5362.0.55.001 - A Guide to Australian Balance of Payments and International Investment Position Statistics, 2004
Latest ISSUE Released at 11:30 AM (CANBERRA TIME) 02/04/2004
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CURRENT ACCOUNT : STANDARD COMPONENTS
Services : comprise services provided by Australian residents and non-residents, together with some transactions in goods where it is not practical to separate the goods and services components (eg. goods purchased by travellers are classified to services).
Income : refers to income earned by Australian residents from non-residents and vice versa.
Transfers : refer to one-sided transactions where a resource is provided without something of equal economic value being provided in return. Current transfers represent the offset to the provision of resources that are normally consumed within a short period (less than twelve months) after the transfer is made, eg food aid.
CAPITAL ACCOUNT : STANDARD COMPONENTS
including data for 2002-2003 financial year (as at 2 March 2004)
Capital transfers : include the offsets to one-sided transactions of a capital nature, such as migrants transferring their wealth to Australia, or Australia providing aid to build a bridge.
Non-produced non-financial assets: include patents, copyrights, trademarks, franchises, etc.
FINANCIAL ACCOUNT : STANDARD COMPONENTS
including data for 2002-2003 financial year (as at 2 March 2004)
TYPE OF INVESTMENT
The type of investment classification used in the balance of payments financial account and the international investment position consists of five broad categories:
Direct investment is investment, undertaken by an entity resident in one economy, in an enterprise resident in another economy, with the objectives of obtaining or sustaining a lasting interest in the enterprise and exercising a significant degree of influence in its management. A 10% equity investment threshold is applied as evidence of such a direct interest. The entity undertaking the investment is referred to as the direct investor and the enterprise in which the investment takes place is referred to as the direct investment enterprise.
A direct investor may be an individual; an incorporated or unincorporated private or public enterprise; an associated group of individuals or enterprises; a government or a government agency; an estate or trust; or an international organisation which has an investment of 10% or more in a direct investment enterprise in an economy other than the one in which the direct investor resides.
An enterprise that has significant long-term operations in more than one economy is divided into separate entities in each economy. These entities are always in a direct investment relationship: the head office constitutes the direct investor, and its branches constitute the direct investment enterprises.
Portfolio investment consists of equity (shares) and debt securities (bonds, bills, money market instruments) not classified to either direct investment, or reserve assets. Debt securities are further subdivided into two categories: bonds and notes; and money market instruments. Portfolio investment indicates investment in an enterprise where the investor has no appreciable say in the operation of the enterprise.
Financial derivatives, such as futures, swaps, forward rate agreements and forward foreign exchange agreements, are financial instruments that are linked to a specific financial instrument or indicator (foreign currencies, government bonds, share price indexes, interest rates), or to a particular commodity (gold, sugar, etc). They provide a hedge for market financial risk in a form that can be traded or otherwise offset in the market.
Other investment is a residual category that captures transactions not classified to direct investment, portfolio investment, financial derivatives or reserve assets. It covers trade credits, loans, currency and deposits, and a residual category for any other assets and liabilities.
Reserve assets refer to those foreign financial assets available to, and controlled by the Reserve Bank of Australia, for meeting balance of payments needs.
ASSETS AND LIABILITIES
A financial asset is generally in the form of a financial claim by Australia on the rest of the world. It is either represented by a contractual obligation (such as a loan) or is evidenced by a security (such as a share certificate). A financial liability on the other hand, represents a financial claim of the rest of the world on Australia.
Assets and liabilities in the international investment position statement are components of the balance sheet of an economy. In the financial account, the asset and liability classifications reflect, respectively, transactions in claims on non-residents (assets) and claims by non-residents (liabilities).
In the international investment position, the difference between assets and liabilities is the net international investment position, also referred to as the net liability position in Australia's case.
DIRECTION OF INVESTMENT
The direction of investment refers to whether a transaction or investment position is Australian investment abroad (AIA) or foreign investment in Australia (FIA). Total AIA and FIA are the same as foreign assets and foreign liabilities, respectively, except for an adjustment made to assets and liabilities to net off certain direct investment claims. AIA includes, on a net basis, the liabilities of Australian direct investors to their direct investment enterprises abroad but excludes the claims of Australian direct investors to direct investment enterprises abroad.
Foreign Investment in Australia is the sum of direct investment in Australia; portfolio investment liabilities; financial derivatives liabilities; and other investment liabilities.
Australian Investment Abroad is the sum of direct investment abroad; portfolio investment assets; financial derivatives assets; other investment assets; and reserve assets.
INSTRUMENT OF INVESTMENT
In the financial account of the balance of payments and in the international investment position statement, all assets and liabilities can be classified to particular instruments of investment - see the types of instruments listed in the table above called "Financial Account: Standard Components". The primary classification of instrument is by equity or by debt. All instruments can be classified under one of these headings.
Equity is that part of the issued capital of an enterprise which acknowledges a claim on the residual value of the enterprise after the claims of all other creditors have been met. It includes ordinary and participating preference shares, any reinvested earnings, and equity in unincorporated enterprises. In the table above, it can be calculated by:
+ Portfolio investment equity securities
(+ any equity securities held as reserve assets, should this ever occur).
Net equity is the difference between equity assets and liabilities.
Debt is considered to be whatever is not equity. In the table above, it can be calculated by
Debt = Other direct investment capital
+ Portfolio debt securities
+ Financial derivatives
+ Other investment
+ Reserve assets
(less any equity securities held as reserves, should this ever occur).
Some of the debt instruments are further split by whether they are short term (meaning the original maturity of the instrument was one year or less), or long term (meaning an original term to maturity of more than one year). Net debt is the difference between debt assets and liabilities.
The IIP institutional sector classification groups together entities (ie enterprises, organisations, government agencies etc) which may be expected to behave similarly in response to differing economic and political stimuli. In general, four broad sectors are distinguished in IIP statistics:
General Government: Departments of state and similar entities that are the agents or instruments of Commonwealth, State or local governments. These are resident entities whose goods and services are provided free of charge, or at nominal prices well below their cost, to other general government bodies or the public or both. It excludes government business enterprises.
Central Bank, in Australia, The Reserve Bank of Australia (RBA)
Depository Corporations: This is further split into Banks and Other Depository Corporations. Banks include trading, savings and development banks, which are licensed by the Australian Prudential Regulation Authority to operate as a bank. This category excludes the RBA. Other depository corporations cover permanent building societies, credit co-operatives, money market corporations, pastoral finance companies, general financiers, and cash management trusts.
Other Sectors: This category covers the remainder of institutions, such as non-financial corporations, insurance companies, superannuation (pension) funds, State and Territory Central Borrowing Authorities (CBAs), other financial institutions and financial auxiliaries, private non-profit institutions and households.
For a full description of the institutional sectors, see Standard Economic Sector Classifications of Australia (SESCA), 1998 (ABS Cat. no. 1218.0).
A subsidiary classification of entities is used when measuring foreign debt, where a distinction is used of whether the debt is owned by the public or private sectors.
Public Sector: Consists of General Government; public sector financial corporations (RBA, CBAs, etc); and public sector non-financial corporations.
Private Sector: The remainder, often split into financial and non-financial.
In the financial account and IIP statistics, data relating to transactions, levels of investment and investment income are classified by industry of the Australian business entity. The industry categories are based on the 1993 edition of the Australian and New Zealand Standard Industrial Classification (ANZSIC) (ABS Cat. no. 1292.0) and relate to the predominant activity of the entity giving (Australian Investment Abroad) or receiving (Foreign Investment in Australia) the investment funds.
In the published data, the following industries are identified: