1370.0 - Measuring Australia's Progress, 2002
ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 19/06/2002
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ASSETS USED IN PRODUCTION - PRODUCED CAPITAL Machinery, buildings and some other assets are inputs to the production of goods and services, and are an important repository of a nation's wealth. Australia's stock of these assets has been growing for many years. Real net capital stock per capita grew on average by 1.4% a year between June 1991 and June 2001. In June 2001, such fixed assets accounted for around 51% of the total value of Australia's assets (down from 59% a decade earlier).(SEE FOOTNOTE 1) The increase in capital stock has in turn led to an increase in the amount of capital services per unit of labour input (a process known as 'capital deepening'). During the past decade, Australia's capital-labour ratio rose by almost 35% (or 3% a year). This has contributed to an increase in labour productivity. The growth of a nation's net capital stock depends on the relative pace of two offsetting influences - investments (or 'capital formation') which increase the stock, and retirements and depreciation which reduce it. Investments significantly outstripped retirements and depreciation during the 1990s, as was the case for most of the twentieth century. Underlying the aggregate growth pattern there may be diverse trends, such as more or less rapid capital deepening in individual industries or shifts in the composition of economic activity toward industries that are more or less capital intensive. Technological changes - for example, the recent rapidly increasing importance of computer and communications hardware and software - have been a major driver of such trends. Between 1991 and 2001, the types of capital showing the most rapid growth were dwellings (up 2.1% a year), machinery and equipment (up 1.4% a year) and software (up 16.2% a year). The commentary Capital formation discusses the investment trends that underlie these growth patterns. Between 1991 and 2001, the industries showing the most rapid growth in capital stock were Communication services (up 4.8% a year in real per capita terms) and Cultural and recreational services (up 5.8% a year). Real net capital stock(a) per capita
Source: Australian System of National Accounts.(SEE FOOTNOTE 1)
Source: Australian System of National Accounts.(SEE FOOTNOTE 1) Economically demonstrated resources(a) per capita
SOME NATURAL ASSETS - MINERAL AND ENERGY RESOURCES Australia has many types of natural assets. Air, water, soil, and biodiversity resources are discussed in other commentaries. Subsoil assets, discussed below, are of major economic significance. In recent years, there has been persistent growth in Australia's known mineral resources. The net present value of economically demonstrated resources (EDR) per capita grew on average by around 10.6% a year between June 1991 and June 2001. For comparison, between June 1992 and June 2001 (the longest period for which estimates are available) the real per capita value of Australia's subsoil assets grew by a little over 2.6% a year. The growth of a nation's stock of subsoil assets broadly depends on the relative pace of two offsetting influences - discoveries which increase the stock, and extractions which reduce it. The former significantly outstripped the latter during the 1990s, as was the case for most of the twentieth century. But because the value of subsoil assets is defined in terms of EDR (see box), other influences come into play. There might, for example, be a marked rise in the world price for a mineral or a technological innovation that makes it economic to extract a known deposit that was hitherto uneconomic. At the end of the decade, Australia had the world's largest demonstrated resources of lead, certain mineral sands (alluvial ilmenite, rutile and zircon), tantalum, uranium, silver and zinc. And Australia ranked among the top six countries for many other minerals such as black and brown coal, bauxite, copper, cobalt, diamonds, gold, iron ore, manganese ore and nickel. Among the minerals showing strongest annual growth in the net present value of EDR per capita between 1991 and 2001 were iron ore (up 47%), magnesite (up 22%) and black coal (up 21%).
Source: Australian System of National Accounts.(SEE FOOTNOTE 1)
EXTERNAL LIABILITIES - FOREIGN DEBT In recent years, Australia's debt to the rest of the world has increased. Real net foreign debt grew on average by 6.3% a year between June 1991 and June 2001.(SEE FOOTNOTE 2) Some of Australia's foreign debt has financed the acquisition of capital goods and other assets that can be used to generate future income and support future consumption; some debt has financed current consumption. The growth in a country's foreign debt can reflect several related influences. The value of its imports and other current payments to foreigners may outstrip the value of its exports and other current receipts from foreigners - the nation experiences a deficit on its current account. An alternative view is that the saving of a country's residents may be outstripped by its needs for investment - i.e. the country experiences a shortfall in saving. Current account deficits and saving shortfalls are conceptually the same phenomenon; they may be financed by, say, selling equity in enterprises to residents of other countries, or by borrowing from residents of other countries, or by running down financial assets held abroad. Foreign holdings of Australian equity and debt were both rising through much of the twentieth century. Australia must pay income (dividends or interest) on both forms of liability to foreign residents. However, if by incurring those liabilities Australia has been able to acquire capital or other assets that will enhance its productive capacity and income-generating potential, then the increased liabilities may not on balance have a deleterious impact on progress. The public sector and private sector components of foreign debt showed markedly different trends during the past decade. The real net foreign debt of the public sector rose from $38.5b in June 1991 to a peak of $74.1b in June 1995. Thereafter, it fell and reached $10.5b in June 2001. The real net foreign debt of the private sector, after having been fairly steady at around $120-130b in the first half of the 1990s, rose throughout the second half of the decade to reach $290.3b in June 2001. Real net foreign debt(a) - June 1991 to June 2001
Source: Balance of Payments and International Investment Position.(SEE FOOTNOTE 2)
FOOTNOTES 1 Unless otherwise indicated, all data in this commentary are derived from Australian Bureau of Statistics 2001, Australian System of National Accounts 2000-01, Cat. no. 5204.0, ABS, Canberra. 2 All data in this segment of the commentary are derived from Australian Bureau of Statistics 2001, Balance of Payments and International Investment Position, Australia, Cat. no. 5302.0, ABS, Canberra.
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