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1301.0 - Year Book Australia, 2005  
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Contents >> International accounts and trade >> International accounts

International accounts cover the closely related and integrated balance of payments and international investment position statistics. Diagram 30.1 presents the broad structure and relationship of these statistics.

Australia's balance of payments provides a statistical statement that systematically summarises the economic transactions between residents of Australia and residents of other countries. Residents, who may be people or businesses, need not be Australian nationals. Transactions cover the provision (changes in ownership) of goods, services, income, financial claims on and liabilities to the rest of the world, and transfers (such as gifts) without anything provided in exchange.

Australia's international investment position is a balance sheet of the stock of foreign financial assets and liabilities of Australian residents. International investment statistics integrate the balance sheet positions at two points in time with information on increases and decreases in the levels of these assets and liabilities as a result of the changes due to transactions (investment flows, including reinvestment of earnings) as shown in the financial account of the balance of payments, together with the other changes that affect either the value of the stock (price, exchange rate) or the volume (other adjustments) of the stock of financial assets and liabilities.

30.1 RELATIONSHIP BETWEEN THE BALANCE OF PAYMENTS AND INTERNATIONAL INVESTMENT POSITION STATEMENTS
Diagram 30.1: RELATIONSHIP BETWEEN THE BALANCE OF PAYMENTS AND INTERNATIONAL INVESTMENT POSITION STATEMENTS
Source: Balance of Payments and International Investment Position, Australia: Concepts, Sources and Methods (5331.0).


Conceptual framework

Australia's international accounts statistics, which cover both the balance of payments and the international investment position, are compiled in accordance with international statistical standards as defined in the fifth edition of the International Monetary Fund's Balance of Payments Manual (BPM5). The concepts of residency, transactions, valuation and time of recording are common to the balance of payments and international investment position statistics.

The balance of payments accounts, which present systematically the economic transactions between Australia and the rest of the world, incorporate four types of economic transactions. The first involves the provision of real resources, that is, transactions in goods, services and income. The second involves the provision of financial resources, that is, foreign financial assets and liabilities. The third covers those one-sided transactions of a current nature (described as current transfers) that are offsets to transactions in current real or financial resources undertaken without an exchange. Current resources are not associated with, nor finance, fixed assets. For example, famine relief, whether in cash or in kind, would have its offset in current transfers. The fourth type is capital transfers that offset transactions undertaken, without exchange, in fixed assets or in their financing (such as development aid). For example, migrants' funds represent the shift of the migrants' net worth to or from Australia, and are classified as capital transfers.

The first and third of these types of transactions make up the current account, while the second type makes up the financial account. The fourth type (capital transfers), together with a minor item for the acquisition and disposal of non-produced, non-financial assets (such as patents), make up the capital account.

The double entry accounting system is used for recording balance of payments transactions. Under this system, credit entries, which are shown with no arithmetic sign, are used to record the provision of real or financial resources. Credit entries are therefore required for exports of goods and services, and for income earned by residents (a return for providing the use of financial capital to non-residents, or for providing the labour of Australian residents). Credit entries are also required for providing financial resources to the rest of the world, either as new liabilities (such as issuing bonds), or through returning existing foreign assets (such as selling foreign equity securities to non-residents). Therefore, any credit entry in the financial account will reflect either an increase in Australia's foreign liabilities (more foreign debt or foreign ownership), or a decrease in Australia's foreign financial assets (such as a run-down in foreign exchange reserves).

Conversely, debit entries, which are identified by a minus sign (-), are used to record the provision by the rest of the world of real or financial resources to Australia, and are shown against imports of goods and services, income earned from Australia by non-residents, and financial transactions involving either an increase in foreign financial assets or a decrease in foreign liabilities.

Transactions in a double entry accounting system are reflected in pairs of equal credit and debit entries. For example, an export transaction for which payment is received through the banking system involves a credit entry for providing the good to a non-resident and a debit entry for being provided with foreign exchange assets due as payment for the export. Any entries that are not automatically paired in a transaction, that is, for which there is no 'quid pro quo', are matched by special offsetting entries. Such offsetting entries are made in the categories 'current transfers' (when offsetting the provision of current resources such as food for famine relief) and 'capital transfers' (when offsetting the provision of capital resources such as development aid to build a new dam).

In principle, the net sum of all credit and debit entries is zero. In practice, some transactions are not measured accurately (errors), while others are not measured at all (omissions). Equality between the sums of the credit and debit entries is then brought about by the inclusion of a 'net errors and omissions' item which balances the accounts.

Transactions and other changes should be valued in the balance of payments at market prices. However, for practical reasons, transactions are generally valued in the statistics at transaction prices as this basis provides the closest practical approximation to the market price principle.

Transactions and other changes recorded in the balance of payments should be recorded at the time of change of ownership. For current account transactions, this occurs when ownership of goods changes, or services are provided. Investment income is recorded on a full accrual basis, that is, when it is earned. Reinvested earnings are calculated for the earnings of the period of account, using current replacement cost estimates of depreciation and excluding holding gains and losses. Current and capital transfers should be recorded when the goods, services, cash, etc., to which they are offsets, change ownership. Those transfers, such as taxes and fines, which are imposed by one party on another, should ideally be recorded at the time of occurrence of the underlying transactions or other flows or events that give rise to the liability to pay. For financial account transactions, the time of recording is at the change of ownership of the financial claims, which by convention is the time at which transactions are entered in the books of the transactors.

In practice, the nature of the available data sources is such that the time of recording of transactions will often differ from the time of change of ownership. Where practical, timing adjustments are made for transactions to ensure that they are recorded in the time period in which change of ownership occurs.

International investment position statistics provide information on the levels (stock) of Australia's foreign financial assets and liabilities. The investment position at the end of a period reflects the foreign financial asset and liability positions at the start of the period, and the financial transactions (investment flows) from the balance of payments which increase or decrease these assets and liabilities, together with the non-transaction changes due to exchange rate effects, other price effects and changes in the volume of these assets and liabilities that are not due to transactions (such as debt write-off).

While the international investment position statistics form an integral part of Australia's balance of payments (diagram 30.1), they are also useful in their own right, for example, in determining the impact of foreign investment policies and the level of Australia's foreign assets and liabilities, including foreign debt. They are also useful when analysing the behaviour of financial markets.

As with the balance of payments, market price is the principal method of valuation in international investment position statistics, and financial assets and liabilities are recognised on a change of ownership basis, that is, at the time when the foreign financial asset or liability is acquired, sold, repaid or otherwise disposed of. By convention, this is generally taken to be the time at which the event is recorded in the books.

Classifications

In the following tables, estimates are presented of the current, capital and financial accounts of Australia's balance of payments. Current and capital account transactions are generally recorded gross. This means that, for each item in the current and capital accounts, the credit entries are recorded separately from the debit entries. For example, goods credits are shown separately from goods debits. For each item in the financial account, however, debit and credit transactions are combined to produce a single result for the item which may be either a net credit or a net debit. For example, in a given period, non-resident purchases of shares issued by companies in Australia (credit) are netted against sales of Australian shares to residents by non-residents (debit) and the net result is recorded in the financial account as either a net credit or a net debit.

The current account records transactions between Australian residents and non-residents in goods, services, income and current transfers. Goods are classified into five main components: general merchandise; goods for processing; goods procured in ports by carriers; repairs on goods; and non-monetary gold. Changes of ownership from residents to non-residents are recorded as credits (also referred to as exports), and changes from non-residents to residents are recorded as debits (also referred to as imports). Services, comprising 11 primary components, cover services provided by Australian residents to non-residents (credits) and by non-residents to residents (debits), together with transactions in a few types of goods (e.g. goods purchased by travellers). Income, comprising investment income (e.g. dividends and interest) and compensation of employees (e.g. wages), covers income earned by Australian residents from non-residents (credits) or earned by non-residents from residents (debits). Current transfers cover the offsetting entries required when resources are provided, without something of economic value being received in return. When non-residents provide something to Australian residents, offsetting credits are required; when residents provide resources to non-residents, offsetting debits are required. General government transfers (e.g. official foreign aid) are distinguished from transfers by other sectors.

The capital account covers capital transfers (such as migrants' funds), distinguished between general government and other sectors, and the acquisition/disposal of non-produced, non-financial assets.

The financial account shows transactions in foreign financial assets and liabilities. The primary split is by functional type of capital (direct investment, portfolio investment, financial derivatives, other investment and reserve assets) further split into assets and liabilities (where appropriate). Within the asset and liability categories, details are presented of instruments of investment and resident sectors (for other than direct investment), and in some cases the contractual maturity of the instruments used.

The primary distinction used in international investment position statistics is between assets and liabilities. Assets primarily represent Australian investment abroad, and liabilities primarily represent foreign investment in Australia. The difference between the two represents the net international investment position (graph 30.8 and table 30.9). Australian investment abroad refers to the stock of foreign financial assets owned by Australian residents, after netting off any liabilities of Australian direct investors to their direct investment enterprises abroad. Conversely, foreign investment in Australia refers to the stock of financial assets in Australia owned by non-residents, after netting off any claims of Australian direct investment enterprises on their foreign direct investors. The first breakdown below this asset/liability dichotomy is by functional type of capital, with details of the instruments of investment (table 30.11), the resident sectors and contractual maturities involved.

While many types of instruments of investment can be identified, similar instruments are combined for analytical reasons and ease of reporting. Some of those instruments are:

Equity capital - which includes ordinary and participating preference shares, units in trusts and net equity in branches.

Reinvestment of earnings of direct investors - which refers to income retained within the enterprise from after-tax profits that is attributable to direct investors.

Debt securities - which include longer term, generally tradable security instruments such as bonds and debentures, with a contractual maturity of more than one year after issue, together with money market instruments (e.g. bills, commercial finance paper, negotiable certificates of deposit) with a contractual maturity of one year or less.

Trade credits - which cover the direct extension by suppliers and buyers for goods and services, including advances for work in progress or to be undertaken.

Loans - which cover the direct lending of funds either without a security evidencing the transaction, or with non-negotiable documentation. They include financial leases.

Deposits - which comprise both transferable and other deposits.

Other assets and liabilities - which consist of miscellaneous accounts in respect of interest, dividends, etc.

Statistical overview

As shown in table 30.2, the balance on current account for 2003-04 was a deficit of $47.4b, an increase of $7.1b (18%) on the previous year. The deficit on goods and services was $24.1b, an increase of $5.5b on the 2002-03 deficit of $18.6b. The main contributing factors were the decrease in goods credits of $6.8b, down from $116.0b in 2002-03 to $109.2b in 2003-04, and the $1.5b increase in services debits, up from $32.9b in 2002-03 to $34.4b in 2003-04. The net goods deficit rose by $5.4b, the net services deficit by $0.1b and the net income deficit by $1.8b on the previous year.

The surplus on capital account increased by $0.2b (21%) to $1.2b in 2003-04.

The balance on financial account recorded a net inflow of $47.1b, up $6.9b (17%) on the previous year. Direct investment recorded a net outflow of $14.8b, a $24.6b turnaround on the net inflow of $9.8b in 2002-03. Contributing to the net outflow were a rise in Australian direct investment abroad of $16.2b to $24.4b and a fall of $8.3b in the net inflow of direct investment into Australia. The net inflow on portfolio investment increased $57.5b, while other investment recorded a turnaround of $27.4b to record a net outflow of $11.3b in 2003-04. Reserve assets fell $0.5b, while financial derivatives recorded a turnaround of $0.9b to be $0.9b in 2003-04.


30.2 BALANCE OF PAYMENTS, Summary

1998-99
1999-2000
2000-01
2001-02
2002-03
2003-04
$m
$m
$m
$m
$m
$m

Current account
-33,610
-32,620
-18,021
-20,550
-40,322
-47,427
Goods and services
-14,431
-14,589
649
-1,233
-18,639
-24,097
Credits
112,025
126,222
153,854
153,340
148,530
143,178
Debits
-126,456
-140,811
-153,205
-154,573
-167,169
-167,275
Goods
-12,647
-13,145
-217
-852
-18,317
-23,688
Credits
85,783
97,665
120,307
121,090
115,961
109,190
Debits
-98,430
-110,810
-120,524
-121,942
-134,278
-132,878
Services
-1,784
-1,444
866
-381
-322
-409
Credits
26,242
28,557
33,547
32,250
32,569
33,988
Debits
-28,026
-30,001
-32,681
-32,631
-32,891
-34,397
Income
-18,430
-18,249
-18,702
-19,300
-21,469
-23,301
Credits
10,288
13,769
16,278
15,672
15,310
15,831
Debits
-28,718
-32,018
-34,980
-34,972
-36,779
-39,132
Current transfers
-749
218
32
-17
-214
-29
Credits
4,498
4,625
4,453
4,280
4,233
4,273
Debits
-5,247
-4,407
-4,421
-4,297
-4,447
-4,302
Capital and financial account
31,281
32,112
17,354
21,907
41,140
48,263
Capital account
1,167
1,053
1,109
1,016
991
1,199
Capital transfers
1,186
1,136
1,182
1,186
1,103
1,230
Credits
2,197
2,335
2,442
2,543
2,404
2,629
Debits
-1,011
-1,199
-1,260
-1,357
-1,301
-1,399
Net acquisition/disposal of non-produced, non-financial assets
-19
-83
-73
-170
-112
-31
Financial account
30,114
31,059
16,245
20,891
40,149
47,062
Direct investment
4,747
9,804
-461
186
9,795
-14,766
Abroad
-3,253
-3,343
-14,353
-21,195
-8,156
-24,377
In Australia
8,000
13,147
13,892
21,381
17,951
9,612
Portfolio investment
6,455
13,033
19,404
11,207
19,899
77,366
Financial derivatives
2,748
470
-538
773
-63
881
Other investment
16,558
10,374
6,720
7,948
16,138
-11,291
Reserve assets
-394
-2,622
-8,880
777
-5,620
-5,127
Net errors and omissions
2,329
508
667
-1,357
-818
-836

Source: Balance of Payments and International Investment Position, Australia (5302.0).


Graph 30.3 illustrates the differing influences of the trade balance and the net income deficit on the balance on current account. The net income deficit rose from $9.2 in 1987-88 to $23.3b in 2003-04. The underlying level of net income continues to drive the level and direction of the current account deficit, as Australia continues to service its external liabilities. However, the trade deficit has fluctuated quite significantly over the past 16 years, moving from a deficit of $2.3b in 1987-88 to a deficit of $24.1b in 2003-04.

Graph 30.3: BALANCE ON CURRENT ACCOUNT COMPARED WITH NET INCOME



Table 30.4 shows the annual levels of Australia's official reserve assets and both the end of year and period average exchange rates for the major currencies, special drawing rights, and the trade weighted index.


30.4 RESERVE ASSETS AND EXCHANGE RATES

1998-99
1999-2000
2000-01
2001-02
2002-03
2003-04

RESERVE ASSETS(a) ($m)

Total reserve assets
-23,954
-27,948
-37,951
-37,435
-40,760
-50,343
Monetary gold
-1,013
-1,233
-1,367
-1,445
-1,329
-1,473
Special drawing rights
-88
-141
-197
-216
-226
-256
Reserve position in IMF
-2,338
-2,225
-2,412
-2,992
-3,185
-2,497
Foreign exchange
-20,515
-24,349
-33,975
-32,782
-36,020
-46,117
Currency and deposits
-7,971
-9,148
-11,340
-11,761
-10,254
-23,420
Securities
-12,544
-15,143
-22,562
-21,137
-25,758
-22,695
Financial derivatives (net)
n.a.
-58
-73
116
-8
-2

EXCHANGE RATES

End of period(a)
United States dollar
0.6596
0.5986
0.5075
0.5648
0.6674
0.6889
United Kingdom pound
0.4188
0.3941
0.3603
0.3700
0.4038
0.3815
Euro
0.6379
0.6282
0.6002
0.5715
0.5840
0.5702
Japanese yen
79.66
63.19
62.94
67.48
79.99
74.82
Special drawing right
0.4932
0.4481
0.4076
0.4277
0.4761
0.4694
Period average(b)
United States dollar
0.6276
0.6292
0.5379
0.5239
0.5847
0.7136
United Kingdom pound
0.3824
0.3947
0.3704
0.3632
0.3685
0.4102
Euro
. .
. .
0.6023
0.5850
0.5577
0.5981
Japanese yen
77.81
67.91
61.49
66.10
70.01
78.91
Special drawing right
0.4589
0.4642
0.4177
0.4135
0.4313
0.4933

TRADE-WEIGHTED INDEX OF VALUE OF THE AUSTRALIAN DOLLAR(c)

End of period(a)
58.4
53.3
49.7
52.3
59.4
59.1
Period average(b)
56.0
55.2
50.3
50.7
53.5
61.5

(a) At 30 June.
(b) Exchange rates and the trade-weighted index are provided by the Reserve bank of Australia in respect of each trading day. Period averages are derived from these rates.
(c) May 1970 = 100.0. The trade weighted index is reweighted annually and on special occasions as required.

Source: Balance of Payments and International Investment Position, Australia (5302.0).


International trade in goods and services (balance of payments basis)

Australia's international trade in goods and services for the six years to 2003-04 is shown in tables 30.5 (exports or credits) and 30.6 (imports or debits). The tables provide both current price and chain volume measures.

The components of merchandise goods shown in tables 30.5 and 30.6 are defined in terms of groupings of items in the United Nations Broad Economic Categories (BEC) for credits, and a version of the BEC for Balance of Payments purposes modified for debits.

Chain volume measures of exports and imports remove the effects of price changes. They provide measures, in dollar values, which indicate changes in the actual volume of exports and imports.

The current price value of a transaction may be expressed conceptually as the product of a price and quantity. The value of the transaction in chain volume measures may then be thought of as being derived by substituting, for the current price, the corresponding price in the chosen reference year.

There are, however, many transactions recorded in statistics of international trade in goods and services for which it is not possible to apply such an approach. In such cases it is necessary to make assumptions and approximations (e.g. revaluing by means of the price index which is considered to be most closely related to the commodity involved). The published chain volume measures should be viewed in this light. For more information on chain volume measures refer to Information Paper: Australian National Accounts, Introduction of Chain Volume and Price Indexes (5248.0).

In current price terms the balance on goods and services recorded a deficit of $24.1b in 2003-04, an increase of $5.5b (29%) on the $18.6b deficit recorded in 2002-03. Between these two years, goods and services credits fell $5.4b to $143.2b (down 4%) while debits rose by $0.1b to $167.3b (up 0.1%).

Over the same period goods credits fell $6.8b (6%) to $109.2b, with rural goods falling $1.0b and non-rural goods down by $5.0b. Goods debits fell by $1.4b (1%) to $132.9b. Consumption goods rose $1.7b, capital goods rose $0.4b, while intermediate and other goods fell $3.0b. Contributing to the fall in the intermediate and other goods were imports of parts for transport equipment, down $0.7b to $6.6b, and other goods down $0.6b to $5.1b in 2003-04.

More detailed information on exports and imports of goods, on a merchandise trade basis without adjustment for balance of payments purposes and trade in services, are shown later in this chapter.


30.5 GOODS AND SERVICES CREDITS

1998-99
1999-2000
2000-01
2001-02
2002-03
2003-04
$m
$m
$m
$m
$m
$m

AT CURRENT PRICES

Goods and services credits
112,025
126,222
153,854
153,340
148,530
143,178
Goods credits
85,783
97,665
120,307
121,090
115,961
109,190
General merchandise
78,323
90,110
112,897
113,471
107,269
101,231
Rural goods
21,862
23,617
29,164
30,085
25,484
24,473
Meat and meat preparations
4,008
4,467
5,796
6,246
5,655
5,752
Cereal grains and cereal preparations
5,046
4,941
5,937
6,481
4,487
5,087
Wool and sheepskins
2,583
2,963
3,897
3,687
3,545
2,791
Other rural
10,225
11,246
13,534
13,671
11,797
10,843
Non-rural goods
56,461
66,493
83,733
83,386
81,785
76,758
Metal ores and minerals
11,037
11,760
15,205
14,774
14,523
14,732
Coal, coke and briquettes
9,288
8,336
10,844
13,430
11,987
10,918
Other mineral fuels
4,461
9,082
13,464
10,940
11,049
8,758
Metals (excl. non-monetary gold)
6,984
8,810
10,146
9,650
8,711
7,765
Machinery
6,569
7,133
8,797
7,999
7,362
6,832
Transport equipment
3,343
4,597
5,041
5,686
6,273
5,175
Other manufactures
10,273
11,539
13,530
13,758
13,485
13,335
Other non-rural (incl. sugar)
4,506
5,236
6,706
7,149
8,395
9,243
Beverages
1,176
1,515
1,931
2,287
2,605
2,620
Sugar, sugar preparations and honey
1,472
1,229
1,330
1,610
1,363
np
Other
1,858
2,492
3,445
3,252
4,427
np
Other goods
7,460
7,555
7,410
7,619
8,692
7,959
Services credits
26,242
28,557
33,547
32,250
32,569
33,988

CHAIN VOLUME MEASURES(a)(b)

Goods and services credits
128,300
140,599
150,925
149,333
148,530
149,897
Goods credits
98,510
109,042
115,583
116,200
115,961
116,569
General merchandise
89,405
99,781
107,402
108,246
107,269
108,318
Rural goods
26,203
28,866
30,274
29,222
25,484
26,513
Meat and meat preparations
5,057
5,160
5,835
5,591
5,654
5,415
Cereal grains and cereal preparations
6,771
6,757
6,485
6,596
4,487
6,081
Wool and sheepskins
4,145
4,862
5,076
4,426
3,545
3,618
Other rural
10,716
12,499
13,207
12,844
11,796
11,397
Non-rural goods
63,489
71,214
77,349
79,107
81,785
81,806
Metal ores and minerals
11,831
12,100
13,231
13,737
14,523
15,060
Coal, coke and briquettes
9,739
10,197
11,176
11,451
11,987
12,568
Other mineral fuels
9,442
11,164
12,005
11,801
11,049
9,556
Metals (excl. non-monetary gold)
7,895
8,681
8,746
9,364
8,711
7,409
Machinery
5,832
6,591
7,950
7,459
7,362
7,562
Transport equipment
3,751
5,116
5,039
5,472
6,273
5,654
Other manufactures
10,272
11,798
12,952
13,215
13,486
14,174
Other non-rural (incl. sugar)
4,671
5,784
6,394
6,776
8,395
9,823
Beverages
1,159
1,546
1,840
2,172
2,605
2,852
Sugar, sugar preparations and honey
1,330
1,435
1,133
1,284
1,363
np
Other
2,151
2,803
3,390
3,270
4,426
np
Other goods
9,253
9,443
8,155
7,886
8,694
8,249
Services credits
29,975
31,767
35,561
33,162
32,568
33,327

(a) Reference year is 2002-03.
(b) Chain volume measures are not additive for most periods; the component measures do not sum to a total in the same way as the corresponding current price components do.

Source: Balance of Payments and International Investment Position, Australia (5302.0).


30.6 GOODS AND SERVICES DEBITS

1998-99
1999-2000
2000-01
2001-02
2002-03
2003-04
$m
$m
$m
$m
$m
$m

AT CURRENT PRICES

Goods and services debits
-126,456
-140,811
-153,205
-154,573
-167,169
-167,275
Goods debits
-98,430
-110,810
-120,524
-121,942
-134,278
-132,878
General merchandise
-94,392
-106,749
-116,165
-116,802
-128,645
-127,796
Consumption goods
-28,041
-30,781
-35,775
-37,422
-41,228
-42,921
Food and beverages, mainly for consumption
-3,606
-3,943
-4,483
-4,687
-5,067
-5,168
Household electrical items
-2,245
-2,456
-3,000
-3,166
-3,657
-3,795
Non-industrial transport equipment
-7,231
-7,735
-9,627
-9,930
-11,302
-12,326
Textiles, clothing and footwear
-3,739
-4,232
-4,811
-4,849
-5,237
-5,078
Toys, books and leisure goods
-3,184
-3,238
-3,359
-3,494
-3,740
-3,595
Consumption goods n.e.s.
-8,036
-9,177
-10,495
-11,296
-12,225
-12,959
Capital goods
-23,058
-26,895
-25,739
-27,208
-31,554
-32,003
Machinery and industrial equipment
-9,226
-8,912
-8,876
-9,502
-11,007
-11,060
ADP equipment
-4,496
-4,912
-5,260
-5,055
-4,908
-5,138
Telecommunications equipment
-2,812
-4,150
-4,379
-3,643
-3,619
-4,104
Civil aircraft
-649
-1,414
-609
-1,513
-3,887
-3,061
Industrial transport equipment n.e.s.
-2,863
-4,181
-2,940
-3,613
-3,881
-4,035
Capital goods n.e.s.
-3,012
-3,326
-3,675
-3,882
-4,252
-4,605
Intermediate and other merchandise goods
-43,293
-49,073
-54,651
-52,172
-55,863
-52,872
Food and beverages, mainly for industry
-758
-731
-592
-577
-736
-625
Primary industrial supplies n.e.s.
-882
-1,117
-1,133
-1,117
-1,220
-1,077
Fuels and lubricants
-4,428
-7,450
-10,358
-8,823
-10,393
-9,897
Parts for transport equipment
-6,085
-6,874
-7,089
-6,827
-7,258
-6,551
Parts for ADP equipment
-1,944
-1,936
-2,255
-2,159
-2,011
-1,812
Other parts for capital goods
-7,692
-8,008
-9,072
-8,216
-8,605
-8,559
Organic and inorganic chemicals
-3,139
-3,572
-3,777
-3,447
-3,089
-3,047
Paper and paperboard
-1,978
-2,207
-2,311
-2,225
-2,326
-2,242
Textile yarn and fabrics
-2,006
-1,987
-1,863
-1,830
-1,839
-1,579
Iron and steel
-1,470
-1,509
-1,437
-1,765
-1,960
-2,026
Plastics
-1,889
-2,037
-2,193
-2,182
-2,478
-2,179
Processed industrial supplies n.e.s.
-10,140
-10,772
-11,251
-11,441
-12,238
-12,044
Other merchandise goods
-882
-873
-1,320
-1,563
-1,710
-1,234
Other goods
-4,038
-4,061
-4,359
-5,140
-5,633
-5,082
Services debits
-28,026
-30,001
-32,681
-32,631
-32,891
-34,397

CHAIN VOLUME MEASURES(a)(b)

Goods and services debits
-129,310
-145,931
-144,087
-147,311
-167,168
-189,061
Goods debits
-98,735
-112,799
-111,597
-115,505
-134,278
-150,256
General merchandise
-94,123
-108,017
-107,040
-110,353
-128,646
-144,805
Consumption goods
-28,427
-32,003
-34,824
-35,943
-41,227
-46,823
Food and beverages, mainly for consumption
-3,710
-4,149
-4,533
-4,737
-5,066
-5,472
Household electrical items
-2,086
-2,354
-2,724
-2,905
-3,656
-4,348
Non-industrial transport equipment
-7,824
-8,320
-9,796
-9,664
-11,301
-12,965
Textiles, clothing and footwear
-3,876
-4,538
-4,709
-4,534
-5,236
-6,011
Toys, books and leisure goods
-3,126
-3,305
-3,104
-3,242
-3,739
-4,127
Consumption goods n.e.s.
-7,879
-9,379
-10,023
-10,892
-12,224
-13,900
Capital goods
-19,997
-24,869
-22,576
-24,563
-31,554
-37,605
Machinery and industrial equipment
-9,112
-9,037
-8,288
-8,760
-11,007
-12,276
ADP equipment
-2,272
-3,167
-3,383
-3,947
-4,908
-7,119
Telecommunications equipment
-2,386
-3,687
-3,831
-3,253
-3,618
-5,168
Civil aircraft
-712
-1,557
-605
-1,425
-3,887
-3,442
Industrial transport equipment n.e.s.
-2,981
-4,345
-2,878
-3,496
-3,881
-4,360
Capital goods n.e.s.
-3,190
-3,516
-3,558
-3,640
-4,252
-5,242
Intermediate and other merchandise goods
-45,998
-51,087
-49,838
-50,005
-55,862
-60,376
Food and beverages, mainly for industry
-625
-774
-725
-700
-736
-703
Primary industrial supplies n.e.s.
-897
-1,202
-1,116
-1,118
-1,221
-1,161
Fuels and lubricants
-9,823
-9,364
-9,232
-9,810
-10,393
-11,125
Parts for transport equipment
-6,433
-7,235
-6,888
-6,463
-7,257
-7,460
Parts for ADP equipment
-990
-1,260
-1,465
-1,699
-2,011
-2,502
Other parts for capital goods
-6,801
-7,688
-8,141
-7,522
-8,605
-10,373
Organic and inorganic chemicals
-2,965
-3,654
-3,378
-3,054
-3,088
-3,212
Paper and paperboard
-2,097
-2,374
-2,185
-2,077
-2,325
-2,513
Textile yarn and fabrics
-2,032
-2,115
-1,770
-1,743
-1,839
-1,818
Iron and steel
-1,548
-1,588
-1,460
-1,785
-1,959
-2,030
Plastics
-2,206
-2,431
-2,095
-2,054
-2,478
-2,491
Processed industrial supplies n.e.s.
-10,072
-10,957
-10,365
-10,640
-12,238
-13,529
Other merchandise goods
-852
-884
-1,216
-1,443
-1,710
-1,460
Other goods
-4,786
-4,794
-4,522
-5,173
-5,632
-5,452
Services debits
-30,893
-33,354
-32,690
-31,895
-32,892
-38,806

(a) Reference year for chain volume measures is 2002-03.
(b) Chain volume measures are not additive for most periods; the component measures do not sum to a total in the same way as the corresponding current price components do.

Source: Balance of Payments and International Investment Position, Australia (5302.0).


Table 30.7 presents various price indexes for Australia's trade in goods and services. The implicit price deflators (IPDs) are derived by dividing the current price measures by the corresponding chain volume measures. These IPDs reflect not only price change, but compositional effects from year to year.

Unlike IPDs, chain price indexes measure only the impact of a price change. The chain Laspeyres price index for goods and services credits fell 4.1% in 2003-04 to 95.9. The fall resulted from a stronger Australian dollar in 2003-04. The chain Laspeyres price index for goods and services debits fell 11.1% to 88.9.

Australia's terms of trade (derived by dividing the IPD for credits by the IPD for debits) rose by 8.0% in 2003-04, resulting from a 4.5% fall in the IPD for goods and services credits and a 11.5% fall in the IPD for goods and services debits (table 30.7).


30.7 IMPLICIT PRICE DEFLATORS, PRICE INDEXES AND TERMS OF TRADE(a)

1998-99
1999-2000
2000-01
2001-02
2002-03
2003-04

Implicit price deflators(b)
Goods and services credits
87.3
89.8
101.9
102.7
100.0
95.5
Goods credits
87.1
89.6
104.1
104.2
100.0
93.7
Services credits
87.5
89.9
94.3
97.3
100.0
102.0
Goods and services debits
97.8
96.5
106.3
104.9
100.0
88.5
Goods debits
99.7
98.2
108.0
105.6
100.0
88.4
Services debits
90.7
89.9
100.0
102.3
100.0
88.6
Chain Laspeyres price indexes
Goods and services credits
86.6
88.7
101.3
102.2
100.0
95.9
Goods credits
86.4
88.4
103.3
103.6
100.0
94.2
Services credits
87.2
89.6
94.2
97.2
100.0
102.0
Goods and services debits
95.4
95.0
105.3
104.4
100.0
88.9
Goods debits
97.0
96.7
107.0
105.1
100.0
88.9
Services debits
89.8
89.1
99.5
102.1
100.0
88.7
Terms of trade(c)
Goods and services
89.3
93.0
95.9
97.9
100.0
108.0
Goods
87.3
91.2
96.4
98.7
100.0
105.9
Services
96.5
99.9
94.4
95.1
100.0
115.1

(a) Reference year for price and terms of trade indexes is 2002-03.
(b) Derived by dividing the estimates at current prices in tables 30.5 and 30.6 by the chain volume measures in those tables.
(c) Derived by dividing the IPDs for credits by the IPDs for debits.

Source: Balance of Payments and International Investment Position, Australia (5302.0).


International investment position

Australia's net international investment position is the difference between the levels of Australia's foreign financial liabilities and the levels of its foreign financial assets. Historically, Australia has had a net liability position with the rest of the world.

Australia's net international investment position at 30 June 2004 was a net foreign financial liability of $501.1b. This was up $50.4b (11.2%) on the position a year earlier and resulted from net increases of $14.1b in the level of foreign equity and $36.3b in the level of foreign debt.

Graph 30.8 shows the components of Australia's international investment position between 30 June 1994 and 30 June 2004. It shows that the increase in net foreign liabilities primarily reflects increase in net foreign debt liabilities.

Graph 30.8: NET INTERNATIONAL INVESTMENT POSITION - 30 June



Table 30.9 shows a reconciliation between opening and closing levels for foreign financial assets, foreign financial liabilities and Australia's net international investment position. Increases or decreases in these assets and liabilities are due to financial transactions (investment flows), price changes, exchange rate changes and other adjustments.


30.9 INTERNATIONAL INVESTMENT POSITION

Changes in position reflecting

Position at beginning of period
Transactions
Price changes
Exchange rate changes
Other adjustments
Position at end of period
$m
$m
$m
$m
$m
$m

NET INTERNATIONAL INVESTMENT POSITION

Total
2001-02
366,408
20,890
14,208
-3,208
79
398,377
2002-03
398,377
40,150
3,829
6,652
1,772
450,778
2003-04
450,778
47,062
10,724
-4,983
-2,435
501,146
Equity
2001-02
63,835
-16,859
16,701
12,496
-992
75,178
2002-03
75,178
-8,533
2,823
23,032
1,087
93,588
2003-04
93,588
-2,976
17,647
491
-1,093
107,656
Debt
2001-02
302,573
37,749
-2,492
-15,703
1,072
323,199
2002-03
323,199
48,684
1,005
-16,381
682
357,190
2003-04
357,190
50,038
-6,923
-5,474
-1,342
393,489

FOREIGN ASSETS(a)

Total
2001-02
-488,144
-53,802
46,553
11,981
50
-483,361
2002-03
-483,361
-32,287
4,518
20,255
-505
-491,378
2003.04
-491,378
-47,223
-31,086
-10,853
-2,741
-583,280
Equity
2001-02
-294,304
-43,874
48,135
12,496
-450
-277,999
2002-03
-277,999
-25,209
9,973
23,032
671
-269,533
2003-04
-269,533
-33,098
-19,209
491
-860
-322,210
Debt
2001-02
-193,840
-9,927
-1,581
-514
500
-205,363
2002-03
-205,363
-7,077
-5,453
-2,777
-1,175
-221,845
2003-04
-221,845
-14,125
-11,875
-11,344
-1,881
-261,070

FOREIGN LIABILITIES(b)

Total
2001-02
854,552
74,692
-32,345
-15,189
29
881,738
2002-03
881,738
72,437
-691
-13,604
2,276
942,156
2003-04
942,156
94,284
41,809
5,870
307
1,084,426
Equity
2001-02
358,139
27,016
-31,434
-
-541
353,176
2002-03
353,176
16,675
-7,148
-
418
363,121
2003-04
363,121
30,120
36,856
-
-232
429,866
Debt
2001-02
496,413
47,678
-910
-15,189
572
528,562
2002-03
528,562
55,762
6,458
-13,604
1,857
579,035
2003-04
579,035
64,163
4,954
5,870
539
654,560

(a) Assets include claims of Australian direct investment enterprises on direct investors abroad, which are classified as part of direct investment in Australia.
(b) Liabilities include liabilities of Australian direct investors to direct investment enterprises abroad, which are classified as part of direct investment abroad.

Source: Balance of Payments and International Investment Position, Australia (5302.0).


Foreign debt

Foreign debt is a subset of the financial obligations that make up a country's international investment position. It includes all the non-equity components of the net international investment position, that is, all recorded assets and liabilities other than equity securities and direct investment equity capital, including reinvested earnings.

The level of borrowing and other non-equity liabilities of Australian residents at a particular date make up Australia's foreign debt liabilities. The level of Australian lending abroad and other non-equity assets at the same date are deducted from the level of borrowing to arrive at Australia's net foreign debt.

The level of net foreign debt at 30 June 2004 was $393.5b, up $36.3b (10.2%) on 30 June 2003. The increase during 2003-04 resulted from a $75.5b (13.0%) increase in foreign debt liabilities partly offset by an increase of $39.2b (17.7%) in foreign debt assets (table 30.10).

At 30 June 2004 the net foreign debt of the public sector (general government plus public financial and non-financial corporations) was $6.2b, which accounted for 1.6% of total net foreign debt. Net foreign debt levels of private financial corporations and private non-financial corporations were $314.0b (79.8% of total net foreign debt) and $73.2b (18.6%) respectively (table 30.10).


30.10 LEVELS OF FOREIGN DEBT - 30 June

1999
2000
2001
2002
2003
2004
$m
$m
$m
$m
$m
$m

Foreign debt assets(a)
-129,150
-144,186
-193,840
-205,363
-221,845
-261,070
Public sector
-40,770
-44,876
-63,432
-56,156
-55,869
-67,134
General government
-9,378
-9,219
-10,338
-10,869
-10,757
-9,996
Financial corporations
-30,470
-35,263
-46,151
-42,832
-43,377
-55,619
Central Bank
-22,883
-27,184
-37,040
-35,053
-37,641
-47,846
Central borrowing authorities
-385
-1,090
-1,426
-998
-568
-548
Other financial corporations
-7,203
-6,990
-7,685
-6,781
-5,168
-7,225
Non-financial corporations
-922
-393
-6,943
-2,455
-1,735
-1,519
Private sector
-88,380
-99,311
-130,408
-149,206
-165,976
-193,937
Financial corporations
-66,328
-75,689
-99,504
-120,990
-132,913
-158,818
Non-financial corporations
-22,052
-23,622
-30,904
-28,216
-33,063
-35,119
Foreign debt liabilities(a)
359,839
416,825
496,413
528,562
579,035
654,560
Public sector
75,279
63,413
69,255
67,912
64,840
73,346
General government
32,373
22,872
24,100
24,927
24,049
29,658
Debt domiciled abroard
2,176
1,567
1,453
1,573
1,557
1,314
Debt domiciled in Australia
30,197
21,305
22,647
23,354
22,493
28,344
Financial corporations
37,284
33,968
32,649
28,926
27,319
30,745
Central Bank
40
34
366
43
150
124
Debt domiciled abroard
-
-
317
-
-
-
Debt domiciled in Australia
40
34
49
43
150
124
Central borrowing authorities
32,772
29,060
27,622
24,906
23,955
27,171
Debt domiciled abroard
29,694
25,646
24,596
22,319
21,091
24,316
Debt domiciled in Australia
3,077
3,413
3,027
2,588
2,864
2,855
Other financial corporations
4,473
4,875
4,661
3,976
3,214
3,450
Debt domiciled abroard
4,473
4,875
4,492
3,976
3,214
3,366
Debt domiciled in Australia
-
-
169
-
-
84
Non-financial corporations
5,622
6,572
12,506
14,060
13,471
12,943
Debt domiciled abroard
5,463
6,340
12,012
13,521
13,036
12,112
Debt domiciled in Australia
159
232
494
538
436
831
Private sector
284,560
353,413
427,157
460,650
514,195
581,214
Financial corporations
209,734
269,917
328,001
365,419
408,215
472,852
Non-financial corporations
74,825
83,496
99,157
95,231
105,980
108,362
Net foreign debt
230,689
272,639
302,573
323,199
357,190
393,489
Public sector
34,509
18,537
5,823
11,756
8,970
6,212
General government
22,995
13,652
13,762
14,058
13,292
19,662
Financial corporations
6,814
-1,295
-13,502
-13,906
-16,058
-24,874
Central Bank
-22,843
-27,150
-36,674
-35,010
-37,491
-47,722
Central borrowing authorities
32,387
27,970
26,196
23,908
23,387
26,623
Other financial corporations
-2,730
-2,115
-3,024
-2,805
-1,955
-3,775
Non-financial corporations
4,700
6,179
5,563
11,605
11,736
11,424
Private sector
196,179
254,102
296,750
311,443
348,219
387,277
Financial corporations
143,406
194,228
228,497
244,429
275,302
314,035
Non-financial corporations
52,773
59,874
68,253
67,014
72,918
73,243

(a) Foreign debt levels between direct investors and direct investment enterprises are recorded on a gross basis for assets and liabilities.

Source: Balance of Payments and International Investment Position, Australia (5302.0).


Levels of foreign investment in Australia and Australian investment abroad

In table 30.11, levels of investment are categorised by direction (Australian investment abroad and foreign investment in Australia), type of investment (direct, portfolio, financial derivatives, other and reserve assets) and instrument.

Direct investment is a category of international investment that reflects the objective of obtaining a lasting interest by a resident in one economy in an enterprise in another economy, and implies a significant degree of influence by the investor in the management of the enterprise. A direct investment relationship is established when an investor, who is a resident in one economy, holds 10% or more of the ordinary shares or voting stock of an enterprise (direct investment enterprise) in another economy. The portfolio investment category covers investment in equity and debt securities other than direct investment, financial derivative assets, other investment assets and reserve assets.

The items Australian investment abroad and foreign investment in Australia in table 30.11 do not equate with foreign assets and liabilities respectively in table 30.9. The difference is due to netting of assets and liabilities in regard to direct investment, both abroad and in Australia. Debt claims by direct investment enterprises on their direct investors, separately identified in table 30.11, are netted off in that table against liabilities to direct investors. These items are not netted off in table 30.9.

At 30 June 2004 Australian investment abroad totalled $557.3b, up $91.8b (19.7%) on the level a year earlier. This rise was the net effect of a $27.9b increase in direct investment abroad, a $38.2b increase in portfolio investment assets, a $1.2b increase in financial derivative assets, a $15.0b increase in other investment assets and a $9.6b increase in reserve assets.

Foreign investment in Australia totalled $1,058.5b at 30 June 2004, up $142.2b (15.5%) on June 2003. This rise was due to a $16.7b increase in direct investment in Australia, a $126.6b increase in portfolio investment liabilities, a $5.2b decrease in financial derivative liabilities and a $4.1b increase in other investment liabilities.


30.11 LEVELS OF AUSTRALIAN INVESTMENT ABROAD AND FOREIGN INVESTMENT IN AUSTRALIA - 30 June

1999
2000
2001
2002
2003
2004
$m
$m
$m
$m
$m
$m

Levels of Australian investment abroad
-313,359
-410,656
-466,710
-464,688
-465,523
-557,336
Direct investment abroad(a)
-129,465
-178,304
-187,177
-161,229
-152,622
-180,535
Equity capital and reinvested earnings
-128,988
-179,805
-182,367
-161,318
-156,332
-183,046
Other capital
-477
1,502
-4,809
88
3,711
2,511
Claims on affiliated enterprises
-5,496
-6,496
-14,470
-9,742
-13,182
-14,072
Liabilities to affiliated enterprises
5,020
7,997
9,660
9,831
16,892
16,583
Portfolio investment assets
-87,196
-126,653
-148,854
-161,649
-158,252
-196,439
Equity securities
-67,025
-102,185
-111,936
-116,681
-113,201
-139,164
Debt securities
-20,171
-24,469
-36,918
-44,968
-45,051
-57,275
Financial derivative assets
-15,529
-18,659
-23,804
-30,250
-40,505
-41,672
Other investment assets
-57,215
-59,092
-68,924
-74,126
-73,384
-88,348
Trade credits
-10,106
-9,982
-9,393
-9,834
-10,629
-10,189
Loans and other assets
-39,587
-42,057
-49,162
-52,331
-49,816
-62,164
Currency and deposits
-7,522
-7,053
-10,369
-11,961
-12,940
-15,995
Reserve assets
-23,954
-27,948
-37,951
-37,435
-40,760
-50,343
Levels of foreign investment in Australia
635,014
739,425
833,118
863,065
916,300
1,058,482
Direct investment in Australia(b)
174,478
196,186
205,333
215,942
237,232
253,967
Equity capital and reinvested earnings
152,753
171,462
174,361
180,254
197,352
216,991
Other capital
21,725
24,724
30,972
35,688
39,879
36,976
Claims on direct investors
-6,785
-7,523
-11,774
-8,842
-8,963
-9,361
Liabilities to direct investors
28,510
32,247
42,746
44,530
48,843
46,337
Portfolio investment liabilities
348,145
419,867
483,345
486,110
493,328
619,904
Equity securities
134,226
166,659
183,778
172,922
165,768
212,875
Debt securities
213,919
253,209
299,566
313,187
327,559
407,029
Financial derivative liabilities
17,826
21,433
23,593
32,096
45,251
40,061
Other investment liabilities
94,565
101,939
120,847
128,917
140,490
144,550
Trade credits
7,685
3,708
3,297
3,154
4,006
3,004
Loans
41,361
53,588
56,041
64,605
67,746
60,110
Currency and deposits
35,347
39,508
56,756
57,703
65,391
78,198
Other liabilities
10,172
5,135
4,753
3,455
3,347
3,237

(a) Net direct investment abroad, after deduction of liabilities to direct investment enterprises abroad.
(b) Net direct investment in Australia, after deduction of claims of Australian direct investment enterprises on direct investors.

Source: Balance of Payments and International Investment Position, Australia (5302.0).


Ratios

Table 30.12 and graph 30.13 show the ratio of the current account deficit to gross domestic product (GDP) was 5.8% in 2003-04, an increase on the previous year, and above the average for the past 10 years (4.5%).

Graph 30.14 shows the ratio of Australia's net foreign liabilities (Australia's net international investment position) to GDP has risen for most years since 1994 and reached its highest level of 61.8% at 30 June 2004. The ratio of net foreign debt to GDP was 48.5% at 30 June 2004, an increase over the 47.2% recorded the previous year. The ratio of net foreign equity to GDP was 13.3% at 30 June 2004, up on the ratio at 30 June 2003 and above the average for the last 10 years (12.8%).

Table 30.12 shows the net investment income payable on net foreign debt as a percentage of goods and services credits was 8.5% in 2003-04. The ratio of net investment income payable on equity to goods and services credits was 7.4% in 2003-04, up from 6.4% the previous year.


30.12 RATIOS

1998-99
1999-2000
2000-01
2001-02
2002-03
2003-04
%
%
%
%
%
%

To GDP
Current account
-5.7
-5.2
-2.7
-2.9
-5.3
-5.8
Goods and services
-2.4
-2.3
0.1
-0.2
-2.5
-3.0
Credits
18.9
20.2
22.9
21.5
19.6
17.7
Debits
-21.4
-22.5
-22.8
-21.6
-22.1
-20.6
Income
-3.1
-2.9
-2.8
-2.7
-2.8
-2.9
Net international investment position(a)
54.3
52.5
54.6
55.8
59.6
61.8
Net foreign equity
15.4
9.0
9.5
10.5
12.4
13.3
Net foreign debt
39.0
43.6
45.1
45.2
47.2
48.5
To good and services credits
Net investment income
-16.4
-14.3
-12.1
-12.4
-14.2
-15.8
Net foreign equity
-7.0
-3.7
-2.6
-3.5
-6.4
-7.4
Net foreign debt
-9.4
-10.6
-9.5
-8.9
-7.8
-8.5

(a) These ratios are derived by expressing net foreign liabilities at end of year as a percentage of GDP at current prices for that year.

Source: Australian National Accounts: National Income, Expenditure and Product (5206.0); Balance of Payments and International Investment Position, Australia (5302.0).

Graph 30.13: RATIO OF BALANCE ON CURRENT ACCOUNT TO GDP


Graph 30.14: RATIOS(a) OF NET INTERNATIONAL INVESTMENT POSITION TO GDP


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