5232.0 - Australian National Accounts: Financial Accounts, Sep 2010  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 16/12/2010   
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FLOW OF FUNDS MATRIX

Table 22 of this publication presents the flow of funds matrix which brings together the capital and financial accounts. In concept the net lending/borrowing derived from the capital account, is identical to the change in financial position derived from the financial account. In practice though, this equality is rarely achieved, and the extent to which the two measures are different is represented in the item 'net errors and omissions'. The 'net errors and omissions' measure the extent of the different data sources used in the real accounts compared to the financial accounts and the measurement imperfections of these accounts.

In the financial accounts, adjustments are made to minimise the net errors and omissions between the two measures. In general, these adjustments are made to the financial instrument 'accounts receivable/payable' which is considered to be of a lower quality compared to estimates of other financial instruments such as deposits, debt securities, loans and equity securities.

For accounts receivable/payable these adjustments are made to account for known issues in reported data including:

  • poor coverage of small and medium sized private trading corporations;
  • poor coverage of households including unincorporated businesses;
  • inconsistency of timing in both taxes received which accrue continuously throughout the year, and also the reporting of accounts payable/receivable; and
  • delays in settlements and therefore duplication of funds within the banking system.

On a sectoral basis, the ABS maintains net errors and omissions close to zero for the general government and rest of the world sectors. For non-financial corporations, financial corporations and households sectors, the two accounts are not equal.

There have been revisions to 'net savings' back to 1959-60 with significant revisions for the latest 5 years following the release of Australian System of National Accounts, 2009-10 (ABS 5204.0). These changes have now flowed through to the quarterly sectoral capital accounts, presented in the flow of funds matrix, and as a result the financial accounts have been re-balanced in the context of these revised estimates. For the periods where re-balancing has occurred, the adjustments made to accounts receivable/payable have been minimal compared to previous releases.

The revisions policy in the financial accounts, means that the re-balancing has only occurred from the December 2008 quarter for this release. For the quarters prior to December 2008, the financial accounts have not been revised and will therefore still include previous balancing adjustments to accounts receivable/payable. However, as the capital accounts contain revisions back to 1988-89, the net errors and omissions for these periods have now re-calibrated and may in some quarters be larger than previously published.

In 2011, the ABS will be investigating a number of potential changes to reduce the net errors and omissions in the flow of funds matrix including:
  • historical revisions to financial accounts to re-balance the flow of funds matrix for the periods prior to December 2008;
  • improvement in timeliness of the re-balancing; and
  • applying a coordinated approach to analysing and improving the discrepancy between the two accounts.

For more information about the flow of funds matrix please contact Tom Lay 02 6252 5574.