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1301.0 - Year Book Australia, 2004  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 27/02/2004   
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Contents >> International accounts and trade >> International accounts

International accounts cover the closely related and integrated balance of payments and international investment position statistics. Diagram 30.1 presents the broad structure and relationship of these statistics.

Australia's balance of payments provides a statistical statement that systematically summarises the economic transactions between residents of Australia and residents of other countries. Residents, who may be people or businesses, need not be Australian nationals. Transactions cover the provision (changes in ownership) of goods, services, income, financial claims on and liabilities to the rest of the world, and transfers (such as gifts) without anything provided in exchange.

Australia's international investment position is a balance sheet of the stock of foreign financial assets and liabilities of Australian residents. International investment statistics integrate the balance sheet positions at two points in time with information on increases and decreases in the levels of these assets and liabilities as a result of the changes due to transactions (investment flows, including reinvestment of earnings) as shown in the financial account of the balance of payments, together with the other changes that affect either the value of the stock (price, exchange rate) or the volume (other adjustments) of the stock of financial assets and liabilities.

30.1 RELATIONSHIP BETWEEN THE BALANCE OF PAYMENTS AND INTERNATIONAL INVESTMENT POSITION STATEMENTS
Graphic - 30.1 Relationship between the balance of payments and international investment position statements

Source: Balance of Payments and International Investment Position, Australia: Concepts, Sources and Methods (5331.0).

Conceptual framework

Australia's international accounts statistics, which cover both the balance of payments and the international investment position, are compiled in accordance with international statistical standards as defined in the fifth edition of the International Monetary Fund's Balance of Payments Manual (BPM5). The concepts of residency, transactions, valuation and time of recording are common to the balance of payments and international investment position statistics.

The balance of payments accounts, which present systematically the economic transactions between Australia and the rest of the world, incorporate four types of economic transactions. The first involves the provision of real resources, that is, transactions in goods, services and income. The second involves the provision of financial resources, that is, foreign financial assets and liabilities. The third covers those one-sided transactions of a current nature (described as current transfers) that are offsets to transactions in current real or financial resources undertaken without an exchange. Current resources are not associated with, nor finance, fixed assets. For example, famine relief, whether in cash or in kind, would have its offset in current transfers. The fourth type is capital transfers that offset transactions undertaken, without exchange, in fixed assets or in their financing (such as development aid). For example, migrants' funds represent the shift of the migrants' net worth to or from Australia, and are classified as capital transfers.

The first and third of these types of transactions make up the current account, while the second type makes up the financial account. The fourth type (capital transfers), together with a minor item for the acquisition and disposal of non-produced, non-financial assets (such as patents), make up the capital account.

The double entry accounting system is used for recording balance of payments transactions. Under this system, credit entries, which are shown with no arithmetic sign, are used to record the provision of real or financial resources. Credit entries are therefore required for exports of goods and services, and for income earned by residents (a return for providing the use of financial capital to non-residents, or for providing the labour of Australian residents). Credit entries are also required for providing financial resources to the rest of the world, either as new liabilities (such as issuing bonds), or through returning existing foreign assets (such as selling foreign equity securities to non-residents). Therefore, any credit entry in the financial account will reflect either an increase in Australia's foreign liabilities (more foreign debt or foreign ownership), or a decrease in Australia's foreign financial assets (such as a run-down in foreign exchange reserves).

Conversely, debit entries, which are identified by a minus sign (-), are used to record the provision by the rest of the world of real or financial resources to Australia, and are shown against imports of goods and services, income earned from Australia by non-residents, and financial transactions involving either an increase in foreign financial assets or a decrease in foreign liabilities.

Transactions in a double entry accounting system are reflected in pairs of equal credit and debit entries. For example, an export transaction for which payment is received through the banking system involves a credit entry for providing the good to a non-resident and a debit entry for being provided with foreign exchange assets due as payment for the export. Any entries that are not automatically paired in a transaction, that is, for which there is no 'quid pro quo', are matched by special offsetting entries. Such offsetting entries are made in the categories 'current transfers' (when offsetting the provision of current resources such as food for famine relief) and 'capital transfers' (when offsetting the provision of capital resources such as development aid to build a new dam).

In principle, the net sum of all credit and debit entries is zero. In practice, some transactions are not measured accurately (errors), while others are not measured at all (omissions). Equality between the sums of the credit and debit entries is then brought about by the inclusion of a 'net errors and omissions' item which balances the accounts.

Transactions and other changes should be valued in the balance of payments at market prices. However, for practical reasons, transactions are generally valued in the statistics at transaction prices as this basis provides the closest practical approximation to the market price principle.

Transactions and other changes recorded in the balance of payments should be recorded at the time of change of ownership. For current account transactions, this occurs when ownership of goods changes, or services are provided. Investment income is recorded on a full accrual basis, that is, when it is earned. Reinvested earnings are calculated for the earnings of the period of account, using current replacement cost estimates of depreciation and excluding holding gains and losses. Current and capital transfers should be recorded when the goods, services, cash, etc., to which they are offsets, change ownership. Those transfers, such as taxes and fines, which are imposed by one party on another, should ideally be recorded at the time of occurrence of the underlying transactions or other flows or events that give rise to the liability to pay. For financial account transactions, the time of recording is at the change of ownership of the financial claims, which by convention is the time at which transactions are entered in the books of the transactors.

In practice, the nature of the available data sources is such that the time of recording of transactions will often differ from the time of change of ownership. Where practical, timing adjustments are made for transactions to ensure that they are recorded in the time period in which change of ownership occurs.

International investment position statistics provide information on the levels (stock) of Australia's foreign financial assets and liabilities. The investment position at the end of a period reflects the foreign financial asset and liability positions at the start of the period, and the financial transactions (investment flows) from the balance of payments which increase or decrease these assets and liabilities, together with the non-transaction changes due to exchange rate effects, other price effects and changes in the volume of these assets and liabilities that are not due to transactions (such as debt write-off).

While the international investment position statistics form an integral part of Australia's balance of payments (diagram 30.1), they are also useful in their own right, for example, in determining the impact of foreign investment policies and the level of Australia's foreign assets and liabilities, including foreign debt. They are also useful when analysing the behaviour of financial markets.

As with the balance of payments, market price is the principal method of valuation in international investment position statistics, and financial assets and liabilities are recognised on a change of ownership basis, that is, at the time when the foreign financial asset or liability is acquired, sold, repaid or otherwise disposed of. By convention, this is generally taken to be the time at which the event is recorded in the books.

Classifications

In the following tables, estimates are presented of the current, capital and financial accounts of Australia's balance of payments. Current and capital account transactions are generally recorded gross. This means that, for each item in the current and capital accounts, the credit entries are recorded separately from the debit entries. For example, goods credits are shown separately from goods debits. For each item in the financial account, however, debit and credit transactions are combined to produce a single result for the item which may be either a net credit or a net debit. For example, in a given period, non-resident purchases of shares issued by companies in Australia (credit) are netted against sales of Australian shares to residents by non-residents (debit) and the net result is recorded in the financial account as either a net credit or a net debit.

The current account records transactions between Australian residents and non-residents in goods, services, income and current transfers. Goods are classified into five main components: general merchandise; goods for processing; goods procured in ports by carriers; repairs on goods; and non-monetary gold. Changes of ownership from residents to non-residents are recorded as credits (also referred to as exports), and changes from non-residents to residents are recorded as debits (also referred to as imports). Services, comprising 11 primary components, cover services provided by Australian residents to non-residents (credits) and by non-residents to residents (debits), together with transactions in a few types of goods (e.g. goods purchased by travellers). Income, comprising investment income (e.g. dividends and interest) and compensation of employees (e.g. wages), covers income earned by Australian residents from non-residents (credits) or earned by non-residents from residents (debits). Current transfers cover the offsetting entries required when resources are provided, without something of economic value being received in return. When non-residents provide something to Australian residents, offsetting credits are required; when residents provide resources to non-residents, offsetting debits are required. General government transfers (e.g. official foreign aid) are distinguished from transfers by other sectors.

The capital account covers capital transfers (such as migrants' funds), distinguished between general government and other sectors, and the acquisition/disposal of non-produced, non-financial assets.

The financial account shows transactions in foreign financial assets and liabilities. The primary split is by functional type of capital (direct investment, portfolio investment, financial derivatives, other investment and reserve assets) further split into assets and liabilities (where appropriate). Within the asset and liability categories, details are presented of instruments of investment and resident sectors (for other than direct investment), and in some cases the contractual maturity of the instruments used.

The primary distinction used in international investment position statistics is between assets and liabilities. Assets primarily represent Australian investment abroad, and liabilities primarily represent foreign investment in Australia. The difference between the two represents the net international investment position (graph 30.8 and table 30.9). Australian investment abroad refers to the stock of foreign financial assets owned by Australian residents, after netting off any liabilities of Australian direct investors to their direct investment enterprises abroad. Conversely, foreign investment in Australia refers to the stock of financial assets in Australia owned by non-residents, after netting off any claims of Australian direct investment enterprises on their foreign direct investors. The first breakdown below this asset/liability dichotomy is by functional type of capital, with details of the instruments of investment (table 30.11), the resident sectors and contractual maturities involved.

While many types of instruments of investment can be identified, similar instruments are combined for analytical reasons and ease of reporting. Some of those instruments are:

Equity capital - which includes ordinary and participating preference shares, units in trusts and net equity in branches.

Reinvestment of earnings of direct investors - which refers to income retained within the enterprise from after-tax profits that is attributable to direct investors.

Debt securities - which include longer term, generally tradable security instruments such as bonds and debentures, with a contractual maturity of more than one year after issue, together with money market instruments (e.g. bills, commercial finance paper, negotiable certificates of deposit) with a contractual maturity of one year or less.

Trade credits - which cover the direct extension by suppliers and buyers for goods and services, including advances for work in progress or to be undertaken.

Loans - which cover the direct lending of funds either without a security evidencing the transaction, or with non-negotiable documentation. They include financial leases.

Deposits - which comprise both transferable and other deposits.

Other assets and liabilities - which consist of miscellaneous accounts in respect of interest, dividends, etc.

Statistical overview

As shown in table 30.2, the balance on current account for 2002-03 was a deficit of $42.5b, an increase of $20.5b (94%) on the previous year. The deficit on goods and services was $19.7b, an increase of $18.0b on the 2001-02 deficit of $1.6b. The main contributing factors were the decrease in goods credits of $5.2b, down from $121.1b in 2001-02 to $115.9b in 2002-03 and the $12.3b increase in goods debits, from $121.9b in 2001-02 to $134.2b in 2002-03. The net goods deficit rose by $17.4b, the net services deficit by $0.6b and the net income deficit by $2.3b on the previous year.

The surplus on capital account increased by $0.3b (28%) to $1.3b in 2002-03.

The balance on financial account recorded a net inflow of $41.6b, up $20.5b (98%) on the previous year. Direct investment recorded a net outflow of $10.6b, a $6.6b increase on the net outflow of $4.0b in 2001-02. A fall in the net outflow on Australian direct investment abroad of $9.2b to $11.0b was partly offset by a fall of $2.5b in the inflow of direct investment into Australia. The net inflow on portfolio investment increased $12.1b (138%) while other investment also rose by $9.6b. Reserve assets and Financial derivatives fell $6.4b and $1.3b, respectively.

30.2 BALANCE OF PAYMENTS, Summary

1997-98
1998-99
1999-2000
2000-01
2001-02
2002-03
$m
$m
$m
$m
$m
$m

Current account
-22,807
-33,607
-32,320
-18,334
-21,938
-42,463
Goods and services
-4,738
-14,428
-14,289
875
-1,648
-19,688
Credits
113,744
112,025
126,034
153,511
152,290
147,269
Debits
-118,482
-126,453
-140,323
-152,636
-153,938
-166,957
Goods
-3,546
-12,644
-12,945
-30
-792
-18,236
Credits
88,538
85,783
97,665
120,307
121,090
115,925
Debits
-92,084
-98,427
-110,610
-120,337
-121,882
-134,161
Services
-1,192
-1,784
-1,344
905
-856
-1,452
Credits
25,206
26,242
28,369
33,204
31,200
31,344
Debits
-26,398
-28,026
-29,713
-32,299
-32,056
-32,796
Income
-18,091
-18,430
-18,249
-19,241
-20,273
-22,555
Credits
10,384
10,288
13,769
16,203
15,147
14,094
Debits
-28,475
-28,718
-32,018
-35,444
-35,420
-36,649
Current transfers
22
-749
218
32
-17
-220
Credits
3,993
4,498
4,625
4,453
4,280
4,233
Debits
-3,971
-5,247
-4,407
-4,421
-4,297
-4,453
Capital and financial account
25,769
31,281
32,112
16,386
22,067
42,889
Capital account
1,127
1,167
1,053
1,109
1,016
1,298
Capital transfers
1,097
1,186
1,136
1,182
1,186
1,431
Credits
2,068
2,197
2,335
2,442
2,543
2,724
Debits
-971
-1,011
-1,199
-1,260
-1,357
-1,293
Net acquisition/disposal of non-produced,
non-financial assets
30
-19
-83
-73
-170
-133
Financial account
24,642
30,114
31,059
15,277
21,051
41,591
Direct investment
2,852
4,747
9,804
2,496
3,992
10,640
Abroad
-7,435
-3,253
-3,343
-9,736
-20,187
-11,009
In Australia
10,287
8,000
13,147
12,232
24,179
21,649
Portfolio investment
21,164
6,455
13,033
17,863
8,725
20,790
Financial derivatives
-2,828
2,748
470
-538
358
-977
Other investment
2,996
16,558
10,374
4,336
7,199
16,756
Reserve assets
458
-394
-2,622
-8,880
777
-5,618
Net errors and omissions
-2,962
2,326
208
1,948
-129
-426

Source: Balance of Payments and International Investment Position, Australia (5302.0).

Graph 30.3 illustrates the differing influences of the trade balance and the net income deficit on the balance on current account. The net income deficit rose from $7b in 1986-87 to between $18-$20b each year from 1995-96 to 2001-02. In 2002-03 the deficit rose to $22.6b. The underlying level of net income continues to drive the level and direction of the current account deficit, as Australia continues to service its external liabilities. However, the trade deficit has fluctuated quite significantly over the past 20 years, moving from surpluses of $2b to a deficit of almost $20b in 2002-03.

Graph - 30.3 Balance on current account compared to net income


Table 30.4 shows the annual levels of Australia's official reserve assets and both the end of year and period average exchange rates for the major currencies, special drawing rights, and the trade weighted index.

30.4 RESERVE ASSETS AND EXCHANGE RATES

1997-98
1998-99
1999-2000
2000-01
2001-02
2002-03

RESERVE ASSETS(a) ($m)

Total reserve assets
-24,260
-23,954
-27,948
-37,951
-37,435
-40,759
Monetary gold
-1,236
-1,013
-1,233
-1,367
-1,445
-1,329
Special drawing rights
-25
-88
-141
-197
-216
-226
Reserve position in IMF
-1,449
-2,338
-2,225
-2,412
-2,992
-3,185
Foreign exchange
-21,550
-20,515
-24,349
-33,975
-32,782
-36,019
Currency and deposits
-11,675
-7,971
-9,148
-11,340
-11,761
-10,253
Securities
-9,875
-12,544
-15,143
-22,562
-21,137
-25,758
Financial derivatives (net)
n.a.
n.a.
-58
-73
116
-8

EXCHANGE RATES

End of period(a)
United States dollar
0.6135
0.6596
0.5986
0.5075
0.5248
0.5952
United Kingdom pound
0.3681
0.4188
0.3941
0.3603
0.3573
0.3719
Euro
. .
0.6379
0.6282
0.6002
0.5737
0.5587
Japanese yen
86.16
79.66
63.19
62.94
65.94
71.29
Special drawing right
0.4617
0.4932
0.4481
0.4076
0.4105
0.4373
Period average(b)
United States dollar
0.6808
0.6276
0.6289
0.5379
0.5239
0.5847
United Kingdom pound
0.4138
0.3824
0.3948
0.3704
0.3632
0.3685
Euro
. .
. .
0.6278
0.6023
0.5850
0.5577
Japanese yen
86.02
77.81
67.90
61.49
66.10
70.01
Special drawing right
0.5026
0.4589
0.4642
0.4177
0.4135
0.4313

TRADE-WEIGHTED INDEX OF VALUE OF THE AUSTRALIAN DOLLAR(c)

End of period(a)
57.9
58.4
53.3
49.7
50.4
54.2
Period average(b)
58.3
56.0
55.2
50.3
50.8
53.5

(a) As at 30 June.
(b) These period average exchange rates and index numbers are derived by averaging figures for each trading day.
(c) May 1970 = 100.0. The trade weighted index is reweighted annually and on special occasions as required.
Source: Balance of Payments and International Investment Position, Australia (5302.0).

International trade in goods and services (balance of payments basis)

Australia's international trade in goods and services for the six years to 2002-03 is shown in tables 30.5 (exports or credits) and 30.6 (imports or debits). The tables provide both current price and chain volume measures.

The components of merchandise goods shown in tables 30.5 and 30.6 are defined in terms of groupings of items in the United Nations (UN) Broad Economic Categories (BEC) for credits, and a version of the BEC for Balance of Payments purposes modified for debits.

Chain volume measures of exports and imports remove the effects of price changes. They provide measures, in dollar values, which indicate changes in the actual volume of exports and imports.

The current price value of a transaction may be expressed conceptually as the product of a price and quantity. The value of the transaction in chain volume measures may then be thought of as being derived by substituting, for the current price, the corresponding price in the chosen reference year.

There are, however, many transactions recorded in statistics of international trade in goods and services for which it is not possible to apply such an approach. In such cases it is necessary to make assumptions and approximations (e.g. revaluing by means of the price index which is considered to be most closely related to the commodity involved). The published chain volume measures should be viewed in this light. For more information on chain volume measures refer to Information Paper: Introduction of Chain Volume Measures in the Australian National Accounts (5248.0).

In current price terms the balance on goods and services recorded a deficit of $19.7b in 2002-03, a significant increase on the $1.6b deficit recorded in 2001-02. Between these two years, goods and services credits fell $5.0b to $147.3b (down 3.3%) while debits rose by $13.0b to $167.0b (up 8.5%).

Over the same period goods credits fell $5.3b (4.3%) to $115.9b, with rural goods falling $4.6b and non-rural goods down by $1.6b . Goods debits rose by $12.3b to $134.2b (10.1%) with Consumption goods increasing by $3.8b, Capital goods by $4.2b and Intermediate and Other Merchandise goods by $3.7b. In Capital goods, Civil aircraft rose by $2.4b to $3.9b with ADP equipment falling slightly (2.9%) to $4.9b in 2002-03.

More detailed information on exports and imports of goods, on a merchandise trade basis without adjustment for balance of payments purposes and trade in services, are shown later in this chapter.

30.5 GOODS AND SERVICES CREDITS

1997-98
1998-99
1999-2000
2000-01
2001-02
2002-03
$m
$m
$m
$m
$m
$m

AT CURRENT PRICES

Goods and services credits
113,744
112,025
126,034
153,511
152,290
147,269
Goods credits
88,538
85,783
97,665
120,307
121,190
115,925
General merchandise
80,571
78,323
90,110
112,897
113,471
107,232
Rural goods
22,130
21,862
23,617
29,164
30,085
25,474
Meat and meat preparations
3,731
4,008
4,467
5,796
6,246
5,655
Cereal grains and cereal preparations
5,094
5,046
4,941
5,937
6,481
4,486
Wool and sheepskins
4,020
2,583
2,963
3,897
3,687
3,548
Other rural
9,285
10,225
11,246
13,534
13,671
11,785
Non-rural goods
58,441
56,461
66,493
83,733
83,386
81,758
Metal ores and minerals
10,835
11,037
11,760
15,205
14,774
14,471
Coal, coke and briquettes
9,586
9,288
8,336
10,844
13,430
11,995
Other mineral fuels
5,309
4,461
9,082
13,464
10,940
11,071
Metals (excl. non-monetary gold)
7,185
6,984
8,810
10,146
9,650
8,691
Machinery
7,549
6,569
7,133
8,797
7,999
7,352
Transport equipment
3,412
3,343
4,597
5,041
5,686
6,280
Other manufactures
9,834
10,273
11,539
13,530
13,758
13,503
Other non-rural (incl. sugar)
4,731
4,506
5,236
6,706
7,149
8,395
Beverages
993
1,176
1,515
1,931
2,287
2,601
Sugar, sugar preparations and honey
1,939
1,472
1,229
1,330
1,610
1,363
Other
1,799
1,858
2,492
3,445
3,252
4,431
Other goods
7,967
7,460
7,555
7,410
7,619
8,693
Services credits
25,206
26,242
28,369
33,204
31,200
31,344

CHAIN VOLUME MEASURES(a)(b)

Goods and services credits
129,141
131,772
144,100
154,528
152,290
151,259
Goods credits
100,938
102,691
113,565
120,367
121,090
120,805
General merchandise
91,184
93,754
104,533
112,506
113,470
112,409
Rural goods
25,204
26,979
29,718
31,169
30,085
26,232
Meat and meat preparations
5,322
5,649
5,766
6,519
6,246
6,318
Cereal grains and cereal preparations
5,761
6,653
6,640
6,371
6,481
4,407
Wool and sheepskins
4,072
3,453
4,051
4,229
3,687
2,956
Other rural
10,150
11,407
13,304
14,059
13,672
12,550
Non-rural goods
66,151
66,691
75,005
81,458
83,386
86,176
Metal ores and minerals
12,394
12,725
13,014
14,229
14,774
15,561
Coal, coke and briquettes
11,034
11,423
11,959
13,107
13,430
14,070
Other mineral fuels
9,136
8,753
10,349
11,129
10,940
10,267
Metals (excl. non-monetary gold)
7,298
9,135
8,945
9,013
9,650
8,955
Machinery
6,930
6,253
7,069
8,526
7,998
7,877
Transport equipment
4,044
3,897
5,317
5,237
5,686
6,526
Other manufactures
10,251
10,696
12,284
13,483
13,758
14,060
Other non-rural (incl. sugar)
5,044
4,956
6,044
6,669
7,148
8,859
Beverages
1,103
1,221
1,628
1,937
2,287
2,739
Sugar, sugar preparations and honey
1,978
1,667
1,800
1,421
1,610
756
Other
1,954
2,065
2,716
3,291
3,252
1,886
Other goods
9,870
8,951
9,120
7,882
7,618
8,397
Services credits
28,273
29,147
30,696
34,239
31,200
30,458

(a) Reference year is 2001-02.
(b) Chain volume measures are not additive for most periods; the component measures do not sum to a total in the same way as the corresponding current price components do.
Source: Balance of Payments and International Investment Position, Australia (5302.0).

30.6 GOODS AND SERVICES DEBITS

1997-98
1998-99
1999-2000
2000-01
2001-02
2002-03
$m
$m
$m
$m
$m
$m

AT CURRENT PRICES

Goods and services debits
-118,482
-126,453
-140,323
-152,636
-153,938
-166,957
Goods debits
-92,084
-98,427
-110,610
-120,337
-121,882
-134,161
General merchandise
-87,521
-94,389
-106,549
-115,979
-116,742
-128,517
Consumption goods
-25,899
-28,041
-30,781
-35,775
-37,422
-41,233
Food and beverages, mainly for consumption
-3,282
-3,606
-3,943
-4,483
-4,687
-5,066
Household electrical items
-2,062
-2,245
-2,456
-3,000
-3,166
-3,658
Non-industrial transport equipment
-7,102
-7,231
-7,735
-9,627
-9,930
-11,034
Textiles, clothing and footwear
-3,456
-3,739
-4,232
-4,811
-4,849
-5,238
Toys, books and leisure goods
-2,956
-3,184
-3,238
-3,359
-3,494
-3,740
Consumption goods n.e.s.
-7,041
-8,036
-9,177
-10,495
-11,296
-12,227
Capital goods
-21,168
-23,055
-26,695
-25,552
-27,148
-31,392
Machinery and industrial equipment
-8,862
-9,226
-8,912
-8,876
-9,502
-11,007
ADP equipment
-4,345
-4,496
-4,912
-5,260
-5,055
-4,908
Telecommunications equipment
-2,070
-2,812
-4,150
-4,379
-3,643
-3,619
Civil aircraft
-464
-649
-1,414
-609
-1,513
-3,887
Industrial transport equipment n.e.s.
-2,560
-2,860
-3,981
-2,753
-3,553
-3,746
Capital goods n.e.s.
-2,867
-3,012
-3,326
-3,675
-3,882
-4,225
Intermediate and other merchandise goods
-40,454
-43,293
-49,073
-54,652
-52,172
-55,892
Food and beverages, mainly for industry
-746
-758
-731
-592
-577
-736
Primary industrial supplies n.e.s.
-950
-882
-1,117
-1,133
-1,117
-1,220
Fuels and lubricants
-4,276
-4,428
-7,450
-10,358
-8,823
-10,400
Parts for transport equipment
-5,346
-6,085
-6,874
-7,089
-6,827
-7,270
Parts for ADP equipment
-1,993
-1,944
-1,936
-2,255
-2,159
-2,012
Other parts for capital goods
-7,193
-7,692
-8,008
-9,072
-8,216
-8,607
Organic and inorganic chemicals
-2,814
-3,139
-3,572
-3,777
-3,447
-3,089
Paper and paperboard
-1,901
-1,978
-2,207
-2,311
-2,225
-2,326
Textile yarn and fabrics
-2,005
-2,006
-1,987
-1,863
-1,830
-1,839
Iron and steel
-1,623
-1,470
-1,509
-1,437
-1,765
-1,961
Plastics
-1,814
-1,889
-2,037
-2,193
-2,182
-2,479
Processed industrial supplies n.e.s.
-9,431
-10,140
-10,772
-11,252
-11,441
-12,244
Other merchandise goods
-362
-882
-873
-1,320
-1,563
-1,709
Other goods
-4,563
-4,038
-4,061
-4,358
-5,140
-5,644
Services debits
-26,398
-28,026
-29,713
-32,299
-32,056
-32,796

CHAIN VOLUME MEASURES(a)(b)

Goods and services debits
-129,378
-135,621
-152,548
-150,605
-153,939
-175,191
Goods debits
-98,338
-104,220
-118,862
-117,629
-121,882
-141,651
General merchandise
-93,007
-99,604
-114,106
-113,109
-116,741
-136,043
Consumption goods
-28,619
-29,597
-33,320
-36,256
-37,423
-42,931
Food and beverages, mainly for consumption
-3,339
-3,672
-4,105
-4,485
-4,686
-5,014
Household electrical items
-2,132
-2,273
-2,566
-2,970
-3,166
-3,988
Non-industrial transport equipment
-8,246
-8,040
-8,549
-10,065
-9,930
-11,616
Textiles, clothing and footwear
-4,038
-4,145
-4,855
-5,035
-4,849
-5,602
Toys, books and leisure goods
-3,456
-3,369
-3,563
-3,346
-3,494
-4,032
Consumption goods n.e.s.
-7,547
-8,172
-9,729
-10,396
-11,296
-12,682
Capital goods
-19,829
-22,119
-27,323
-24,822
-27,148
-34,788
Machinery and industrial equipment
-10,326
-9,884
-9,803
-8,991
-9,502
-11,941
ADP equipment
-2,150
-2,909
-4,054
-4,331
-5,055
-6,288
Telecommunications equipment
-1,784
-2,673
-4,130
-4,289
-3,643
-4,056
Civil aircraft
-632
-757
-1,653
-643
-1,513
-4,129
Industrial transport equipment n.e.s.
-2,888
-3,060
-4,256
-2,784
-3,553
-3,868
Capital goods n.e.s.
-3,378
-3,403
-3,749
-3,794
-3,882
-4,507
Intermediate and other merchandise goods
-44,805
-47,993
-53,303
-52,001
-54,172
-58,325
Food and beverages, mainly for industry
-490
-515
-638
-597
-577
-606
Primary industrial supplies n.e.s.
-936
-896
-1,200
-1,113
-1,118
-1,218
Fuels and lubricants
-7,724
-8,833
-8,422
-8,302
-8,823
-9,353
Parts for transport equipment
-6,477
-6,796
-7,642
-7,276
-6,827
-7,679
Parts for ADP equipment
-995
-1,558
-1,601
-1,862
-2,160
-2,558
Other parts for capital goods
-7,111
-7,427
-8,397
-8,892
-8,215
-9,402
Organic and inorganic chemicals
-2,965
-3,347
-4,122
-3,813
-3,447
-3,488
Paper and paperboard
-2,336
-2,247
-2,544
-2,344
-2,225
-2,493
Textile yarn and fabrics
-2,077
-2,134
-2,220
-1,858
-1,829
-1,930
Iron and steel
-1,734
-1,531
-1,571
-1,443
-1,655
-1,940
Plastics
-2,222
-2,343
-2,583
-2,227
-2,182
-2,634
Processed industrial supplies n.e.s.
-10,384
-10,831
-11,783
-11,147
-11,440
-13,173
Other merchandise goods
-391
-922
-957
-1,317
-1,564
-1,849
Other goods
-5,629
-4,696
-4,754
-4,483
-5,140
-5,610
Services debits
-31,328
-31,578
-33,779
-33,050
-32,055
-33,539

(a) Reference year for chain volume measures is 2001-02.
(b) Chain volume measures are not additive for most periods; the component measures do not sum to a total in the same way as the corresponding current price components do.
Source: Balance of Payments and International Investment Position, Australia (5302.0).

Table 30.7 presents various price indexes for Australia's trade in goods and services. The implicit price deflators (IPDs) are derived by dividing the current price measures by the corresponding chain volume measures. These IPDs reflect not only price change, but compositional effects from year to year.

Unlike IPDs, chain price indexes measure only the impact of a price change. The chain Laspeyres price index for goods and services credits fell 2.2% in 2002-03 to $97.8b. The fall resulted from reduced commodity prices in 2002-03 and a stronger Australian dollar. The chain Laspeyres price index for goods and services debits fell 4.2% to $95.8b.

Australia's terms of trade IPD (derived by dividing the IPD for credits by the IPD for debits, rose by 2.1% in 2002-03, resulting from a 2.6% fall in the IPD for goods and services credits, offset by a 4.7% fall in the IPD for goods and services debits (table 30.7).

30.7 IMPLICIT PRICE DEFLATORS, PRICE INDEXES AND TERMS OF TRADE(a)

1997-98
1998-99
1999-2000
2000-01
2001-02
2002-03

Implicit price deflators(b)
Goods and services credits
88.1
85.0
87.5
99.3
100.0
97.4
Goods credits
87.7
83.5
86.0
99.9
100.0
96.0
Services credits
89.1
90.0
92.4
97.0
100.0
102.9
Goods and services debits
91.6
93.2
92.0
101.3
100.0
95.3
Goods debits
93.6
94.4
93.1
102.3
100.0
94.7
Services debits
84.3
88.8
88.0
97.7
100.0
97.8
Chain Laspeyres price indexes
Goods and services credits
87.8
84.9
87.0
99.3
100.0
97.8
Goods credits
87.6
83.6
85.7
100.0
100.0
96.5
Services credits
88.8
89.7
92.2
96.9
100.0
103.0
Goods and services debits
89.0
91.4
91.1
100.9
100.0
95.8
Goods debits
90.6
92.3
92.1
101.8
100.0
95.2
Services debits
83.5
88.0
87.4
97.5
100.0
98.1
Terms of trade(c)
Goods and services
96.2
91.2
95.1
98.0
100.0
102.2
Goods
93.7
88.5
92.4
97.7
100.0
101.3
Services
105.8
101.4
105.1
99.2
100.0
105.2

(a) Reference year for price and terms of trade indexes is 2001-02.
(b) Derived by dividing the estimates at current prices in tables 30.5 and 30.6 by the chain volume measures in those tables.
(c) Derived by dividing the IPDs for credits by the IPDs for debits.
Source: Balance of Payments and International Investment Position, Australia (5302.0).

International investment position

Australia's net international investment position is the difference between the levels of Australia's foreign financial liabilities and the levels of its foreign financial assets. Historically, Australia has had a net liability position with the rest of the world.

Australia's net international investment position at 30 June 2003 was a net foreign financial liability of $441.5b. This was up $44.8b (11.3%) on the position a year earlier and resulted from net increases of $15.0b in the level of foreign equity and $29.8b in the level of foreign debt.

Graph 30.8 shows the components of Australia's international investment position between 30 June 1993 and 30 June 2003. It shows that the increases in net foreign liabilities reflect increases in both net foreign debt liabilities and net foreign equity liabilities in most years.

Graph - 30.8 Net international investment position - 30 June


Table 30.9 shows a reconciliation between opening and closing levels for foreign financial assets, foreign financial liabilities and Australia's net international investment position. Increases or decreases in these assets and liabilities are due to financial transactions (investment flows), price changes, exchange rate changes and other adjustments.

30.9 INTERNATIONAL INVESTMENT POSITION

Changes in position reflecting

Position at beginning
of period
Transactions
Price
changes
Exchange
rate
changes
Other adjustments
Position
at end
of period
$m
$m
$m
$m
$m
$m

NET INTERNATIONAL INVESTMENT POSITION

Total
2000-01
328,770
15,277
28,813
-6,945
-2,011
363,905
2001-02
363,905
21,052
12,296
-1,345
839
396,746
2002-03
396,746
41,590
-3,139
5,136
1,198
441,532
Equity
2000-01
56,131
5,814
25,495
-28,139
-1,484
57,818
2001-02
57,818
-19,913
15,563
14,266
-180
67,555
2002-03
67,555
-4,021
-2,158
21,080
112
82,566
Debt
2000-01
272,639
9,464
3,316
21,194
-527
306,087
2001-02
306,087
40,964
-3,265
-15,610
1,017
329,191
2002-03
329,191
45,611
-979
-15,945
1,087
358,965

FOREIGN ASSETS(a)

Total
2000-01
-426,176
-53,617
34,010
-39,019
-626
-485,427
2001-02
-485,427
-52,178
44,535
13,751
-167
-479,487
2002-03
-479,487
-26,747
1,994
17,563
692
-485,986
Equity
2000-01
-281,990
-20,023
33,078
-28,139
-467
-297,542
2001-02
-297,542
-47,367
46,571
14,266
-172
-284,244
2002-03
-284,244
-21,495
7,052
21,080
1,100
-276,507
Debt
2000-01
-144,186
-33,595
934
-10,879
-158
-187,885
2001-02
-187,885
-4,811
-2,038
-515
5
-195,243
2002-03
-195,243
-5,253
-5,059
-3,516
-410
-209,480

FOREIGN LIABILITIES(b)

Total
2000-01
754,946
68,895
-5,199
32,073
-1,384
849,332
2001-02
849,332
73,230
-32,237
-15,096
1,005
876,233
2002-03
876,233
68,338
-5,132
-12,427
508
927,518
Equity
2000-01
338,121
25,839
-7,581
-
-1,016
355,360
2001-02
355,360
27,454
-31,010
-
-7
351,799
2002-03
351,799
17,472
-9,211
-
-987
359,073
Debt
2000-01
416,825
43,058
2,384
32,073
-368
493,972
2001-02
493,972
45,776
-1,228
-15,096
1,011
524,434
2002-03
524,434
50,864
4,079
-12,427
1,495
568,445

(a) Assets include claims of Australian direct investment enterprises on direct investors abroad, which are classified as part of direct investment in Australia.
(b) Liabilities include liabilities of Australian direct investors to direct investment enterprises abroad, which are classified as part of direct investment abroad.
Source: Balance of Payments and International Investment Position, Australia (5302.0).

Foreign debt

Foreign debt is a subset of the financial obligations that make up a country's international investment position. It includes all the non-equity components of the net international investment position, that is, all recorded assets and liabilities other than equity securities and direct investment equity capital, including reinvested earnings.

The level of borrowing and other non-equity liabilities of Australian residents at a particular date make up Australia's foreign debt liabilities. The level of Australian lending abroad and other non-equity assets at the same date are deducted from the level of borrowing to arrive at Australia's net foreign debt.

The level of net foreign debt at 30 June 2003 was $359.0b, up $29.8b (9.0%) on 30 June 2002. The increase during 2002-03 resulted from a $44.0b (8.4%) increase in foreign debt liabilities partly offset by an increase of $14.2b (7.3%) in foreign debt assets (table 30.10).

At 30 June 2003 the net foreign debt of the public sector (general government plus public financial and non-financial corporations) was $9.1b, which accounted for 2.5% of total net foreign debt. Net foreign debt levels of private financial corporations and private non-financial corporations were $284.4b (79.2% of total net foreign debt) and $65.5b (18.2%) respectively (table 30.10).

30.10 LEVELS OF FOREIGN DEBT - 30 June

1998
1999
2000
2001
2002
2003
$m
$m
$m
$m
$m
$m

Foreign debt assets(a)
-119,189
-129,150
-144,186
-187,885
-195,243
-209,480
Public sector
-41,329
-40,770
-44,876
-63,659
-56,156
-55,838
General government
-8,095
-9,378
-9,219
-10,565
-10,869
-10,757
Financial corporations
-32,196
-30,470
-35,263
-46,151
-42,832
-43,376
Central Bank
-23,998
-22,883
-27,184
-37,040
-35,053
-37,640
Central borrowing authorities
-179
-385
-1,090
-1,426
-998
-568
Other financial corporations
-8,019
-7,203
-6,990
-7,685
-6,781
-5,168
Non-financial corporations
-1,037
-922
-393
-6,943
-2,455
-1,705
Private sector
-77,860
-88,380
-99,311
-124,225
-139,087
-153,641
Financial corporations
-58,762
-66,328
-75,689
-93,122
-110,335
-118,892
Non-financial corporations
-19,098
-22,052
-23,622
-31,103
-28,752
-34,749
Foreign debt liabilities(a)
346,971
359,839
416,825
493,972
524,434
568,445
Public sector
86,721
75,279
63,413
71,709
68,078
64,967
General government
38,463
32,373
22,872
26,554
24,927
24,049
Financial corporations
41,392
37,284
33,968
32,649
28,926
26,990
Central Bank
48
40
34
366
43
150
Central borrowing authorities
36,571
32,772
29,060
27,622
24,906
23,962
Other financial corporations
4,774
4,473
4,875
4,661
3,976
2,879
Non-financial corporations
6,866
5,622
6,572
12,506
14,225
13,927
Private sector
260,250
284,560
353,413
422,262
456,356
503,478
Financial corporations
187,507
209,734
269,917
327,240
362,285
403,258
Non-financial corporations
72,742
74,825
83,496
95,022
94,071
100,220
Net foreign debt
227,782
230,689
272,639
306,087
329,191
358,965
Public sector
45,392
34,509
18,537
8,050
11,922
9,129
General government
30,368
22,995
13,652
15,989
14,058
13,292
Financial corporations
9,196
6,814
-1,295
-13,502
-13,906
-16,386
Central Bank
-23,950
-22,843
-27,150
-36,674
-35,010
-37,490
Central borrowing authorities
36,391
32,387
27,970
26,196
23,908
23,393
Other financial corporations
-3,245
-2,730
-2,115
-3,024
-2,805
-2,290
Non-financial corporations
5,828
4,700
6,179
5,563
11,770
12,222
Private sector
182,390
196,179
254,102
298,037
317,269
349,836
Financial corporations
128,746
143,406
194,228
234,118
251,950
284,366
Non-financial corporations
53,644
52,773
59,874
63,919
65,319
65,470

(a) Foreign debt levels between direct investors and direct investment enterprises are recorded on a gross basis for assets and liabilities.
Source: Balance of Payments and International Investment Position, Australia (5302.0).

Levels of foreign investment in Australia and Australian investment abroad

In table 30.11, levels of investment are categorised by direction (Australian investment abroad and foreign investment in Australia), type of investment (direct, portfolio, financial derivatives, other and reserve assets) and instrument.

Direct investment is a category of international investment that reflects the objective of obtaining a lasting interest by a resident in one economy in an enterprise in another economy, and implies a significant degree of influence by the investor in the management of the enterprise. A direct investment relationship is established when an investor, who is a resident in one economy, holds 10% or more of the ordinary shares or voting stock of an enterprise (direct investment enterprise) in another economy. The portfolio investment category covers investment in equity and debt securities other than direct investment, financial derivative assets, other investment assets and reserve assets.

The items Australian investment abroad and foreign investment in Australia in table 30.11 do not equate with foreign assets and liabilities respectively in table 30.9. The difference is due to netting of assets and liabilities in regard to direct investment, both abroad and in Australia. Claims by direct investment enterprises on their direct investors, separately identified in table 30.11, are netted off in that table against liabilities to direct investors. These items are not netted off in table 30.9.

At 30 June 2003 Australian investment abroad totalled $464.4b, up $4.2b (0.9%) on the level a year earlier. This rise was the net effect of a $1.8b decrease in direct investment abroad, a $5.2b decrease in portfolio investment assets, a $9.7b increase in financial derivative assets, a $1.9b decrease in other investment assets and a $3.3b increase in reserve assets.

Foreign investment in Australia totalled $905.9b at 30 June 2003, up $49.0b (5.7%) on June 2002. This rise was due to a $20.7b increase in direct investment in Australia, a $4.7b increase in portfolio investment liabilities, a $13.4b increase in financial derivative liabilities and a $10.3b increase in other investment liabilities.

30.11 LEVELS OF AUSTRALIAN INVESTMENT ABROAD AND FOREIGN INVESTMENT IN AUSTRALIA - 30 June

1998
1999
2000
2001
2002
2003
$m
$m
$m
$m
$m
$m

Levels of Australian investment abroad
-290,293
-313,359
-410,656
-464,002
-460,154
-464,353
Direct investment abroad(a)
-125,580
-129,465
-178,304
-183,303
-158,376
-156,535
Equity capital and reinvested earnings
-124,085
-128,988
-179,805
-178,485
-159,211
-154,868
Other capital
-1,494
-477
1,502
-4,819
-835
-1,667
Claims on affiliated enterprises
-5,050
-5,496
-6,496
-14,470
-9,742
-13,394
Liabilities to affiliated enterprises
3,555
5,020
7,997
9,651
10,577
11,727
Portfolio investment assets
-71,962
-87,196
-126,653
-150,312
-160,257
-155,079
Equity securities
-56,254
-67,025
-102,185
-119,058
-125,033
-121,638
Debt securities
-15,708
-20,171
-24,469
-31,254
-35,224
-33,440
Financial derivative assets
-14,357
-15,529
-18,659
-23,804
-30,250
-39,996
Other investment assets
-54,134
-57,215
-59,092
-68,633
-73,836
-71,984
Trade credits
-9,658
-10,106
-9,982
-9,620
-10,259
-10,435
Loans and other assets
-37,427
-39,587
-42,057
-50,549
-54,254
-52,146
Currency and deposits
-7,049
-7,522
-7,053
-8,464
-9,324
-9,404
Reserve assets
-24,260
-23,954
-27,948
-37,951
-37,435
-40,759
Levels of foreign investment in Australia
587,231
635,014
739,425
827,907
856,900
905,885
Direct investment in Australia(b)
162,371
174,478
196,186
201,238
215,322
235,974
Equity capital and reinvested earnings
138,943
152,753
171,462
170,908
178,838
192,961
Other capital
23,428
21,725
24,724
30,330
36,484
43,013
Claims on direct investors
-5,680
-6,785
-7,523
-11,774
-8,756
-9,907
Liabilities to direct investors
29,107
28,510
32,247
42,104
45,240
52,920
Portfolio investment liabilities
332,038
348,145
419,867
484,898
485,050
489,723
Equity securities
110,552
134,226
166,659
184,452
172,962
166,112
Debt securities
221,485
213,919
253,209
300,446
312,088
323,610
Financial derivative liabilities
15,040
17,826
21,433
23,593
31,586
44,980
Other investment liabilities
77,783
94,565
101,939
118,177
124,943
135,209
Trade credits
7,221
7,685
3,708
3,322
3,193
4,124
Loans
34,144
41,361
53,588
53,682
61,689
65,925
Currency and deposits
33,356
35,347
39,508
56,172
56,585
61,664
Other liabilities
3,061
10,172
5,135
5,001
3,475
3,496

(a) Net direct investment abroad, after deduction of liabilities to direct investment enterprises abroad.
(b) Net direct investment in Australia, after deduction of claims of Australian direct investment enterprises on direct investors.
Source: Balance of Payments and International Investment Position, Australia (5302.0).

Ratios

Table 30.12 and graph 30.13 show that the ratio of the current account deficit to gross domestic product (GDP) was 5.6% in 2002-03, an increase on the previous year, and above the average for the last 10 years (4.4%).

Graph 30.14 shows that the ratio of Australia's net foreign liabilities (Australia's net international investment position) to GDP has risen for most years since 1988 and reached its highest level of almost 60% at 30 June 2003. The ratio of net foreign debt to GDP was 47.8% at 30 June 2003, an increase over the 46.3% recorded the previous year. The ratio of net foreign equity to GDP was 11.1% at 30 June 2003, up on the ratio at 30 June 2002, but below the average for the last 10 years (12.6%).

Table 30.12 shows that the net investment income payable on net foreign debt as a percentage of goods and services credits was 8.3% in 2002-03, continuing the downward trend of the previous two years. The ratio of net investment income payable on equity to goods and services credits was 7.0% in 2002-03, up from 3.9% the previous year.

30.12 RATIOS

Units
1997-98
1998-99
1999-2000
2000-01
2001-02
2002-03

Value
GDP(a)
$m
561,229
591,917
628,621
669,307
711,547
751,647
Ratios to GDP
Current account
%
-4.1
-5.7
-5.1
-2.7
-3.1
-5.6
Goods and services
%
-0.8
-2.4
-2.3
0.1
-0.2
-2.6
Credits
%
20.3
18.9
20.0
22.9
21.4
19.6
Debits
%
-21.1
-21.4
-22.3
-22.8
-21.6
-22.2
Income
%
-3.2
-3.1
-2.9
-2.9
-2.8
-3.0
Net international investment position(b)
%
52.9
54.3
52.3
54.4
55.8
58.7
Net foreign equity
%
12.3
15.4
8.9
8.6
9.5
11.0
Net foreign debt
%
40.6
39.0
43.4
45.7
46.3
47.8
Ratios to good and services credits
Net investment income
%
-15.9
-16.4
-14.4
-12.4
-13.2
-15.3
Net foreign equity
%
-6.2
-7.0
-3.7
-2.7
-3.9
-7.0
Net foreign debt
%
-9.7
-9.4
-10.7
-9.7
-9.3
-8.3

(a) GDP at current prices.
(b) These ratios are derived by expressing net foreign liabilities at end of year as a percentage of GDP at current prices for that year.
Source: Australian National Accounts: National Income, Expenditure and Product (5206.0); Balance of Payments and International Investment Position, Australia (5302.0).

Graph - 30.13 Ratio of balance on current account to GDP

Graph - 30.14 Ratios of net international investment position to GDP

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