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3.3. The standard balance of payments classification comprises two main groups of accounts -the current account and the capital and financial account. Transactions classified to the current account include goods and services, income and current transfers. Within the capital and financial account, the capital account includes capital transfers and the net acquisition or disposal of non-produced, non-financial assets. The financial account includes transactions in financial assets and liabilities. Transactions in current account and capital account items are generally shown on a gross basis (gross debits and credits separately). Transactions in financial account items are mainly recorded on a net basis.
3.4. Table 3.1 shows the standard classification of the current account. Each of the broad categories is described briefly below, while individual component items are described in detail in subsequent chapters.
Goods and services
3.5. Goods and services are divided into separate accounts for goods and services. Goods comprise most movable goods that change ownership between Australian residents and non-residents. Separate entries are shown for general merchandise, goods for processing, repairs on goods, goods procured in ports by carriers, and non-monetary gold. In Australian balance of payments statistics, general merchandise is further classified by commodity.
3.7. Income refers to income earned by Australian residents from non-residents and vice versa. Income covers compensation of employees and investment income. Compensation of employees comprises wages, salaries and other benefits earned by individuals from economies other than those in which they are residents, as well as earnings from extraterritorial bodies such as foreign embassies, which often employ staff from the economy in which they are located. Investment income comprises income earned from the provision of financial capital and is classified by direct, portfolio and other investment income.
3.8. Transfers represent offsets to the provision of resources between residents and non-residents with no quid pro quo in economic value (for example, the provision of food aid). Current transfers are distinguished from capital transfers, which are included in the capital account. Current transfers represent the offset to the provision of resources that are normally consumed within a short period (less than twelve months) after the transfer is made. In the example of food aid, the food is presumed to be consumed within twelve months of it being received. The classification of current transfers is by general government and other sectors.
Capital and financial account
3.9. The capital and financial account of Australia’s balance of payments is divided into the capital account and the financial account. Table 3.2 outlines the standard classification of this account.
3.10. The capital account comprises both capital transfers and the acquisition and disposal of non-produced, non-financial assets (such as copyrights). The latter includes land purchases and sales associated with embassies and other extraterritorial bodies. Capital transfers entries are required where there is no quid pro quo to offset the transfer of ownership of fixed assets, or the transfer of funds linked to fixed assets (e.g. aid to finance capital works), or the forgiveness of debt. It also includes the counterpart to the transfer of net wealth by migrants, referred to as migrants’ transfers.
3.11. The financial account comprises transactions associated with changes of ownership of Australia’s foreign financial assets and liabilities. The main classifications used in the financial account are discussed in conjunction with the international investment position classification in paragraphs 3.15 onwards.