5331.0 - Balance of Payments and International Investment Position, Australia, Concepts, Sources and Methods, 1998  
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Contents >> Chapter 3. Classifications >> Standard balance of payments classification

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.

Current account

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.

3.6. Services comprise services provided between Australian residents and non-residents, together with some transactions in goods where, by international agreement, it is not practical to separate the goods and services components (e.g. goods purchased by travellers are classified to services).

Income

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.

3.1 CURRENT ACCOUNT: STANDARD COMPONENTS
CreditDebit

Goods and services
Goods
General merchandise
Goods for processing
Repairs on goods
Goods procured in ports by carriers
Non-monetary gold
Services
Transportation
Travel
Communication services
Construction services
Insurance services
Financial services
Computer and information services
Royalties and licence fees
Other business services
Personal, cultural and recreational services
Government services, n.i.e.

Income
Compensation of employees
Investment income
Direct investment
Portfolio investment
Other

Current transfers
General government
Other sectors


Current transfers

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.


3.2 CAPITAL AND FINANCIAL ACCOUNT: STANDARD COMPONENTS
CreditDebit

Capital account
Capital transfers
Acquisition / disposal of non-produced, non-financial assets
Financial account
Direct investment
Abroad
Equity capital
Reinvested earnings
Other capital
In Australia
Equity capital
Reinvested earnings
Other capital

Portfolio investment
Assets
Equity securities
Debt securities
Liabilities
Equity securities
Debt securities

Other investment
Assets
Trade credits
Loans
Currency and deposits
Other assets
Liabilities
Trade credits
Loans
Currency and deposits
Other assets

Reserve assets
Monetary gold
Special Drawing Rights
Reserve position in the IMF
Foreign exchange

Foreign exchange

Capital 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.

Financial account

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.





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