TECHNICAL NOTE STATEMENT OF STOCKS AND FLOWS


2009-10 STATEMENT OF STOCKS AND FLOWS

1 The international Government Finance Statistics (GFS) standard as promulgated by the International Monetary Fund (IMF) recommends that opening and closing 'stock' values be reconciled with all 'flows' occurring throughout the year. The standard is based on an analytical framework in which all changes in the values of stocks from one year to the next can be fully explained by the flows that have occurred during that year.

2 Institutional units hold assets (financial and non-financial) and incur liabilities (which by definition are financial). The level of these assets and liabilities at any point in time is the stock. The difference between assets and liabilities is net worth, which is a measure of the 'wealth' of units or of government. Anything which causes a change in these stocks of assets and liabilities is a flow. Flows are disaggregated into transactions and 'other economic flows'. A transaction is, for the most part, an interaction between two units by mutual agreement, whereas an 'other economic flow' is a change in the volume or value of a stock of a unit not resulting from a transaction.

3 By definition, the value of a stock at the end of a period is the sum of the stock at the beginning of the period and all the flows affecting that stock which took place during the period, i.e. S₁ = S₀ + F₁, where S₀ and S₁ represent the values of a specific stock at the beginning and end of an accounting period, and F₁ represents the net value of all flows during the period relevant to that particular stock.

4 Statistics on transactions giving rise to revenues and expenses are published as part of the GFS operating statement. Revenues are defined as transactions which increase net worth whereas expenses are transactions which decrease net worth. The difference between revenues and expenses, therefore, represents the change in net worth due to transactions. This equates to the GFS net operating balance.

5 Other economic flows can be disaggregated into movements in asset/liability values resulting from price changes ('revaluations') and those resulting from volume changes ('other volume changes').

6 Revaluations result from changes to the value of the assets and liabilities held. Revaluations can accrue to financial assets such as bonds and bills, shares and other forms of equity, as well as non-financial assets such as land and buildings.

7 Other volume changes refer to events that include:

• the recognition or de-recognition of assets or liabilities on the balance sheet - e.g. when resources become economically exploitable, or when an asset is no longer providing an economic benefit, and so is removed from the balance sheet
• changes in the quantity or quality of the existing asset - these typically result from catastrophic losses through natural disasters, changes in the volume of natural assets such as fish or forest stocks, creation, discovery, cancellation or seizure of assets, or quality differences arising from events such as a change in the expected life of the asset
• changes in the classification of assets - these usually arise when the use of an asset changes, e.g. if the use of a parcel of public land changes from recreational use to industrial use.

8 The net effect of all revaluations and other volume changes occurring through the year represents the change in net worth due to other economic flows.

9 Since the values of stocks at the end of a year must be equal to their values at the start of a year, plus all transactions and other economic flows affecting them during the year, it follows that the total change in net worth during a given year is equal to the change in net worth due to transactions, plus the change in net worth arising from other economic flows.

10 When working with reported data, it is often assumed that the difference between opening and closing net worth and the change in net worth due to transactions is attributable to the change in net worth due to other economic flows (i.e. other economic flows is effectively used as a balancing item). However, to ensure data quality it is necessary to independently collect and calculate the change in net worth due to other economic flows. In situations where the reported data do not add through, it is not necessarily the case that the data quality issue is in the other economic flows component of the framework. Where data quality is high throughout the reported data set, the change in net worth as derived via the balance sheet will be consistent with the sum of transaction and other economic flows.


COMMONWEALTH GENERAL GOVERNMENT - STATEMENT OF STOCKS AND FLOWS

11 The change in the treatment of Special Drawing Rights to align with the System of National Accounts 2008, has impacted on the Statement of Stocks and Flows for the Commonwealth General Government. The time series has been revised to reflect this change which, along with other revisions, has altered the value of the opening stocks as at 1 July 2009. The statement for 2009-10 is not comparable to previously published data.

12 The Commonwealth Government publishes a statement of other economic flows for the general government sector. This statement outlines all revaluations and other volume changes occurring throughout the year, which allows a full reconciliation of stocks and flows. This information allows the Australian Bureau of Statistics (ABS) to disaggregate other economic flows into price and volume effects. While some states also publish a statement of other economic flows, the majority currently do not. For local government, information on the components of other economic flows are also generally unavailable. Accordingly, the ABS does not have enough information on which to disaggregate other economic flows into its two components across the state and local levels of government.

13 The statement of stocks and flows for the Commonwealth general government sector is presented in Table 1. During 2009-10 the net worth of the Commonwealth general government sector decreased by $68,644m. This was the result of a GFS net operating balance (which reflects the change in net worth due to transactions) of -$45,699m combined with revaluations of -$23,662m. The key contributor to revaluations on the liabilities side were revaluations to unfunded superannuation and other employee entitlements ($17,198m). Revaluations on the assets side of the statement were driven by other non-equity assets ($6,860m) and equity ($1,650m), offset by advances paid (-$7,864 m).

TABLE 1. COMMONWEALTH, General Government - Statement of Stocks and Flows
			Opening Stocks as at 1 July 2009	Transactions	Revaluations	Other Volume Changes(a)	Closing Stocks as at 30 June 2010
			$m	$m	$m	$m	$m
Assets
	Financial assets
		Cash and deposits	1 622	193	1	-	1 816
		Advances paid	31 748	4 279	-7 864	-	28 163
		Investments, loans and placements	106 775	-5 150	1 285	-	102 910
		Other non-equity assets	46 822	-	6 860	-	53 682
		Equity	50 424	-	1 650	-	52 074
		Total	237 391	-677	1 931	-	238 645
	Non-financial assets
		Land and fixed assets	82 062	4 450	-1 021	717	86 208
		Other non-financial assets	622	2 718	-1 892	-	1 448
		Total	82 684	7 168	-2 914	717	87 655
	Total		320 075	6 490	-981	717	326 301
Liabilities
	Deposits held		3 748	149	-374	-	3 523
	Advances received		-	-	-	-	-
	Borrowing		114 732	47 385	9 258	-	171 375
	Unfunded superannuation and other employee entitlements		134 218	-	17 198	-	151 416
	Other provisions		11 876	-	1 379	-	13 255
	Other non-equity liabilities		28 444	4 802	-4 928	-	28 318
	Total		293 018	52 336	22 533	-	367 887
GFS Net worth			27 057	-45 699	-23 662	717	-41 587
Net debt			-21 665	. .	. .	. .	42 010
Net financial worth			-55 627	. .	. .	. .	-129 242
. . not applicable
- nil or rounded to zero (including null cells)
(a) Source: Department of Finance and Deregulation, Consolidated Finanical Statements for the Year Ended 30 June 2009, December 2009.

STATE AND LOCAL GENERAL GOVERNMENT - STATEMENT OF STOCKS AND FLOWS

14 Both the state and local general government Statements of Stocks and Flows (Table 2 and Table 3 respectively) highlight the significance of other economic flows. The net worth of state governments increased by $25,474m during 2009-10, driven by $22,123m from other economic flows. On the asset side the largest contributors were land and fixed assets ($16,315m) and equity ($13,526m). The most significant contributor to liabilities was unfunded superannuation and other employee entitlements ($10,345m).

15 The net worth of local government increased by $35,043m in 2009-10, driven by $30,515m from other economic flows. The largest contributor to assets was land and fixed assets ($30,861m). The most significant contributor to liabilities was other non-equity liabilities ($590m) which was offset by advance received (-$208m).

TABLE 2. STATE, General Government - Statement of Stocks and Flows
			Opening Stocks as at 1 July 2009	Transactions	Other Economic Flows	Closing Stocks as at 30 June 2010
			$m	$m	$m	$m
Assets
	Financial assets
		Cash and deposits	14 105	-815	-759	12 531
		Advances paid	5 403	-72	481	5 812
		Investments, loans and placements	43 428	2 648	1 992	48 068
		Other non-equity assets	17 840	223	988	19 051
		Equity	239 278	2 019	13 526	254 823
		Total	320 054	4 002	16 228	340 284
	Non-financial assets
		Land and fixed assets	480 125	16 986	16 315	513 426
		Other non-financial assets	1 939	663	-534	2 068
		Total	482 064	17 649	15 781	515 494
	Total		802 118	21 651	32 009	855 778
Liabilities
	Deposits held		2 163	344	565	3 072
	Advances received		3 637	-123	19	3 533
	Borrowing		45 444	13 871	912	60 227
	Unfunded superannuation and other employee entitlements		124 046	-115	10 345	134 276
	Other provisions		7 501	-	329	7 830
	Other non-equity liabilities		17 618	4 322	-2 284	19 656
	Total		200 409	18 300	9 885	228 594
GFS Net worth			601 709	3 351	22 123	627 183
Net debt			-11 691	. .	. .	422
Net financial worth			119 645	. .	. .	111 690
. . not applicable
- nil or rounded to zero (including null cells)

TABLE 3. LOCAL, General Government - Statement of Stocks and Flows
			Opening Stocks as at 1 July 2009	Transactions	Other Economic Flows	Closing Stocks as at 30 June 2010
			$m	$m	$m	$m
Assets
	Financial assets
		Cash and deposits	7 018	809	-304	7 523
		Advances paid	3	-31	32	4
		Investments, loans and placements	6 403	275	244	6 922
		Other non-equity assets	2 643	276	247	3 166
		Equity	1 084	-20	-344	720
		Total	17 152	1 308	-125	18 335
	Non-financial assets
		Land and fixed assets	270 375	5 591	30 861	306 827
		Other non-financial assets	1 306	118	-60	1 364
		Total	271 680	5 709	30 803	308 192
	Total		288 832	7 017	30 677	326 526
Liabilities
	Deposits held		631	94	-89	636
	Advances received		63	206	-208	61
	Borrowing		6 595	2 175	-51	8 719
	Unfunded superannuation and other employee entitlements		2 462	191	-83	2 570
	Other provisions		61	46	3	110
	Other non-equity liabilities		3 022	-224	590	3 388
	Total		12 833	2 489	162	15 484
GFS Net worth			275 999	4 528	30 515	311 042
Net debt			-6 136	. .	. .	-5 032
Net financial worth			4 319	. .	. .	2 850
. . not applicable

16 For more information on the statement of stocks and flows, refer to Table 2.1 in Australian System of Government Finance Statistics: Concepts, Sources and Methods (cat. no. 5514.0.55.001) electronic version or (cat. no. 5514.0) PDF version and Chapter 4 of the International Monetary Fund's Government Finance Statistics Manual 2001.