5512.0 - Government Finance Statistics, Australia, 2005-06  
ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 03/04/2007   
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TECHNICAL NOTE 2 STATEMENT OF STOCKS AND FLOWS


STATEMENT OF STOCKS AND FLOWS

1 The international GFS standard as promulgated by the International Monetary Fund 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 currently 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 further 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 whilst 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 actual 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 three independently reported components (i.e. change in net worth as derived via the balance sheet, change in net worth due to transactions, and change in net worth due to other economic flows) will be consistent with each other.


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 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 Users should be aware that Australian equivalents of International Financial Reporting Standards (AIFRS) were adopted by all Australian governments in 2005-06. Ideally, all source data in a statement of stocks and flows would be compiled according to a common financial reporting framework; however opening balance sheet data in the tables below was compiled under the previous financial reporting standards, Australian Generally Accepted Accounting Principles (AGAAP). As a result, some AIFRS-related events are reflected in these tables as other economic flows. For further information on the impact of AIFRS on GFS, see Technical Note 1 on page 49 of this publication.


Commonwealth General Government - Statement of Stocks and Flows

13 During 2005-06 the net worth of the Commonwealth general government sector increased by $14,627 million. However, GFS net operating balance (which reflects the change in net worth due to transactions) was $17,992 million. There was therefore -$3,365 million of other economic flows which are explicitly shown in the statement of stocks and flows. This -$3,365 million change in net worth arising from other economic flows can be disaggregated further. The vast majority of this -$3,365 million was due to revaluations: -$3,372 million. The key driver on the liability side is unfunded superannuation and other employee entitlements ($6,648 million). On the asset side, significant impacts relate to other non-equity assets ($10,808 million) and equity (-$5,574 million). Only $7 million is explained by other volume changes; specifically, assets recognised for the first time in 2005-06.

COMMONWEALTH, General Government - Statement of Stocks and Flows

Opening Stocks
as at
June 2005
Transactions
Revaluations
Other
Volume
changes
Closing
Stock
as at
June 2006
  $m
  $m
  $m
  $m
  $m

Assets
Financial Assets
Cash and deposits
1 793
430
-46
-
2 177
Advances paid
24 539
1 647
-684
-
25 502
Investments, loans and placements
35 012
12 684
-383
-
47 313
Other non-equity assets
20 636
-
10 808
-
31 444
Equity
50 200
-
-5 574
-
44 626
Total
132 180
14 761
4 122
-
151 063
Non-financial Assets
Land and fixed assets
42 175
596
2 601
7
45 379
Other non-financial assets
189
838
-807
-
220
Total
42 364
1 434
1 794
7
45 599
Total
174 544
16 195
5 916
7
196 662
Liabilities
Deposits held
2 771
33
32
-
2 836
Advances received
-
-
-
-
-
Borrowing
67 262
-1 314
-2 533
-
63 415
Unfunded superannuation and other employee entitlements
99 335
-
6 648
-
105 983
Other provisions
4 313
-
2 108
-
6 421
Other non-equity liabilities
25 677
-516
3 032
-
28 193
Total
199 358
-1 797
9 288
-
206 849
GFS Net worth
-24 814
17 992
-3 372
7
-10 187
Net debt
8 688
-
-
-
-8 742
Net financial worth
-67 177
-
-
-
-55 786

- nil or rounded to zero (including null cells)


State and Local General Government - Statement of Stocks and Flows

14 Both the state and local tables highlight the significance of other economic flows. Though the net worth of state governments increased by $20,826 million during 2005-06, only $8,230 million of this increase can be attributed to transactions. The remainder ($12,596 million) derives from other economic flows. The largest impacts are reflected against land and fixed assets ($18,404 million) and unfunded superannuation liabilities ($14,898 million). Both of these impacts partially result from the implementation of AIFRS. The net worth of local government increased by $15,455 million during 2005-06. Only $2,580 million of this increase derives from transactions. $12,875 million of this increase comes from other economic flows, which is almost solely driven by increases in land and fixed assets.

STATE, General Government - Statement of Stocks and Flows

Opening Stock
as at
June 2005
Transactions
Other
Economic
Flows
Closing Stock
as at
June 2006
  $m
  $m
  $m
  $m

Assets
Financial Assets
Cash and deposits
8 889
2 649
-1 493
10 045
Advances paid
4 081
-251
-296
3 534
Investments, loans and placements
39 258
5 491
2 029
46 778
Other non-equity assets
15 815
141
1 798
17 754
Equity
166 606
1 416
4 253
172 275
Total
234 650
9 447
6 289
250 386
Non-financial
Land and fixed assets
275 633
4 176
18 404
298 213
Other non-financial assets
3 775
495
-261
4 009
Total
279 409
4 671
18 141
302 221
Total   
514 058
14 118
24 431
552 607
Liabilities
Deposits held
1 265
192
96
1 553
Advances received
3 901
-174
-617
3 110
Borrowing
25 720
-768
934
25 886
Unfunded superannuation and other employee entitlements
74 130
-98
14 898
88 930
Other provisions
9 299
-
17
9 316
Other non-equity liabilities
12 407
6 735
-3 493
15 649
Total
126 721
5 887
11 836
144 444
GFS Net worth                                                          
387 337
8 230
12 596
408 163
Net debt
-21 342
-
-
-29 807
Net financial worth
107 929
-
-
105 942

- nil or rounded to zero (including null cells)

LOCAL, General Government - Statement of Stocks and Flows

Opening
Stocks
as at
June 2005
Transactions
Other
Economic
Flows
Closing Stocks
as at
June 2006
  $m
  $m
  $m
  $m

Assets
Financial Assets
Cash and deposits
4 510
201
341
5 052
Advances paid
8
-3
2
7
Investments, loans and placements
4 897
301
230
5 428
Other non-equity assets
1 824
11
79
1 914
Equity
1 072
10
44
1 126
Total
12 311
520
695
13 526
Non-financial Assets
Land and fixed assets
182 041
2 153
12 614
196 808
Other non-financial assets
1 439
237
-147
1 529
Total
183 479
2 390
12 468
198 337
Total  
195 790
2 910
13 163
211 863
Liabilities
Deposits held
389
21
-12
398
Advances received
46
21
-25
42
Borrowing
5 327
192
-48
5 471
Unfunded superannuation and other employee entitlements
1 813
33
144
1 990
Other provisions
306
-
34
340
Other non-equity liabilities
1 962
64
194
2 220
Total
9 843
330
288
10 461
GFS Net worth
185 947
2 580
12 875
201 402
Net debt
-3 652
. .
. .
-4 575
Net financial worth
2 468
. .
. .
3 065

. . not applicable
- nil or rounded to zero (including null cells)


Further information

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) and Chapter 4 of the International Monetary Fund's Government Finance Statistics Manual 2001