5512.0 - Government Finance Statistics, Australia, 2014-15
ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 26/04/2016
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STATEMENT OF STOCKS AND FLOWS

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.

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.

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.

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.

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').

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.

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.

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.

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.

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

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.

The statement of stocks and flows for the Commonwealth general government sector is presented in Table 1. During 2014-15 the net worth of the Commonwealth general government sector decreased by \$56,931m. This was the result of a GFS net operating balance (which reflects the change in net worth due to transactions) of -\$37,211m, revaluations of -\$20,046m and slightly offset by other volume changes of \$326m.

 TABLE 1, STATEMENT OF STOCKS AND FLOWS, General Government Sector, Commonwealth Opening stocks as at 1 July 2014 Transactions Revaluations Other volume changes(a) Closing stocks as at 30 June 2015 \$m \$m \$m \$m \$m Assets Financial assets Cash and deposits 3 844 -689 1 - 3 156 Advances paid 42 956 6 030 -2 933 - 46 053 Investments, loans and placements 117 507 11 957 6 913 - 136 377 Other non-equity assets 67 405 - -4 115 - 63 290 Equity 84 383 -872 -1 - 83 510 Total financial assets 316 096 16 427 -137 - 332 386 Non-financial assets Land and fixed assets 110 548 3 225 8 694 326 122 793 Other non-financial assets 2 552 1 608 -1 393 - 2 767 Total non-financial assets 113 100 4 833 7 300 326 125 559 Total assets 429 196 21 259 7 165 326 457 946 less Liabilities Deposits held 3 956 104 10 - 4 070 Advances received - - - - - Borrowing 363 195 52 290 8 369 - 423 854 Unfunded superannuation and other employee entitlements 237 677 - 27 584 - 265 261 Other provisions 14 237 - -1 559 - 12 678 Other non-equity liabilities 40 074 6 188 -7 305 - 38 957 Total liabilities 659 140 58 582 27 098 - 744 820 equals GFS Net worth -229 943 -37 211 -20 046 326 -286 874 Net debt 202 843 . . . . . . 242 338 Net financial worth -343 044 . . . . . . -412 433 . . not applicable - nil or rounded to zero (including null cells) (a) Source: Department of Finance, Consolidated Financial Statements for the Year Ended 30 June 2015, December 2015.

STATE AND LOCAL GENERAL GOVERNMENT - STATEMENT OF STOCKS AND FLOWS

During 2014-15 the net worth of the state general government sector increased by \$25,551m, driven by \$20,305m from other economic flows and \$5,246m from transactions.

The net worth of the local general government sector increased by \$33,769m in 2014-15. Other economic flows contributed \$26,073m to this movement.

 TABLE 2, STATEMENT OF STOCKS AND FLOWS, General Government Sector, State Government Opening stocks as at 1 July 2014 Transactions Other Economic Flows Closing stocks at 30 June 2015 \$m \$m \$m \$m Assets Financial assets Cash and deposits 19 544 2 725 129 22 398 Advances paid 11 057 -234 -807 10 016 Investments, loans and placements 63 299 1 909 -302 64 906 Other non-equity assets 24 488 244 3 656 28 388 Equity 288 973 -2 203 13 113 299 883 Total financial assets 407 361 2 441 15 789 425 591 Non-financial assets Land and fixed assets 585 625 7 335 11 990 604 950 Other non-financial assets 2 740 1 098 -394 3 444 Total non-financial assets 588 365 8 433 11 597 608 395 Total assets 995 726 10 874 27 385 1 033 985 less Liabilities Deposits held 3 491 -321 -151 3 019 Advances received 3 103 912 -70 3 945 Borrowing 131 808 1 785 878 134 471 Unfunded superannuation and other employee entitlements 168 079 -38 8 638 176 679 Other provisions 10 771 - 629 11 400 Other non-equity liabilities 21 828 3 290 -2 843 22 275 Total liabilities 339 081 5 628 7 080 351 789 equals GFS Net worth 656 645 5 246 20 305 682 196 Net debt 44 503 . . . . 44 115 Net financial worth 68 280 . . . . 73 801 . . not applicable - nil or rounded to zero (including null cells)

 TABLE 3, STATEMENT OF STOCKS AND FLOWS, General Government Sector, Local Government Opening stocks as at 1 July 2014 Transactions Other Economic Flows Closing stocks at 30 June 2015 \$m \$m \$m \$m Assets Financial assets Cash and deposits 8 753 1 656 124 10 533 Advances paid 28 -4 11 35 Investments, loans and placements 11 584 1 254 -958 11 880 Other non-equity assets 3 764 -1 066 1 033 3 731 Equity 7 203 12 287 7 502 Total financial assets 31 332 1 851 499 33 682 Non-financial assets Land and fixed assets 352 869 4 869 25 854 383 592 Other non-financial assets 1 748 125 19 1 892 Total non-financial assets 354 617 4 994 25 873 385 484 Total assets 385 949 6 845 26 372 419 166 less Liabilities Deposits held 466 -8 44 502 Advances received 19 -12 15 22 Borrowing 12 515 64 -766 11 813 Unfunded superannuation and other employee entitlements 3 175 98 9 3 282 Other provisions 145 47 -65 127 Other non-equity liabilities 4 152 -1 040 1 063 4 175 Total liabilities 20 473 -852 300 19 921 equals GFS Net worth 365 476 7 696 26 073 399 245 Net debt -7 365 . . . . -10 112 Net financial worth 10 859 . . . . 13 761 . . not applicable - nil or rounded to zero (including null cells)

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, 2005 (cat. no. 5514.0) and Chapter 3 of the International Monetary Fund's (IMF) Government Finance Statistics Manual 2014 (GFSM 2014).