5512.0 - Government Finance Statistics, Australia, 2010-11
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 17/04/2012
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TECHNICAL NOTE STATEMENT OF STOCKS AND FLOWS 2010–11

2010–11 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 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.

12 The statement of stocks and flows for the Commonwealth general government sector is presented in Table 1. During 2010–11 the net worth of the Commonwealth general government sector decreased by \$53,470m. This was the result of a GFS net operating balance (which reflects the change in net worth due to transactions) of –\$45,336m combined with revaluations of –\$8,642m. The key contributor to revaluations on the liabilities side was revaluations to unfunded superannuation and other employee entitlements (\$5,233m). Revaluations on the assets side of the statement were driven by equity (–\$3,325m); investments, loans and placements (\$2,959m); and advances paid (–\$2,884m).

 TABLE 1. COMMONWEALTH, General Government – Statement of Stocks and Flows Opening Stocks as at 1 July 2010 Transactions Revaluations Other Volume Changes(a) Closing Stocks as at 30 June 2011 \$m \$m \$m \$m \$m Assets Financial assets Cash and deposits 1 816 619 – – 2 435 Advances paid 28 163 5 422 –2 884 – 30 701 Investments, loans and placements 102 910 –7 194 2 959 – 98 675 Other non–equity assets 53 682 – –1 745 – 51 937 Equity 52 074 1 606 –3 325 – 50 355 Total 238 645 454 –4 996 – 234 103 Non–financial assets Land and fixed assets 85 171 3 170 –1 676 508 87 173 Other non–financial assets 1 448 2 785 –2 474 – 1 759 Total 86 619 5 954 –4 149 508 88 932 Total 325 264 6 408 –9 145 508 323 035 Liabilities Deposits held 3 523 95 –4 – 3 614 Advances received – – – – – Borrowing 171 375 44 487 –3 557 – 212 305 Unfunded superannuation and other employee entitlements 151 416 – 5 233 – 156 649 Other provisions 13 255 – –815 – 12 440 Other non–equity liabilities 28 318 7 162 –1 361 – 34 119 Total 367 887 51 744 –504 – 419 127 GFS Net worth –42 623 –45 336 –8 642 508 –96 093 Net debt 42 010 . . . . . . 84 108 Net financial worth –129 242 . . . . . . –185 024 . . not applicable – nil or rounded to zero (including null cells) (a) Source: Department of Finance and Deregulation, Consolidated Financial Statements for the Year Ended 30 June 2011, December 2011

STATE AND LOCAL GENERAL GOVERNMENT – STATEMENT OF STOCKS AND FLOWS

13 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 \$24,582m during 2010–11, driven by \$22,489m from other economic flows. On the asset side the largest contributors were equity (\$18,392m) and land and fixed assets (\$5,796m). The most significant contributor to liabilities was borrowing (\$9,949m).

14 The net worth of local government increased by \$1,005m in 2010–11. Other economic flows contributed –\$3,175m to this movement.

 TABLE 2. STATE, General Government – Statement of Stocks and Flows Opening Stocks as at 1 July 2010 Transactions Other Economic Flows Closing Stocks as at 30 June 2011 \$m \$m \$m \$m Assets Financial assets Cash and deposits 12 531 3 965 1 439 17 935 Advances paid 5 775 –3 390 3 668 6 053 Investments, loans and placements 48 068 4 672 457 53 197 Other non–equity assets 19 052 192 2 118 21 362 Equity 253 061 –5 318 18 392 266 135 Total 338 488 122 26 072 364 682 Non–financial assets Land and fixed assets 513 426 16 453 5 796 535 675 Other non–financial assets 2 068 979 –983 2 064 Total 515 494 17 431 4 815 537 740 Total 853 981 17 553 30 888 902 422 Liabilities Deposits held 3 072 1 126 –293 3 905 Advances received 3 497 –110 1 3 388 Borrowing 60 227 10 570 9 949 80 746 Unfunded superannuation and other employee entitlements 134 276 –123 2 293 136 446 Other provisions 7 830 – 530 8 360 Other non–equity liabilities 19 656 3 996 –4 082 19 570 Total 228 558 15 459 8 399 252 416 GFS Net worth 625 424 2 094 22 489 650 006 Net debt 422 . . . . 10 853 Net financial worth 109 930 . . . . 112 266 . . 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 2010 Transactions Other Economic Flows Closing Stocks as at 30 June 2011 \$m \$m \$m \$m Assets Financial assets Cash and deposits 7 978 319 –593 7 704 Advances paid 4 –37 39 6 Investments, loans and placements 6 515 324 3 401 10 240 Other non–equity assets 3 172 5 060 –4 741 3 491 Equity 2 477 1 3 414 5 892 Total 20 146 5 667 1 520 27 333 Non–financial assets Land and fixed assets 306 415 4 474 –11 554 299 335 Other non–financial assets 1 328 75 197 1 600 Total 307 743 4 548 –11 355 300 936 Total 327 889 10 215 –9 836 328 268 Liabilities Deposits held 392 – 37 429 Advances received 58 4 –2 60 Borrowing 8 696 888 –1 791 7 793 Unfunded superannuation and other employee entitlements 2 572 134 –46 2 660 Other provisions 119 218 –195 142 Other non–equity liabilities 3 693 4 792 –4 664 3 821 Total 15 530 6 036 –6 661 14 905 GFS Net worth 312 359 4 180 –3 175 313 364 Net debt –5 351 . . . . –9 667 Net financial worth 4 616 . . . . 12 428 . . not applicable – nil or rounded to zero (including null cells)

15 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.