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International Investment (Survey of)
 
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    NAME OF ORGANISATION
    Australian Bureau of Statistics (ABS)

    OVERVIEW
    The Survey of International Investment (SII) is a quarterly survey which collects information about investment activity into and out of Australia. The SII measures:

    • the levels (stock) of foreign financial assets and foreign liabilities of residents;
    • financial transactions (investment flows) resulting in increases and decreases in the levels of these assets and liabilities;
    • other changes in the levels of these assets and liabilities; and
    • income accrued on these assets and liabilities.

    Collectively, these aspects are referred to as international investment activity.

    PURPOSE
    International investment statistics are the starting point for any analysis of the levels of Australia's foreign financial assets and liabilities, changes in those levels over time, associated income streams and the impact of international investment activity on other economic aggregates.

    The key uses of the collection are as follows:

    Compilation of official statistics

    International investment financial transactions statistics are the source of the financial account and capital account (in the case of 'debt forgiveness') components of Australia's balance of payments statistics. Investment income statistics also form an important component of the income estimates in the current account. International investment statistics are also inputs to the financial accounts of the Australian national accounts.

    Debt Analysis

    Monitoring the extent of foreign debt and the cost of servicing it relies on international investment statistics.

    Economic policy formulation

    International investment statistics are used widely by government agencies and advisers in evaluating various economic strategies, formulating policy advice and monitoring the economy's responses to policy initiatives.

    Market information

    Changes in levels of international investment, particularly levels of debt, are used by participants in financial markets (such as the foreign exchange market), in conjunction with other indicators, as pointers to the general health of the economy.

    International use

    Statistics produced by the International investment Section are used by Australia to meet obligations under international treaty to release BoP and IIP statistics according to a specified format mandated by international agencies, such as the International Monetary Fund (IMF), Asia Pacific Economic Co-operation (APEC), the United Nations (UN) and the Organisation for Economic Co-operation and Development (OECD), and to studies undertaken by these agencies. They are also used by the Australian authorities during trade negotiations and to monitor developments in external economic relations between countries.

    General economic research

    International investment statistics are also used in economic forecasting, econometric modelling, academic research and media articles on economic developments.

    SCOPE

    Scope

    International investment statistics measure:
    • the levels (stock) of foreign financial assets and foreign liabilities of residents at a specified date;
    • financial transactions (investment flows) resulting in increases and decreases in the levels of these assets and liabilities;
    • other changes in the levels of these assets and liabilities such as price changes and exchange rate changes; and
    • income accrued on these assets and liabilities.

    International investment statistics are compiled from a number of sources of which the most important are, the quarterly Survey of International Investment (SII) and official advices. In principle, the scope of this survey is consistent with the scope of international investment statistics.

    The scope of the SII is defined as the international investment activity of all economic entities comprising the Australian economy. An economic entity may be a government institution, financial or trading enterprise, non-profit body or an individual, and is considered part of the Australian economy if it has a closer association with the territory of Australia than with any other territory. Each such entity is described as a resident of Australia.

    Coverage

    It is not practical to give all economic entities in the Australian economy a chance of selection, since many will not have any international investment activity. Instead, the coverage of the survey is all Australian enterprise groups which are known to have international investment activity.

    DATA DETAIL

    Conceptual framework
    Up to September quarter 1997, the conceptual basis on which Australia's international investment statistics were founded drew upon the recommendations of three international standards which were largely consistent with each other and addressed different aspects of economic statistics. First, the overall framework for economic statistics described in the 1968 Edition of the United Nations' (UN) System of National Accounts (SNA); second, in relation to levels of investment, the SNA Balance Sheet Guidelines issued in 1977; and third, in respect of international transactions, the Fourth Edition of the International Monetary Fund's (IMF) 'Balance of Payments Manual' (BPM4) issued in 1977. In cases where either the UN or IMF recommendations were impractical or inappropriate to the Australian environment different approaches were adopted.

    Revised international standards covering these fields of economic statistics were issued in late 1993 in the form of the 1993 Edition of the SNA and the Fifth Edition of the IMF's 'Balance of Payments Manual' (BPM5). The implications of these revised standards for international investment statistics, were described in the ABS discussion paper, titled 'Introduction of Revised International Standards in ABS Macro Economic Statistics' (ABS Cat No. 5245.0), issued in December 1994.

    The ABS commenced collection of international investment statistics based on the new standards in September 1996, however these statistics continued to be published on a BPM4 basis until September quarter 1997 when the first issue of the combined Balance of Payments and International Investment Statistics publication, 'Balance of Payments and International Investment Position, Australia' (ABS Cat No. 5302.0), was released.

    The conceptual framework of Australia's balance of payments and international investment position statistics based on the revised international standards, together with the data sources and methods used to compile them, are described in the publication 'Balance of Payments and International Investment Position, Australia: Concepts, Sources and Methods, 1998' (ABS Cat No. 5331.0), which was released on 22 September 1998.

    Main outputs
    International investment statistics measure:

    • the levels (stock) of foreign financial assets and foreign liabilities of residents;
    • financial transactions (investment flows) resulting in increases and decreases in the levels of these assets and liabilities;
    • other changes in the levels of these assets and liabilities; and
    • income accrued on these assets and liabilities.

    Collectively, these aspects are referred to as international investment activity.

    The key outputs are as follows:

    International Investment Position

    The international investment position of an economy is the balance sheet recording its stock of foreign financial assets and liabilities. The position at the end of a specific period reflects financial transactions and other changes in the levels of these assets and liabilities that occurred during the period. The net international investment position is defined as the difference between the level of foreign financial assets and the level of foreign liabilities at a particular date. In published international investment statistics, the components of the net position are shown from two alternative perspectives: first, as the sum of net foreign equity liabilities and net foreign debt liabilities; and the second as the difference between foreign assets and foreign liabilities. For both perspectives, opening levels of investment at the beginning of a period are reconciled with closing levels of investment at the end of the period by showing financial transactions, exchange rate changes, market price changes and other adjustments during the period.

    Net Foreign Debt Position and Gross External Debt Liabilities

    Foreign debt is a subset of financial obligations that comprise a country's international investment position. The level of Australian debt assets, including official reserve assets, at the same date are deducted from the level of Australian debt liabilities (gross foreign debt) to arrive at Australia's net foreign debt position. As per IMF's External Debt Guide and Australia's SDDS obligations, gross debt liabilities are published on a quarterly basis.

    Levels of investment

    Levels of international investment refer to both the value of foreign financial assets held by Australian residents (Australian investment abroad) and the value of foreign liabilities of Australian residents (foreign investment in Australia) at a particular date. The terms opening levels and closing levels refer, respectively, to levels of investment at the beginning and end of particular periods.

    Financial transactions

    Financial transactions refer to investment flows into and out of Australia and consist of:
    • the creation or extinction of a foreign financial asset (or liability) which is matched by a liability (or financial asset) in the records of another transactor;
    • the change of ownership of a foreign financial asset or liability; and
    • injections / withdrawals of equity, increases or reductions to debt positions.

    Also included as imputed financial transactions are the reinvested earnings of resident enterprises attributable to their foreign direct investors and the reinvested earnings of foreign enterprises attributable to their resident direct investors.

    By convention, two other events, not arising from transactions, are also included. These are:
    • monetisation/demonetisation of gold;
    • allocation/cancellation of Special drawing rights (SDRs).

    Financial transactions data collected via the SII is the main source of data reported in the Financial Account in Australia's balance of payments statistics.


    Investment income

    International investment income is income earned by the owners of foreign financial assets from the ownership of those assets. Under BPM5, income is recorded on an accrual basis, rather than the due for payment basis recommended under BPM4. While the total amount of income does not change when recorded on an accrual basis, it is recorded continuously rather than in discrete amounts when due for payment. The most common types of investment income are dividends and interest.

    Other forms of investment income are remitted profits and reinvested earnings. The item remitted profits refers to the distribution of income of unincorporated enterprises to their owners. The item reinvested earnings refers to that part of the undistributed income of a direct investment enterprise that is attributable to direct investors in the enterprise.

    Investment income data collected via the SII is a major input to the Income component of the Current Account in Australia's balance of payment statistics.

    International Investment Ratios

    To aid analysis of the economy's capacity to meet its international financial obligations, a number of ratios are calculated and presented in quarterly and annual paper publications. These ratios relate international investment aggregates to broad national accounting aggregates. The 2 key ratios produced are the 'ratio of net foreign debt to gross domestic product' and the 'debt service ratio'. The first of these expresses the level of net foreign debt at the end of a period as a proportion of gross domestic product for the year ending at that date. This gives an indication of the share of the economy's annual production that would be necessary to meet Australia's net international indebtedness. The second key ratio expresses net investment income for the year ending in a particular quarter as a proportion of the value of goods and services credits for the same period. This ratio indicates the proportion of annual export earnings that are used to meet investment income payments abroad.

    Classifications
    The classifications used in international investment statistics have been determined with the principal objectives of meeting user requirements; ensuring that, as far as possible, international recommendations (particularly those of the International Monetary Fund's (IMF) 'Balance of Payments Manual' (BPM5) and the United Nations' (UN) System of National Accounts (SNA)) are adhered to and that related ABS statistical requirements (particularly those of balance of payments and national accounting statistics) are being met.

    The BPM5 hierarchical order for the financial account is:

    • type of investment;
    • direction of investment;
    • asset or liability;
    • instrument of investment (for direct investment, this classification takes precedence over the asset/liability dichotomy);
    • sector; and
    • original contractual maturity.

    In addition to these BPM5 requirements, to satisfy known user requirements, further classifications are applied for foreign debt by domicility; and for foreign assets and liabilities by currency and maturity.

    All of the above classifications are described in 'Balance of Payments and International Investment Position, Australia: Concepts, Sources and Methods, 1998' (ABS Cat No. 5331.0).

    Other concepts (summary)
    Other concepts focal to the measurement of international investment statistics are:

    Statistical Unit

    Enterprise

    Concepts of territory and resident

    In compiling international investment statistics the Australian economy is conceived as being comprised of the economic entities that have a closer association with the territory of Australia than with any other territory. Each such economic entity is described as a resident of Australia . Any economic entity which is not determined to be a resident of Australia is described as a non resident.

    Australia's territory is defined to include the territories lying within its political frontiers and territorial seas and international waters over which it has exclusive jurisdiction. It does not include Australia's external territories such as Norfolk Island.

    Valuation

    Market price is the principle of valuation in international investment statistics. A market price is the amount of money that a willing buyer pays to acquire something from a willing seller, when such an exchange is between independent parties and involves only commercial considerations.

    In compiling international investment statistics, however, one or more of the above conditions needed to establish a market price for valuing a transaction may be absent. In practice, transactions are generally valued in the statistics using values recorded in the accounts of transactors. This basis provides the closest practical approximation to the market price principle.

    Levels of foreign financial assets and liabilities are valued at their market value on the reference dates (ie applicable at the beginning and end of the quarter).

    As international investment statistics are expressed in Australian dollars, it is necessary to convert transactions and stocks expressed in foreign currencies to Australian currency. In principle, such transactions and stocks should be converted at the mid point of the buying and selling rate applying at the time of the transaction or beginning or end of period. In practice the conversion rate used in the enterprise's accounts is accepted, as it is not expected that this will differ significantly from the market price.

    Time of recording

    Financial transactions are recorded on a change of ownership basis (either actual or imputed), that is, at the time when a foreign financial asset or liability is acquired, sold, repaid or otherwise disposed of. By convention, this is taken to be the time at which the event is recorded in the books of transactors.

    Under investment income, interest is recorded on an accrual basis, which is a continuous method of recording that matches the cost of capital with the provision of capital. Dividends are recorded as of the date they are payable. Reinvested earnings on direct investment are recorded in the periods when they are earned.

    GEOGRAPHIC DETAIL
    Australia

    Comments and/or Other Regions


    COLLECTION FREQUENCY
    Quarterly

    Frequency comments


    COLLECTION HISTORY
    The ABS has collected and published international investment statistics of varying coverage and detail since the 1920's. Early statistics were compiled annually until, in 1962, a quarterly collection was introduced. During the following decades, the quarterly collection(s) in this field have undergone a number of reviews and name changes, and their scope has expanded, in line with user demand, until, by the late 1980's, the quarterly collection (then called the Survey of Foreign Investment) had acquired much of its current form. In the mid 1990s the collection underwent some large transformations to meet the new data requirements of BPM5 and was renamed the Survey of International Investment.

    DATA AVAILABILITY
    Yes

    Data availability comments
    Data by reference quarter are loaded to the ABSDB every quarter.
    Data are available for use (released) 9 weeks after the end of the reference quarter.
    Country data is available 7 months after the reference year.


    DATE OF LAST UPDATE FOR THIS DOCUMENT
    14/02/2005 11:24 AM



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