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NATURAL RESOURCES IN NATIONAL BALANCE SHEETS
Given the way estimates of the value of subsoil assets are derived, only a very small portion of the total resource is accounted for at any one time; and valuation can give a very misleading impression of the extent of the resource. The point is not that valuation should not be attempted, but rather that the monetary estimates should be used in conjunction with the physical stocks of the resources (bearing in mind that the physical estimates are also subject to some uncertainty). Hence, the estimates must be viewed with some caution. Monetary estimates are subject to considerable volatility and accordingly can give a deceptively optimistic or pessimistic picture, while physical estimates may offer only a very limited view of the resource's full extent.
Land is defined (SNA93, para. 10.121) as the ground itself, including the soil covering and any associated surface water. Excluded are buildings, cultivated flora and fauna, subsoil assets, and non-cultivated biological resources. As land is not created, the only way transactions in land impact on GDP is through the transaction costs associated with purchase and sale, or through improvements (such as clearing).
Land estimates cover the value of freehold and leasehold land in private hands, plus land owned by Commonwealth government business enterprises. Unalienated Crown land, including land potentially subject to Mabo-like claims, has been excluded from the scope of these estimates because of the difficulty in establishing an appropriate value. Also excluded because of the unavailability of data is land held, but not leased out, by State and local government business enterprises. The significance of these exclusions is not known, but it is thought that they do not materially effect the levels, and most certainly have no significant impact on the changes over time in the estimated values.
The estimates were standardised on a consistent basis for each State and Territory and are based on the concept of 'site value'. Site value includes the value of invisible improvements to the land that cannot be separated from it, such as clearing of trees and drainage work, as well as the unimproved capital value of the land itself. This leads to an element of double counting in the balance sheets: expenditure on invisible improvements are recorded as gross fixed capital expenditure on non-dwelling construction in the capital account, as well as being included in the estimate of land (this double count is not considered significant). Estimates of site values were taken from the Coleman Report(e) (1993) to the Commonwealth Government, which was produced to assist the comparison of the relative capacities of the States and the Northern Territory to raise revenues from owners of land and from transactions in land. Land is valued at its approximate current market price.
Using administrative data has certain shortcomings. The data are compiled for use by governments when assessing the potential for raising revenue from land rates and taxes on transactions in land. Their estimation process uses whatever data are available to isolate the value of the land from any capital improvements to the land. This may introduce an element of subjectivity into the data.
SNA93 does not specify the types of forests which should be included in the national balance sheet. The ABS has chosen to value only the timber value of those forests which are available now, or will be available in the future, for production of timber. Further, as there are too few transactions from which to determine a market value, indirect valuation techniques have been used as a proxy for the economic value of forests. Non-timber values (such as the prevention of soil erosion, and maintenance of bio-diversity) lie outside the presently accepted methods of SNA93.
All publicly owned forests outside conservation reserves and all private forests are potentially available for timber production, although a number of constraints reduce the area of forest that is actually available. For publicly owned forests, the constraints include the accessibility of the resource, the economic feasibility of extracting the resource and the setting aside of specified areas of forests under management codes of practice. National parks, wilderness areas and world heritage listed areas have been excluded from the valuation because logging is prohibited.
The ABS approach
Forests have been broken down into two broad types: native forests (which account for approximately 95% of the area of all forests, including a very small area of broadleaved plantations), and coniferous plantations.
For native forests (including broadleaved plantations) the stream of future income was calculated for each forest age group by State and Territory. The future net income was derived from the size of the forests (number of hectares or thousand trees) multiplied by the yield per hectare (or thousand trees) for sawlogs and pulplogs, with the results being multiplied by the stumpage fees per cubic metre for sawlogs and pulplogs, respectively. Stumpage fees are the payments made to the owner of the resource by the logger for the right to log. They were taken to be the equivalent of economic rent. The values are then discounted over the time to maturity of the forest, assuming current production rates are maintained through the forests' lives. Mature forests were not discounted.
Coniferous plantation forests were valued using an insurance schedule provided by a private insurance company. The schedule shows the value of each hectare of plantation from 1 to 30 years of age as determined by the Australian Forest Growers Association.
At present, there are no comprehensive data sources to provide annual estimates of the total area of forest available for timber production. However, the survey by the Resource Assessment Commission found that 22.1 million hectares of native forest were available for logging in 1990(f). In addition, data from the Australian Bureau of Agricultural and Resource Economics (ABARE) indicate that there were just over one million hectares of plantation forest, comprising broadleaved and coniferous forests.
Stumpage fees are being used as a proxy for economic rent. However, the stumpage fees may include non-rent components, such as service costs for road maintenance, and the stumpage fee itself is subject to variation according to such factors as straightness, location and log size.
Any income received from thinnings was also ignored, which results in an underestimate of net income.
Finally, the values for forests presented in the balance sheets have been calculated for their timber values only, but it should be noted that forests have other non-economic values, many of which are in conflict with their usual economic activity (namely logging). Placing a non-timber value on forests is very difficult and highly contentious. Even though there are clear economic benefits from the existence of forests there is no satisfactory method of assigning dollar values to these benefits.
The table shows the balance sheet estimates of natural resources in their most aggregated form.
(a) Total assets includes produced assets (fixed assets, inventories) not shown separately in the table.
Source: Occasional Paper: National Balance Sheets for Australia, Issues and Experimental Estimates 1989 to 1992 (5241.0).
At 30 June 1992, the total value of land in Australia was estimated to be $509b, which represents a fall of almost 7% on the previous year's estimate. In value terms subsoil assets are the next largest, and are estimated to have grown during each year of the period 30 June 1989 to 30 June 1992. Although native forests represent many times the area of plantation forests, they are estimated as having (in absolute terms) little difference in value. The value of native forests has been stable during the period in nominal terms, while that of plantation forests has grown steadily.
Both total non-financial assets and net worth peaked at 30 June 1991, with the fall in the land estimates over the next twelve months causing the consequent drop in both series. 'Natural resources' (defined to include only those presented in the table) account for just under 40% of total non-financial assets throughout the period, with produced assets representing just over 60%. Liabilities to non-residents make a negative contribution (reducing total assets) and account for approximately 10% of net worth throughout the period.
This article has briefly outlined the approach taken by the ABS when constructing the national balance sheet, and identified some of the issues related to the valuation of subsoil assets, land and forests. The results should be interpreted with care as there are still many conceptual and data issues to be resolved. Readers are invited to contact: Director, National Accounts Research Section, ABS, PO Box 10, Belconnen, ACT 2616 with any comments or queries.
(a) The SNA is being widely adopted by government statistical agencies throughout the world, including the ABS, as the conceptual basis for compiling their national accounts.
(b) For an asset to be included in the national balance sheets, SNA93 states that it must fulfill certain criteria.
'The assets recorded in the balance sheets of the System are economic assets. These are defined as entities:
The economic benefits consist of income derived from the use of the asset and the value, including possible holding gains/losses, that could be realised by disposing of the asset or, in the case of a financial asset, by extinguishing it.
(c) The BRS has adapted the McKelvey Box to cross-classify Australian subsoil assets by the degree of economic feasibility and geological assurance of the deposit.
(d) Economic rent is the return to the owner of the resource for use of that resource, but excludes the costs necessary to replace it. Originally applied to land, it is now generally applied as the return to the owners of any natural resource.
(e) Coleman, M.R., Report on Land Valuation Data, Commonwealth Grants Commission Report on the General Revenue Grant Relativities 1993, Volume 3, Appendixes, July 1993.
(f) Resource Assessment Commission, Forest and Timber Inquiry Final Report, Volumes 1, 2A and 2B, March 1992, RAC, Canberra.
Source: Year Book Australia 1997 (ABS Catalogue No. 1301.0)
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