Deposits, RBA funding boost liabilities

Bernard Kellerman

Australia's bank customers have started to throw off their conservatism, buoyed by an easing of COVID-19 restrictions, along with government stimulus packages and cheap debt.

According to the Australian Bureau of Statistics, household primary income increased in the September quarter through a rise in compensation of employees, and courtesy of a rebound in business activity following the easing of COVID-19 restrictions.

Australia's financial institutions, in turn, have seized the opportunity to replace maturing term debt with the Reserve Bank of Australia's funding facility and have also benefitted from the largest growth in deposit accounts on record.

These are some of the highlights from the Australian national accounts for the September quarter, published by the ABS yesterday.

The Australian Bureau of Statistics analysis showed that access to increasing levels of customers' deposits and the RBA term funding facility allowed authorised deposit taking institutions' funding from debt securities to decrease.

In comparison to the previous quarter, the funding mix was:

• 61.2 per cent from deposits, an increase from 58.7 per cent
• 11.5 per cent from bonds, a decrease from 12.0 per cent
• 10.2 per cent from shares and other equity, a decrease from 10.6 per cent
• 6.1 per cent from short term debt securities, a decrease from 6.6 per cent

Looking at the ABS numbers in more detail shows that ADIs' deposit funding grew by $75.0 billion in the Sept quarter, courtesy of a $63.8 billion boost from households and a $22.1 billion increase from "other private non-financial corporations".

These were partly offset by a $14.9 billion decrease in deposits held by superannuation funds and a $10.2 billion decrease from "rest of world" investors.

In conjunction with the ADI funding flows, the total financial assets of superannuation funds increased $36.1 billion, and continued to recover losses suffered in the March quarter. This explained by a $58.7 billion increase in shares (mainly through valuation gains of $33.6 billion, with an additional $25.1 billion invested), partly offset by a $14.3 billion decrease in deposits through early access to superannuation schemes.

Household wealth rose by 1.7 per cent in the September quarter, driven by the largest growth in deposit accounts on record and an increase in residential assets. The financial assets of households rose at an even greater rate (1.9 per cent) in the quarter through a $63.7 billion rise in household deposits – the largest on record – and a $33.1 billion boost to superannuation reserves

Growth was boosted by ongoing government income support packages and the second round of early access to superannuation, in addition to tax refunds which typically contribute to growth in September quarters.

The reshaping of Australian ADIs' balance sheets also continued apace.

The ABS commentary noted that "by the end of September, ADIs had accessed the full initial allowance of the RBA's term funding facility (a form of low cost funding), exchanging debt securities acquired through internal securitisation as collateral."

ADIs' funding from short term debt securities and bonds fell $56.1 billion, while some existing debt securities were allowed to mature without replacement – including $29.2 billion in bonds.

Internal securitisations from the previous two quarters are being unwound, with the ABS tracking an $85.1 billion increase in the RBA's holdings of bonds issued by securitisers, against a $122.2 billion decrease in ADIs' holdings of bonds issued by securitisers.