grew by 0.5% ($30.3b) to $5,585.7b in December quarter 2015, recording thirteen consecutive quarters of growth. The non residential land assets include commercial and rural land owned by household and unincorporated businesses.

Financial assets grew by 2.4% ($102.9b), driven by growth in insurance technical reserves - superannuation (2.7%) and shares and other equities (4.3%).


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. The ratio at December quarter 2015 was 9.7%, an increase from the September quarter ratio of 9.3%.

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 rose to 28.4% in December quarter 2015 from 28.1% in September quarter 2015, indicating that mortgage debt grew faster than the value of residential real estate owned by household.

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 31 December 2015, household debt equalled 20.4% of assets, remaining unchanged from September quarter 2015.

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 decreased from 127.6% at 30 September 2015 to 125.2% at 31 December 2015, largely driven by increased deposits and valuation increases in equities.


ANALYTICAL MEASURES OF INCOME, CONSUMPTION AND WEALTH

Graph 4. Household net saving


Household net saving fell $15.6b in December quarter 2015, mainly due to a $12.4b increase in household final consumption expenditure and a $2.8b decrease in household gross disposable income. With the inclusion of other changes in real net wealth, known as the wealth effect, net saving increased from $47.3b to $84.3b in December quarter 2015. Despite the decrease in net saving, with the addition of the wealth effects, household net worth increased by $119.4b to $8,622.3b.

Graph 5. Gross disposable income


The addition of $65.0b in other changes in real net wealth (wealth effects) to household disposable income increased household income from $290.5b to $355.5b in December quarter 2015. At the height of the GFC in December quarter 2008 the wealth effect had large impacts on household income, decreasing it by $469.9b to -$251.7b. In recent quarters, wealth effects have made positive impacts on household income with the last negative wealth effect being recorded in June quarter 2013.