Balance of Payments, International Investment Position and Australian National Accounts: How are they related

Balance of Payments, International Investment Position and Australian National Accounts: How are they related?

On this page:
What is Balance of Payments?
What is International Investment?
How are they related to Australian National Accounts?
Further reading

What is Balance of Payments?

The Balance of Payments is a statistical statement which records all economic transactions between residents and non-residents of Australia.

Residents and non-residents can be people or organisations. To be an Australian resident in this context means that the particular person or organisation has a closer association with Australia than anywhere else.

The transactions in the Balance of Payments are divided into three broad categories:

Current Account - measures exports and imports of goods and services, primary income of residents from non-residents, and secondary income (goods, services or income which are given to Australian residents from non-residents, or vice-versa).

Capital Account - records acquisition or disposal of non-produced, non-financial assets, (such as patents and copyrights) and capital transfers (such as debt forgiveness).

Financial Accounts - records transactions relating to financial assets and liabilities (such as shares, bonds and loans) between residents and non-residents.

Australia's payment to the rest of the world is generally greater than what we receive and this is known as the current account deficit. A balance is said to be in surplus if credit entries exceed debit entries or in deficit if debit entries exceed credit entries.
What is International Investment Position?

The International Investment Position is the balance sheet showing the stock of foreign financial assets and liabilities at a point in time and includes total Foreign Debt.How are they related to Australian National Accounts?

The Balance of Payment and International Investment Position form part of the broader system of Australian National Accounts. In the Australian National Accounts, the Gross Domestic Product (GDP) is the key economic aggregate that measures the total value added for the Australian economy in any period. The GDP gives a complete picture of the state of Australia's economy and allows to identify the factors driving economic growth in a particular time period.

There are three measures of GDP:

1. Production = value of goods and services produced by an industry, i.e cost of production.

2. Income = sum of incomes generated from production.

3. Expenditure = sum of spending on goods and services produced plus exports minus imports.

Headline GDP is the average of the three figures. This figure can be found on the front of the ABS publication Australian National Accounts: National Income, Expenditure and Product, Australia (cat no. 5206.0).

When reading a Balance of Payment or Australian National Account table, note that:

Credits = exports
Debits = imports
Residents = Australians
Non-residents = non-Australians

Further Reading:

Balance of Payments and International Investment Position, Australia, Concepts, Sources and Methods, Australia, 1998 (cat. no. 5331.0)
Australian National Accounts: Concepts, Sources and Methods, 2000 (
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Balance of payment_Final.pdf