International Investment (Survey of)
NAME OF ORGANISATION
Collectively, these aspects are referred to as international investment activity.
International investment statistics are the starting point for any analysis of the levels of Australia's foreign financial assets and liabilities, changes in those levels over time, associated income streams and the impact of international investment activity on other economic aggregates.
The key uses of the collection are as follows:
Compilation of official statistics
International investment financial transactions statistics are the source of the financial account and capital account (in the case of 'debt forgiveness') components of Australia's balance of payments statistics. Investment income statistics also form an important component of the income estimates in the current account. International investment statistics are also inputs to the financial accounts of the Australian national accounts.
Monitoring the extent of foreign debt and the cost of servicing it relies on international investment statistics.
Economic policy formulation
International investment statistics are used widely by government agencies and advisers in evaluating various economic strategies, formulating policy advice and monitoring the economy's responses to policy initiatives.
Changes in levels of international investment, particularly levels of debt, are used by participants in financial markets (such as the foreign exchange market), in conjunction with other indicators, as pointers to the general health of the economy.
Statistics produced by the International investment Section are used by Australia to meet obligations under international treaty to release BoP and IIP statistics according to a specified format mandated by international agencies, such as the International Monetary Fund (IMF), Asia Pacific Economic Co-operation (APEC), the United Nations (UN) and the Organisation for Economic Co-operation and Development (OECD), and to studies undertaken by these agencies. They are also used by the Australian authorities during trade negotiations and to monitor developments in external economic relations between countries.
General economic research
International investment statistics are also used in economic forecasting, econometric modelling, academic research and media articles on economic developments.
International investment statistics measure:
International investment statistics are compiled from a number of sources of which the most important are, the quarterly Survey of International Investment (SII) and official advices. In principle, the scope of this survey is consistent with the scope of international investment statistics.
The scope of the SII is defined as the international investment activity of all economic entities comprising the Australian economy. An economic entity may be a government institution, financial or trading enterprise, non-profit body or an individual, and is considered part of the Australian economy if it has a closer association with the territory of Australia than with any other territory. Each such entity is described as a resident of Australia.
It is not practical to give all economic entities in the Australian economy a chance of selection, since many will not have any international investment activity. Instead, the coverage of the survey is all Australian enterprise groups which are known to have international investment activity.
Collectively, these aspects are referred to as international investment activity.
The key outputs are as follows:
International Investment Position
The international investment position of an economy is the balance sheet recording its stock of foreign financial assets and liabilities. The position at the end of a specific period reflects financial transactions and other changes in the levels of these assets and liabilities that occurred during the period. The net international investment position is defined as the difference between the level of foreign financial assets and the level of foreign liabilities at a particular date. In published international investment statistics, the components of the net position are shown from two alternative perspectives: first, as the sum of net foreign equity liabilities and net foreign debt liabilities; and the second as the difference between foreign assets and foreign liabilities. For both perspectives, opening levels of investment at the beginning of a period are reconciled with closing levels of investment at the end of the period by showing financial transactions, exchange rate changes, market price changes and other adjustments during the period.
Net Foreign Debt Position and Gross External Debt Liabilities
Foreign debt is a subset of financial obligations that comprise a country's international investment position. The level of Australian debt assets, including official reserve assets, at the same date are deducted from the level of Australian debt liabilities (gross foreign debt) to arrive at Australia's net foreign debt position. As per IMF's External Debt Guide and Australia's SDDS obligations, gross debt liabilities are published on a quarterly basis.
Levels of investment
Levels of international investment refer to both the value of foreign financial assets held by Australian residents (Australian investment abroad) and the value of foreign liabilities of Australian residents (foreign investment in Australia) at a particular date. The terms opening levels and closing levels refer, respectively, to levels of investment at the beginning and end of particular periods.
Financial transactions refer to investment flows into and out of Australia and consist of:
Also included as imputed financial transactions are the reinvested earnings of resident enterprises attributable to their foreign direct investors and the reinvested earnings of foreign enterprises attributable to their resident direct investors.
By convention, two other events, not arising from transactions, are also included. These are:
Financial transactions data collected via the SII is the main source of data reported in the Financial Account in Australia's balance of payments statistics.
International investment income is income earned by the owners of foreign financial assets from the ownership of those assets. Under BPM5, income is recorded on an accrual basis, rather than the due for payment basis recommended under BPM4. While the total amount of income does not change when recorded on an accrual basis, it is recorded continuously rather than in discrete amounts when due for payment. The most common types of investment income are dividends and interest.
Other forms of investment income are remitted profits and reinvested earnings. The item remitted profits refers to the distribution of income of unincorporated enterprises to their owners. The item reinvested earnings refers to that part of the undistributed income of a direct investment enterprise that is attributable to direct investors in the enterprise.
Investment income data collected via the SII is a major input to the Income component of the Current Account in Australia's balance of payment statistics.
International Investment Ratios
To aid analysis of the economy's capacity to meet its international financial obligations, a number of ratios are calculated and presented in quarterly and annual paper publications. These ratios relate international investment aggregates to broad national accounting aggregates. The 2 key ratios produced are the 'ratio of net foreign debt to gross domestic product' and the 'debt service ratio'. The first of these expresses the level of net foreign debt at the end of a period as a proportion of gross domestic product for the year ending at that date. This gives an indication of the share of the economy's annual production that would be necessary to meet Australia's net international indebtedness. The second key ratio expresses net investment income for the year ending in a particular quarter as a proportion of the value of goods and services credits for the same period. This ratio indicates the proportion of annual export earnings that are used to meet investment income payments abroad.
In addition to these BPM5 requirements, to satisfy known user requirements, further classifications are applied for foreign debt by domicility; and for foreign assets and liabilities by currency and maturity.
All of the above classifications are described in 'Balance of Payments and International Investment Position, Australia: Concepts, Sources and Methods, 1998' (ABS Cat No. 5331.0).
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