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25.1 This chapter describes the sources and methods used in compilation of the financial accounts and the financial asset/liability components of the balance sheets. The financial accounts record information about transactions in financial assets and liabilities, while the balance sheets provide information about the values of stocks of financial assets and liabilities at particular points in time. Information on the structure of the financial accounts and balance sheets is provided in Chapter 8. Financial accounts statistics are sometimes referred to as 'flow-of-funds' statistics.
25.6 The institutional sector classification used in the financial accounts is the same as that used in the rest of the national accounts. Five broad sectors are identified:
25.7 In Cat. no. 5232.0 the general government, financial corporations and non-financial corporations sectors are broken down into subsectors, as shown in the table below:
25.8 In Cat. no. 5232.0 the institutional sector classification is also used to classify the counterparty transactions and positions shown for each institutional sector/subsector.
25.9 Chapter 5 provides a description of the sectors and subsectors used in the financial accounts.
25.10 Financial instruments are classified in the national accounts as follows:
25.11 Chapter 6 provides a description of each of these types of financial instruments. In certain financial account and balance sheet tables, securities are further classified by domicile of issuer (i.e. issued in Australia/issued offshore).
Sources of data
25.12 Most of the data used in the compilation of the financial components of the national accounts are derived from statistical surveys conducted by the ABS. Of particular importance are the Survey of Financial Information (SFI) and the Survey of International Investment (SII), both of which are conducted quarterly. Other data sources are used to supplement the ABS sources, particularly for estimating for certain types of financial corporations and for deriving valuation adjustments. The specific information sources for each of the sectors and subsectors are described below.
Private non-financial corporations
25.13 Balance sheet data for the largest groups, as well as for those property trusts which are open to the general public, are obtained from the SFI. Estimates for the remainder of units that make up this subsector are derived from data coming from several different sources, including counterpart information from banks, market capitalisation information from the Australian Stock Exchange, and data from the SII.
National public non-financial corporations
25.15 The largest of these units report balance sheet information in the SFI. Estimates for the remainder of units that make up this subsector are derived from several different sources, including counterpart information from banks and data from the ABS's quarterly SII.
State and local public non-financial corporations
25.16 The largest State corporations provide quarterly balance sheet information to the ABS in the SFI. For State and Territory housing commissions, Annual Reports are used as a data source. For the remaining State and local public non-financial corporations, counterpart information from the central borrowing authorities (which report to the ABS) is used, as the financing for most of these units is arranged through the central borrowing authorities.
25.17 The Reserve Bank of Australia (RBA) provides a full balance sheet to the ABS each quarter. However, some items on the RBA’s balance sheet are valued as at the Wednesday closest to the end of the quarter. This is inconsistent with information provided by the Commonwealth Department of Finance and Administration and the commercial banks, both of which close off their accounts on the last working day of the quarter. As the latter timing basis is closer to the conceptual requirements of the financial accounts, counterpart information is substituted for the relevant items. Also, the RBA records entries in the Commonwealth Government's account when cheques are presented for payment, but the Commonwealth Department of Finance and Administration makes these entries in its books when the cheques are drawn, which is likely to be several days earlier. Because of the large amounts involved, this 'float' is a serious problem from time to time, and counterpart information is used to make the necessary adjustments.
25.18 Each bank provides quarterly, as part of the SFI, a full balance sheet showing the consolidated position of its domestic banking businesses. Data reported by banks in the SII are used to supplement the SFI data.
Other depository corporations
25.19 All cash management trusts report balance sheet data to the ABS monthly. Estimates for building societies and credit unions are derived using data collected by the Australian Prudential and Regulation Authority (APRA). The RBA provides the ABS with information for the remaining depository corporations derived from statutory balance sheet returns. However, these returns do not include information about shareholders’ funds. This information is collected quarterly by the ABS from the larger corporations.
Life insurance offices
25.20 The SFI collects balance sheet, transactions and valuation information from the large life insurers. This information is supplemented by data provided by APRA, which requires all privately owned life insurance offices to provide it with assets and liabilities information quarterly. Large friendly societies provide quarterly balance sheet information to the ABS.
25.21 The largest pension funds (both public and private sector) provide quarterly balance sheet, transaction and valuation information in the APRA/ABS Survey of Superannuation Funds. These data are supplemented by an ABS collection from professional fund managers, in which an asset breakdown is reported of the pension funds they manage. This collection is designed to enable the elimination of double counting of pension fund assets. APRA and the ABS jointly estimate the assets of small (‘excluded’) pension funds.
Other insurance corporations
25.22 All private general insurance companies are required to provide a quarterly statement of assets and liabilities to APRA. The ABS uses this information, which is supplemented by its own quarterly survey of government-owned general insurers. Data for health insurance companies are estimated from annual statistics provided by the Private Health Insurance Administration Council (PHIAC).
Central borrowing authorities
25.23 All central borrowing authorities provide balance sheet data to the ABS on a quarterly basis as part of the SFI.
Financial intermediaries nec.
25.24 Financial Corporations Act Category J financial corporations (credit union leagues and other financial corporations n.e.c.) report quarterly to the RBA, which provides this information in aggregate form to the ABS.
National general government
25.29 Information on the Commonwealth Government's assets is mostly obtained from counterpart information. Information on the Commonwealth Government's coin liability is provided by the RBA. Information about Treasury notes is provided by the Commonwealth Treasury. Data for Treasury bonds are provided by the Commonwealth Treasury and the RBA. Other liabilities of the Commonwealth Government are estimated using published annual balance sheet data.
State and local general government
25.31 Quarterly data for the State and Territory Governments are obtained from the relevant Treasuries as part of the SFI. Data for local government is obtained from counterpart information, as most of the funding for these units is provided by government agencies that report to the ABS.
Households (including unincorporated enterprises)
25.32 Estimates of the value of notes and coin held by this sector are derived by halving the estimate of notes and coin held outside the banking system, which is in turn derived by subtracting the notes and coins held by the banking system from the total notes and coin in circulation. Other estimates for this sector are generally obtained from counterpart information. Estimates for transactions and holdings of securities are derived residually.
Rest of the world
25.33 The main source of data on the financial position of non-residents vis-a-vis residents is the SII, which measures the investment position, financial transactions and other changes in position (price changes, exchange rate changes and other adjustments), and investment income associated with claims on and liabilities to non-residents by Australian residents. The publication Balance of Payments and International Investment Position, Australia, Concepts Sources and Methods (Cat. no. 5331.0) provides further information on this survey.
25.34 Estimates of stocks (levels) are prepared by gathering together balance sheet information from various sources and selecting the most reliable estimates. As noted previously, a choice is often possible because different data sources provide alternative or counterpart measures of the same item. For example, most borrowing by State-owned non-financial corporations will be reported by the State central borrowing authorities or Treasuries as assets and by the non-financial corporations themselves as liabilities. The data will generally not agree because the ABS does not survey all State owned non-financial corporations. In this case, the data from the central borrowing authorities and Treasuries are therefore used to estimate both the asset and liability aspects of these borrowings.
25.38 The national accounts should record transactions on an accrual basis (as opposed to a cash or ‘due for payment’ basis), to reflect the time when economic value is transferred rather than when cash relating to the transaction is paid or falls due for payment. For practical reasons complete implementation of accrual accounting in the financial accounts is not possible. Two affected areas are:
25.39 Accordingly, assets and liabilities associated with income tax and employee entitlements are not recorded in the financial accounts.
25.40 Furthermore, non-financial corporations are likely to report balance sheet information on a complete accrual basis for the quarter that coincides with the end of their tax year (usually June), but may be less likely to do so for the other quarters. This may cause some distortion in the data for the two quarters surrounding the end of the tax year.
25.41 Stocks of financial assets and liabilities should be valued using prices that are current on the date to which the balance sheet relates and that refer to specific assets. These prices should be observable prices on markets whenever such prices are available. In practice there are some cases where the prices of analogous assets are used to estimate prices for assets where there are no observable prices.
25.42 Tradable securities, which include shares listed on the Australian Stock Exchange (ASX) and debt securities traded on organised markets, are valued at actual market prices. Other securities are assigned estimated market values. For example, equity not listed on ASX is valued on the basis of the value of total assets of the enterprise in question less the value of any repayable liabilities.
25.43 For derivatives, respondents to ABS surveys are asked to mark each derivative contract to its net market value. This may result in a net asset or liability value being recorded for the contract. It is possible for a derivative contract to change from a net liability position to a net asset position (or vice versa) from one period to the next.
25.44 Deposits, loans and other accounts payable/receivable are recorded at their face value. As these instruments are not traded, this valuation basis is considered to be an acceptable proxy for market valuation.
25.45 Insurance technical reserves funds are valued on the basis of the market value of the total assets (including non-financial assets) of the funds and companies less the sum of any repayable liabilities and (in the case of companies) shareholders' funds.
25.46 The ABS is aware of the following deficiencies in its financial accounts data:
25.47 The dissection of changes in balance sheet positions into transaction and non-transaction components is most important for tradable securities, as these instruments are most likely to be affected by valuation changes. The data used to estimate the effect of valuation changes on frequently traded securities, which include listed shares and Commonwealth and State government bonds/bills, are of good quality. The data available for securities that are less frequently traded, such as unlisted shares, are of only fair quality.
25.48 Despite the above-mentioned problems, the ABS considers that the financial accounts statistics are of an acceptable standard for the purposes they are intended to serve. An indication of the overall quality of the data can be gained by considering the households sector, which is judged to have the poorest quality data in the financial accounts. Most of the liabilities data are based on good quality counterpart data from the asset records of financial institutions. In addition, households’ deposit and loan assets are based on good quality counterpart data. Household holdings of tradable securities are derived residually, and so reflect errors and omissions in the estimates for the other sectors. Household positions in other accounts payable/receivable are also derived residually.
Comparison with previous RBA estimates
25.49 The ABS's financial accounts estimates were first compiled in respect of the September quarter 1989. Prior to then, the RBA had produced annual flow-of-funds statistics for the reference years 1953–54 to 1988–89. The two sets of statistics, however, are not directly comparable for the following reasons: