5310.0.55.002 - Information Paper: Implementation of new international statistical standards in ABS National and International Accounts, September 2009
ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 28/10/2009 First Issue
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CHAPTER 13 OTHER VOLUME CHANGES DUE TO CHANGES IN RESIDENCY
Migration is the movement of a household unit from one economy to another for an intended period of more than one year. Migrants are covered in the calculation of Net Overseas Migration for population estimates, however the movement of their personal effects, assets and liabilities need to be accounted for. Under Balance of Payments Manual fifth edition (BPM5), this wealth was treated as a capital transfer and limited to personal effects and assets carried across the border. The Balance of Payments and International Investment Position Manual sixth edition (BPM6) revises the treatment of the transfer of assets and liabilities of persons and other entities changing their economy of residence.
Migrants are defined as individuals (excluding students, medical patients or diplomatic, military or similar personnel stationed abroad) who move to a new country with the intention to stay there for more than one year. Under BPM5 the transfer of assets by persons changing residency status was classified as 'migrant transfers' and were treated as transactions in the capital account. In principle, migrants' transfers include all the net worth of the migrant in his or her former persona as a non-resident (immigrant) or resident (emigrant). The net worth of an individual includes their household and personal effects, movable capital equipment, funds transferred by the migrant at the time of change of residency, and the ownership of real estate and investments, less any liabilities. 'Migrant transfers' are included in the Balance of Payments (BoP) and International Investment Position (IIP), Australia (cat. no. 5302.0) as a capital transfer.
BPM6 recommends that financial assets and liabilities of persons changing residency be added to or removed from the IIP through a reclassification (Other volume change in the reconciliation account). Assets and liabilities belonging to persons changing residency status are not imputed as a transfer because there has been no transaction between two entities, but rather a change in the residency status of a single entity. The treatment of change in residence applies to all the financial assets and liabilities, not just those that are shifted to the new economy of residence. When persons change their residence to a different economy, their financial assets that represent claims on residents of other economies, including their previous economy of residence, will be reclassified through other changes in volume of assets of the new economy of residence. Similarly, any assets that represent claims on residents of their new economy of residence will be reclassified through other changes in volume to resident-to-resident positions. Liabilities will be reclassified in the same way. Migrant transfers will no longer appear as a category in capital transfers.
A new methodology will be developed to estimate the addition or removal of these assets and liabilities between Australia and other economies. This new data series will be included under foreign assets and foreign liabilities reconciliations, tables 26 and 27 of the Balance of Payments and International Investment Position, Australia (cat. no. 5302.0). The new classification and estimation methodology will also be applied in the Australian System of National Accounts (ASNA).
An estimate of the number of households arriving and departing permanently will be required to avoid allocating household assets to every man, woman and child that changed residency. For arrivals, the proportion of primary applicants to total arrivals will be used to determine the number of households arriving. This information was obtained from the Department of Immigration and Citizenship (DIAC) . Household formation rates by age group from the ABS publication Household Wealth and Wealth Distribution (cat. no. 6554.0), will be applied to departures to determine the number of households departing.
Household assets in the National Accounts are classified into financial and non-financial assets with property (dwellings and land) included as non financial assets. The national accounts household balance sheet shows property representing about 60% of household assets. BPM6 requires the creation of a notional resident unit as an owner of the land and buildings. This notional resident unit then is defined as a quasi-corporation. This treatment is designed so that land and other non-relocatable assets such as natural resources are always assets of the economy in whose territory they are located. Otherwise, the land would appear in another economy’s national balance sheet. Therefore property assets (dwellings and land) will be included as part of equity in non-resident unincorporated corporations. SNA08 treatment will be the same.
Based on asset transfer information obtained from the third Longitudinal Survey of Immigrants to Australia, about 60% of settler arrivals transfer assets during their first year of stay. It will be assumed that all permanent migrants transfer or otherwise dispose of foreign held assets within two years of migration. The initial 'other change' and resulting position will be amortised through transactions over a two year period.
It will be assumed that the same pattern of transfer and disposal applies to resident permanent departures as there is no information about the transfer of assets by residents.
Permanent arrivals and departures data was obtained from official demographic estimates. Each September, the ABS releases the annual publication Migration, Australia (cat. no. 3412.0), which revises migration counts and gives consideration to migrants that change their stay intentions (category jumpers). The section can also provide country of origin and destination information.
Information from the Longitudinal Survey of Immigrants to Australia conducted by DIAC, available at www.immi.gov.au, was used to obtain transfer of assets information. This is a survey of approximately 10,000 primary applicants who arrived in Australia between December 2004 and March 2005 from the family and skill stream, and comprises two survey waves. Wave 1 was conducted in August 2005 (approximately 6 months after arrival or grant of visa). Migrants were then surveyed again 12 months later (wave 2). Wave 2 information is used as applicants remaining in Australia for 12 months or more are considered residents for BoP purposes.
The ABS Household Income and Expenditure Survey is a sample survey conducted in 2003-04 and 2005-06 of around 10,000 households out of around 8 million households in total. The same household formation rates and asset and liability values by age groups were used in other volume changes due to residency changes, published in the Household Wealth and Wealth Distribution (cat. no. 6554.0).
National Accounts compiles household assets and liabilities information by asset type. This information is available from ABS publication Australian System of National Accounts (cat. no. 5204.0).
Implementation and Methodology
Other volume changes
The following methodology estimates the value of financial plus property assets and liabilities of persons changing residency permanently. Students, defence personnel, diplomats and refugees will be removed from the migration data as these persons are deemed not to change residency status under BPM6. Assets are classified into direct equity (60%), portfolio equity (30%) and currency & deposits (10%). All liabilities will be classified as loans.
To avoid double counting, assets and liabilities accounted for elsewhere will be adjusted. For example, liabilities held in pension funds for non residents will be deducted from total liabilities due to their inclusion as technical reserves in other parts of the international investment position. Similarly assets held by residents in non-resident pension funds will be deducted from total assets held by residents.
The main countries of origin for arrivals are the United Kingdom, New Zealand, China and India, and the main destination countries for departures are the United Kingdom, New Zealand, the United States of America and Hong Kong.
Based on asset transfer information obtained from the third Longitudinal Survey of Immigrants to Australia, about 60% of settler arrivals transfer assets during their first year of stay. It will be assumed that all permanent migrants transfer or otherwise dispose of foreign held assets within two years of migration. The initial 'other change' and resulting position will be amortised through transactions.
Immigrants (Non-resident movements)
Other volume changes
Assets of Immigrants = (In scope primary applicant arrivals of professional/manager type visa class * mean of immigrant assets) + (primary applicant family type visa class * mean of immigrant assets)
Liabilities of Immigrants = (In scope primary applicant arrivals of professional/manager type visa class * their mean assets) + (primary applicant family type visa class * their mean liabilities)
These asset and liability figures are then allocated to the asset types and countries of origin.
Following the assumption that assets are transferred to Australia over two years after their arrival, transactions are:
Transactions due to immigrant asset transfers = - 60% of current year other volume changes - 40% of previous years other volume changes
Transactions due to immigrant liability transfers = - 60% of current year other volume changes - 40% of previous years other volume changes
Emigrants (Resident movements)
Other volume changes
Numbers of persons departing will be converted to households, using household formation rates by age group.
Assets of Emigrants = Household departing by age group * asset values for age group by households
For liabilities of emigrants, numbers of persons departing are converted to households, using household formation rates by age group.
Liabilities of Emigrants = Household departing by age group * mean liability values for age group by emigranthouseholds
These asset and liability figures are then allocated to the asset types and countries of destination.
Transactions due to emigrant asset transfers = - 60% of current year other volume changes - 40% of previous years other volume changes
Transactions due to emigrant liability transfers = - 60% of current year other volume changes - 40% of previous years other volume changes
Other volume changes in 2007-08 will increase foreign assets by about $8.7 billion and transactions from previous migration will be about -$8.6 billion. The large increases in other volume changes and transactions in from 2003-04 onwards coincides with an increase in population due to net overseas migration, especially permanent settlers.
Other volume changes in 2007-08 will increase foreign liabilities by about $3.8 billion and transactions from previous migration will be about -$3.7 billion. The increase in liabilities coincides with increasing rates of permanent departures and liabilities that are carried from increasing permanent settlers to Australia.
Figure 2 - Foreign liabilities, other volume changes and transactions from permanent residency changes
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