5331.0 - Balance of Payments and International Investment Position, Australia, Concepts, Sources and Methods, 1998  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 22/09/1998   
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Direction of investment

12.7. The primary classification in direct investment statistics is the direction of investment. Investment by resident direct investors in direct investment enterprises abroad is labelled outward investment (or direct investment abroad). Investment in resident direct investment enterprises by direct investors is referred to as inward investment (or direct investment in Australia). The definitions associated with Australian direct investment abroad are symmetrical with those for foreign direct investment in Australia.

12.8. Within each direction of investment, separate data in respect of assets and liabilities are collected in the Survey of International Investment. Some cases of reverse equity investment (including reinvested earnings) do exist, although they are rare. Reverse equity investment occurs where the direct investment enterprise has an equity interest in its direct investor. If the reverse equity were below 10 per cent, to arrive at direct investment abroad (or direct investment in Australia) equity investment (and reinvested earnings) by the direct investment enterprise in the direct investor is deducted from the direct investor’s equity investment in the direct investment enterprise. If the reverse participation is at or above 10 per cent, then direct investment equity relationships are established and measured in both directions.

12.9. While instances of reverse equity participation are very rare in Australia, it is more common for direct investors to incur liabilities to their direct investment enterprises. This is recognised in the other capital component in table 12.4, where separate data are shown for direct investment assets (claims) and liabilities. In order to arrive at other capital for Australian investment abroad, liabilities are netted against assets. Similarly, in order to arrive at other capital for foreign investment in Australia, assets are netted against liabilities.


12.4
DIRECT INVESTMENT: MAJOR STANDARD COMPONENTS
Direct investment abroad

Equity capital

Reinvested earnings
(a)

Other capital
Claims on affiliated enterprises
Liabilities to affiliated enterprises

Direct investment in Australia
Equity capital

Reinvested earnings
(a)

Other capital
Claims on direct investors
Liabilities to direct investors

(a)
In tables showing the level of investment, reinvested earnings are included with equity capital.

Type of capital

12.10 Within direct investment, the distinction is maintained between equity capital (including reinvested earnings) and debt (other capital). Unless the direct investor and direct investment enterprise are both depository corporations, all debt instruments, including bonds and notes, money market instruments, derivatives, trade credit, loans, etc. between enterprises in a direct investment relationship are included in other capital.





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