4.21. The summary tables provide the key analysis of balance of payments and international investment position statistics. The more detailed and supplementary tables to be found in the quarterly publication (Cat. no. 5302.0), are set out in box 4.5. Descriptions and explanations of these data are shown below or in later chapters.
4.5 DETAILED AND SUPPLEMENTARY TABLES IN CAT. NO. 5302.0
|Detailed balance of payments standard components (in original, current price terms) - goods (tables 8 and 9), services (tables 18 and 19), income (tables 22 and 23), current transfers (table 24), capital account transactions (table 25), and the financial account (tables 26 and 27);|
Further disaggregated international investment position reconciliation statements (tables 28 and 29), the standard components for the international investment position reconciliation statement for the latest quarter for which data are available (tables 30 and 31), and the standard components for the investment position at end of the period (tables 32 and 33);
Seasonally adjusted and trend estimates of the current account (tables 4 and 5);
Seasonally adjusted and trend estimates of goods and services in current prices and as volume measures and the related implicit price deflators, terms of trade and fixed weighted indexes (tables 6 and 7, 10 to 17, 20 and 21);
Additional classification of general merchandise goods by commodity (tables 8 to 17);
Foreign debt transactions (table 34), levels (table 35) and interest (table 36) by detailed resident sub-sector;
Exchange rate data (table 37);
Foreign investment liabilities: capital transactions, investment income and levels of investment by industry (table 38);
Balance of payments and international investment position ratios (table 39);
Revisions to previous published data (table 40);
Historical series, starting in 1980-81 for balance of payments and 1985-86 for the international investment position (tables 41 to 43); and
Reconciliation of the BPM5-based balance of payments with the current external account of the Australian national accounts (table 44), a temporary presentation pending implementation of SNA93 in Australia’s national accounts.
Seasonally adjusted estimates
4.22. An original statistical time series is usually affected by three notional influences - seasonal, trend and irregular. Quarterly balance of payments current account and monthly goods and services series are presented on a seasonally adjusted basis. Seasonal adjustment removes the identifiable effects of normal seasonal variation so that the effects of other influences (both trend and irregular) are more clearly recognised. The term seasonal is used in a general sense to describe those influences that are observed to operate in a systematic and calendar-related manner, such as trading day patterns, holiday effects and other seasonal patterns. The production cycle of a rural commodity like wheat, in which activities such as sowing and harvesting regularly take place at the same time each year, and which therefore will be reflected in the seasonal pattern of exports of this good, is a good example of the type of influence which seasonal adjustment can remove.
4.23. Once the seasonal or calendar-related influences have been removed from the original data, only the trend and irregular components remain. The irregular element refers to changes which are attributable to irregular events such as industrial disputes that are not part of a longer trend, as well as the general lumpiness of events occurring irregularly (e.g. imports of large ships and aircraft, and variability in shipping patterns). When the seasonal element is removed, the trend and irregular elements are more readily recognised.
4.24. In cases where the removal of only the seasonal element from a seasonally adjusted series may not be sufficient to allow identification of changes in its trend, a statistical technique is used to dampen the irregular element. This technique is known as smoothing, and the resulting smoothed series are known as trend series. Box 4.6 discusses seasonal adjustment and the process of smoothing in more detail.
Chain volume measures
|4.6 TECHNICAL NOTE ON SEASONALLY ADJUSTED AND TREND ESTIMATES |
|The method used to seasonally adjust the balance of payments statistics is the SEASABS package developed by the ABS. This is based on the X-11 seasonal adjustment technique developed by the US Bureau of the Census. The general seasonal adjustment method is briefly described in the ABS publication Seasonally Adjusted Indicators (Cat. no. 1308.0), which was last published in 1983. A short description of the concepts underlying seasonal adjustment and other aspects of time series analysis can be found in the ABS Information Paper: Time Series Decomposition—an Overview (Cat. no. 1317.0), published in March 1987.|
|In Australia’s balance of payments, many current account standard components are affected to some extent by seasonal influences. Seasonally adjusted estimates are presented for goods and services in the monthly publication (Cat. no. 5368.0), and for the entire current account in the quarterly publication (Cat. no. 5302.0). While all higher level components of the current account are examined for seasonality, not all current account series are amenable to seasonal adjustment; in some instances, influences do not occur in a manner that is regular enough to be identified as seasonal (e.g. from December quarter 1995, the item non-monetary gold is not seasonally adjusted). Seasonal adjustment of the current account is also important in the wider context of the seasonally adjusted national accounts for production and income distribution. Seasonal adjustment is not attempted for any components of the capital and financial account. For the financial account the seasonal effect is likely to be swamped by the scale of the irregular influences on these series, given the types of transactions recorded in this account.|
|To maintain the accounting identity, broader monthly and quarterly aggregates such as the goods balance, the goods and services balance and the current account balance are derived through aggregation from the directly-adjusted components of the balances rather than by directly adjusting the aggregates themselves. However, the monthly and quarterly series are independently adjusted; as a consequence, monthly adjusted series do not add to quarterly series and, on occasion, show different movements.|
|Seasonally adjusted series are subject to revisions as the original series may be revised, and the seasonal factors themselves are subject to revision. The seasonal adjustment factors for the balance of payments are revised at least once a year to take account of additional original data and other information that has become available. This standard reanalysis is included in the June quarter issue of Cat. no. 5302.0 and the July issue of Cat. no. 5368.0. However, reanalyses are often undertaken at more frequent intervals when the behaviour of the series warrants.|
|Smoothing, to derive trend estimates, is achieved by applying moving averages to seasonally adjusted series. A number of different types of moving average may be used - for balance of payments quarterly series a seven term Henderson moving average is applied, while a 13 term Henderson moving average is applied to monthly goods and services series.|
|The use of Henderson moving averages invariably leads to smoother data series relative to series that have been seasonally adjusted only. The Henderson moving average is symmetric, but asymmetric forms of the average are applied as the end of a time series is approached. While the asymmetric weights enable trend estimates for recent periods to be produced, they result in revisions to the estimates when subsequent observations are available. In the monthly publication (Cat. no. 5368.0), the possible impact of the next month’s observation on the provisional trend estimates of the balance on goods and services for the latest six months can be gauged from the ‘What if?’ analysis found at the end of that publication. Revisions may arise from four factors: the availability of subsequent data, revisions to the underlying data, especially in more recent periods; re-estimation of seasonal factors; and asymmetries in the smoothing procedure.|
|For a more complete explanation of the methods of seasonal adjustment and trend estimation, the reader should refer to the ABS Information Paper: A Guide to Smoothing Time Series - Estimates of Trend (Cat. no. 1316.0). Details of trend-cycle weighting patterns and seasonal adjustment methods are available on request from the ABS. |
4.25. In addition to the current price balance of payments statistics relating to goods and services, the ABS produces chain volume measures. Chain volume measures, which will appear for the first time in the September quarter 1998 issue of Balance of Payments and International Investment Position (Cat. no. 5302.0), replace the existing constant price estimates. Current price values reflect the effect of changes in the price as well as the volume of goods and services. Chain volume measures remove the effect of price changes so that movements in the data between one period and another reflect changes in the volume of goods and services imported and exported. Chain volume measures are used to analyse changes in goods and services trade which are not directly attributable to inflationary or other pricing influences. Box 4.7 discusses chain volume measures in more detail.
4.26. Chain volume measures, expressed in dollar terms, are presented in the quarterly and annual balance of payments publications. These publications also present chain volume measures of commodities exported and imported. The reference year is the year prior to the latest complete financial year. For example, chain volume measures published in the September quarter 1998 issue of Balance of Payments and International Investment Position (Cat. no. 5302.0), will be in terms of 1996-97 dollars.
|4.7 TECHNICAL NOTE ON CHAIN VOLUME MEASURES |
|In the September 1998 issue of Balance of Payments and International Investment Position (Cat. no. 5302.0), the ABS will replace constant price estimates with annually reweighted Laspeyres volume measures. This follows the SNA93 recommendation that annually reweighted chain volume measures should be compiled to aid the analysis of economic statistics. SNA93 argues that chain volume measures provide better indicators of volume growth than constant price estimates for most economic statistics relating to expenditure and production. The ABS considered this recommendation carefully, consulted with users and undertook an empirical analysis of Australian data. The decision to adopt chain volume measures was outlined in the Information Paper: Introduction of Chain Volume Measures in the Australian National Accounts (Cat. no. 5248.0). The paper describes what chain volume measures are, their advantages and disadvantages with respect to constant price estimates, and how and when they would be implemented in the Australian national accounts and associated statistics.|
|A current price value may be thought of as being the product of a price and a quantity. By eliminating the effect of price change from the current price value, the remaining change can be attributed to changes in volume. As a consequence, although volume measures are expressed in money terms, they vary only with changes in the quantities of the goods and services transacted.|
|Two basic approaches can be taken to derive volume measures. The first, referred to as quantity revaluation, uses the quantity for an individual commodity in each period and multiplies this by the reference year average unit price. This method can be applied if the commodity is defined narrowly enough to ensure that it is homogeneous in content and free from quality changes over time (since a change in quality is considered to be a change in quantity). This approach is used for most goods exports.|
|The second approach to obtaining volume measures is referred to as price deflation. A measure of the price component of the current price value is obtained (usually in the form of a price index) and is divided into the current price value to obtain the volume measure. Relative price movements are normally more highly correlated between commodities than are relative quantity movements. Therefore, an adequate indicator of price movement can generally be obtained with less data than are required to obtain an equally adequate indicator of quantity movement (which is required in the quantity revaluation approach).|
|In some instances data constraints are such that directly relevant quantity or price data are not available to revalue a current price value. In these circumstances, a proxy series comprising quantity or price movements of related commodities may be used. One type of price index which is often used as a proxy indicator of price movement is the implicit price deflator of related commodities which have already been revalued with directly relevant quantity or price data (see box 4.8 for a description of implicit price deflators).|
|A brief description of the methods used in deriving volume measures for exports and imports follows.|
|Exports of goods|
|For about 85 per cent, by value, of export commodities, the volume measures are obtained by quantity revaluation. The volume measures of the remainder are calculated using either price indexes or implicit price deflators obtained from quantity revaluation of other components. The price indexes used include the price index for computer equipment of the U.S. Bureau of Economic Analysis, and the ABS price indexes underlying those published in Export Price Index, Australia (Cat. no. 6405.0) and Price Indexes of Articles Produced by Manufacturing Industry, Australia Cat. no. 6412.0). The volume measures of the coverage and timing adjustments, made to bring exports as recorded in international merchandise trade statistics (trade basis) onto a balance of payments basis, are derived using relevant implicit price deflators (see box 4.8 for a description of implicit price deflators).|
|Exports of services|
|Volume measures are obtained mainly by deflation of the current price values, using relevant ABS price indexes underlying those published in Consumer Price Index, Australia (Cat. no. 6401.0), Price Indexes of Articles Produced by Manufacturing Industry, Australia (Cat. no. 6412.0), Award Rates of Pay Indexes, Australia (Cat. no. 6312.0), up until March quarter 1998, and Wage Cost Index (Cat. no. 6345.0), from June quarter 1998, as well as some special purpose price indexes. Quantity revaluation is also used for some transportation services, where it is assumed that the volume of services moves in the same way as the capacity to provide the service.|
|Imports of goods|
|All volume measures are derived using detailed price indexes to deflate the corresponding current price values. Price indexes derived from price indexes underlying those published in Import Price Index, Australia (Cat. no. 6414.0), are used to deflate all but two components. The exceptions are computer equipment, for which a computer equipment price index from the U.S. Bureau of Economic Analysis is used, and other transport equipment, for which an overseas price index for rail and sea components is used.|
|Imports of services|
|In most cases, current price values of the components are deflated using consumer price indexes from overseas countries, adjusted for exchange rate changes. In all other cases, special purpose price indexes, implicit price deflators and ABS price indexes from Consumer Price Index, Australia (Cat. no. 6401.0), and Import Price Index, Australia (Cat. no. 6414.0), are used.|
Implicit price deflators
4.27. An implicit price deflator is a derived measure of price change. It is obtained by dividing a current price value by the corresponding chain volume measure. It is then multiplied by 100, and so has a value of 100 in the base year.
Chain Laspeyres price indexes
4.28. Implicit price deflators are derived using the composition of goods and services (exported and imported) in the current period. Therefore such indexes do not reflect a fixed basket of goods, so that changes in the implicit price deflator from one period to another may reflect changes in composition of the imports or exports rather than (or in addition to) price changes. However, with the introduction of implicit price deflators derived from annually reweighted chain Laspeyres volume measures, the effect of compositional change has been reduced. Box 4.8 discusses implicit price deflators in more detail.
4.29. In addition to implicit price deflators, the ABS produces annually reweighted chain Laspeyres price indexes. The chain Laspeyres price indexes are considered superior to the implicit price deflators described above. The chain Laspeyres price indexes are formed by applying current price weights for the previous year to detailed price indexes and then aggregating them.
4.30. The detailed price indexes used to form chain Laspeyres price indexes are those used to derive chain volume measures, and are drawn from ABS producer price indexes, import and export price indexes, consumer price indexes and wage and salary rates, as well as various sources outside the ABS.
Terms of trade
4.31. The implicit price deflators (IPDs) for exports and imports are used to derive Australia’s terms of trade for goods and services. They are expressed as an index, calculated by dividing the IPD for exports by the IPD for imports, with the result multiplied by 100. A rise in the index implies an improvement in a country’s terms of trade, enabling it to purchase more imports from the same amount of exports. A fall in the index implies a deterioration in a country’s terms of trade, requiring it to export more to purchase the same amount of imports. Movements in the terms of trade are used in assessing the changing purchasing power of exports over imports, analysing real income, and evaluating the level of consumption that can be sustained in the domestic economy.