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Household wealth report

29 June 2020 by News Desk

Household wealth in Australia: Household liabilities grew $18.7b (0.8%), following moderate growth in the previous quarter. Total household liabilities were $2,510b, 92% of which are long term loans.

The 0.9% growth in long term loans this quarter was due to rises in owner occupier (0.9%) and unincorporated business loans (1.0%), partly offset by falls in investor housing loans (-0.3%).

Short term loan borrowings by households decreased 7.2% this quarter, the largest fall in the history of the time series, reflecting weak expenditure on non-essential goods and services due to COVID-19 restriction measures and bushfire impacts as well as a continuation of a long term decline driven by tighter serviceability requirements on mortgages and interest rates not changing despite cash rate cuts.

Disposable income

Household gross disposable income adjusted for other changes in real net wealth (wealth effect) decreased from $445.5b to $89.3b, and household net saving adjusted for other changes in real net wealth was negative this quarter, decreasing from $125.3b to -$209.2b.

The falls in gross disposable income and household net saving when adjusted for other changes in net wealth are due to the significant real holding losses of $360.4b in financial assets this quarter, this is the strongest negative result in the time series.

This quarter the household saving ratio increased from 1.2 to 6.7 (original basis), driven by a large fall of 7.6% in final consumption expenditure.

Gross disposable income fell by 2.0% this quarter, partly offset by a 0.8% increase in consumption of fixed capital. The decline in household consumption expenditure was due to both the bushfires and COVID-19.

Household debt

The household debt to assets ratio increased from 19.1 to 19.6, as the fall in household assets (-1.4%) outweighed the rise in household debt (0.8%). The ratio of mortgage debt to residential land and dwellings decreased from 28.0 to 27.6, as the value of land and dwellings (2.0%) owned by households (which had no significant impacts from COVID-19) outgrew mortgage debt (0.6%) for the third consecutive quarter.

The household debt to liquid assets ratio grew strongly this quarter, from 109.6 to 112.5. The rise was driven by large falls in ownership of shares and other equity, which were impacted by COVID-19 effects on financial markets.

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