An information paper, released in September 2007, described revisions to Australia's national and international accounts to be implemented in 2009. These revisions result from the updating of the respective international standards - the System of National Accounts (SNA) and the Balance of Payments Manual (BPM). This information paper is one in a series that provides more detail about the most significant changes being made to Australia's national and international accounts.
This paper discusses the treatment of Workers' remittances. Workers' remittances are cash or in-kind transfers by resident households in one economy to households of other economies. A methodology has been developed to estimate Workers' remittances debits (i.e. transfers out of Australia). The new data series will commence from September quarter 1989 and will be included under Personal transfers in the Secondary Income Account of the Balance of Payments from the September quarter 2009 issue of Balance of Payments and International Investment Position, Australia (cat. no. 5302.0).
DEFINITION AND STANDARDS
Workers’ remittances are current transfers made by employees to residents of another economy. For many economies, Workers' remittances can represent a sizeable and stable source of funds that can exceed official aid or financial inflows from foreign direct investment. Workers' remittances is of considerable interest to economists and analysts because it can have a significant impact on poverty reduction and / or can finance economic growth in receiving economies.
The definition of Workers' remittances has not changed between the BPM 5th edition (BPM5) and the BPM 6th edition (BPM6), although in BPM6 Workers' remittances are included as a supplementary item under the Personal transfers category. Relevant extracts from BPM5 and BPM6 follow.
BPM5, paragraph 302 - Workers' remittances
Workers' remittances cover current transfers by migrants who are employed in their new economies and considered residents there. (A migrant is a person who comes to an economy and stays, or is expected to stay, for a year or more.) Workers' remittances often occur between related persons. Persons who work for and stay in new economies for less than a year are considered non residents; their transactions are appropriate mainly to compensation of employees. Workers' remittances are not currently estimated in Australia's Balance of Payments due to the difficulty in collecting or estimating this data.
BPM6, paragraphs 12.47 to 12.50 - Personal Transfers (includes Workers' remittances)
Personal transfers consist of all current transfers in cash or in kind made or received by resident households to or from non-resident households. Personal transfers thus include all current transfers between resident and non-resident individuals, independently of:
(a) the source of income of the sender (irrespective of whether the sender receives income from labour, entrepreneurial or property income, social benefits, and any other types of transfers; or disposes assets); and
(b) the relationship between the households (irrespective of whether they are related or unrelated individuals).
By convention, current transfers between households with regard to lotteries and other gambling are included under personal transfers.
Workers’ remittances are current transfers made by employees to residents of another economy. They are included as a supplementary item.
The connection to the residence status of the person concerned is important in determining whether a personal transfer is involved. In the case of workers, personal transfers include only those transfers abroad made by workers who are residents of the economy in which they are employed.
Funds sent abroad by individuals who are resident in the economy in which they are employed, self-employed, or operating a business, for the purpose of making a deposit in his or her own account with a bank located abroad represent a financial investment, which is recorded in the financial account, rather than as a personal transfer. But, any withdrawals to provide resources to a relative or another person (without a quid pro quo) should be recorded as a personal transfer.
In BPM5 Workers' remittances is recorded in its own category and is a sub-component of 'Current transfers'. The current presentation is shown in table 23 of Balance of Payments and International Investment Position, Australia (cat. no. 5302.0). BPM6 includes Workers' remittances under a new category termed 'Personal transfers'. Personal transfers is a sub-component of the 'Secondary Income'. In BPM6 Workers' remittances is a supplementary item meaning that each country can decide if this item should be recorded separately.
Along with other changes to the international accounts, the revised treatment of Worker's remittances will be implemented in the September quarter 2009 issue of Balance of Payments and International Investment Position, Australia (cat. no. 5302.0). Workers' remittances will be presented as a supplementary item in the 'Secondary income' table. The new classification and estimation methodology will also be applied in the 2008-09 issue of Australian System of National Accounts (cat. no. 5204.0) and the September quarter 2009 issue of Australian National Accounts: National Income, Expenditure and Product (cat. no. 5206.0).
WORKERS' REMITTANCES CREDITS (INFLOWS)
It is not currently possible to estimate the value of Workers' remittances credits (inflows) as there is no information available regarding the amounts expatriate Australians remit back to Australia. It is considered unlikely that Australia receives significant amounts of remittances. Therefore, both the Personal transfers credits item and the Workers' remittances credits supplementary item will be recorded as not available (n.a.).
NEW METHODOLOGY AND DATA SOURCES FOR WORKERS' REMITTANCES DEBITS (OUTFLOWS)
The estimate for Workers' remittances debits (outflows) is derived using the following formula:
Total Workers remittances = population of remitters x average amount remitted, where
- Population of remitters = foreign born population x percentage remitting to another economy
- Average remitted = average income of foreign born employees x percentage of income remitted to another economy
ESTIMATES OF WORKERS' REMITTANCES DEBITS AND IMPACT ON THE CURRENT ACCOUNT
- The data sources for the above components are:
- Estimates of foreign born employees (i.e. foreign born population) and average weekly earnings (i.e. average income) of foreign born employees aged between 15 and 54 years are derived from Employee Earnings, Benefits and Trade Union Membership, Australia (cat. no. 6310.0).
- The percentage of foreign born employees remitting to another economy and the percentage of their income remitted to another economy are obtained from the 2004 report on the Second Longitudinal Survey of Immigrants in Australia (LSIA2), The Changing Settlement Experience of New Migrants, prepared by the National Institute of Labour Studies, Flinders University.
Secondary income (Current transfers) debits will increase by $676 million in 2006-07 due to the incorporation of an estimate of Workers' remittances. This is likely to increase current account debits by between 0.2% and 0.3%.
Table 1: Estimates of Workers' remittances debits and impact on the current account 1996-97 to 2006-07
Workers' remittances debits
Current account debits
Estimated impact on
Current account debits
Over the past ten years the value of Workers' remittances has increased from $414 million to $676 million, an average increase of 5% per year. The percentage increase was lower in 2000-01 and 2003-04 due to falls in the employed foreign born population.
Estimates for Workers' remittances debits have been compiled from September quarter 1989 onwards. Estimates could not be compiled for earlier periods because estimates of the average weekly earnings of foreign born persons are not available prior to 1989-90. As a result, both the Personal transfers debits item and the Workers' remittances debits supplementary item will be recorded as not available (n.a.) prior to September quarter 1989.
Workers' remittances are one part of Personal transfers albeit usually the most significant. Due to the lack of information currently available on other Personal transfers, Workers' remittances debits and Personal transfer debits will have the same value.
For further information about revisions to Australia's national and international accounts to be implemented in 2009 see:
For further information please contact Peter Meadows on 02 6252 7209.