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6 Because of administrative complexities and measurement difficulties, transactions between Norfolk Island and the rest of the world will not always be captured in all relevant balance of payments and international investment position statistics. Most of the transactions involving Norfolk Island are not material to Australia's trade performance and not capturing these transactions will not distort these statistics. However, any significant transactions will be identified and included in the relevant statistics.
7 An economic entity (person, organisation, or enterprise) has its centre of predominant economic interest (or residency) in Australia if it has closer association with the economic territory of Australia than any other economic territory. To have a centre of predominant economic interest in a territory is to have ownership of land or ownership of structures or to engage in production in a territory on a significant basis (generally interpreted as at least one year). An exception to this is made in determining the residency status of students as they are generally expected to return to their home economies upon completion of study. Medical patients abroad are also considered to be residents of their economies of origin regardless of the length of stay in the other economies in which they are receiving treatment.
8 In compiling the Australian balance of payments and international investment position, the Australian economy is conceived as comprising the economic entities that have a closer association with the territory of Australia than with any other territory. Each such economic entity is described as a resident of Australia. Any economic entity which is not regarded as a resident of Australia is described as a non-resident.
Resident entities include:
Non-resident entities include:
9 Foreign direct investment statistics are presented according to the directional principle rather than asset/liability principle. Under the directional presentation, the direct investment flows and positions are organised according to the direction of the investment for the reporting economy—either outward or inward. So, for a particular country, all flows and positions of direct investors resident in that economy are shown under outward investment and all flows and positions for direct investment enterprises resident in that economy are shown under inward investment. The diagram below illustrate how outward and inward investment are compiled.
10 Reverse investment is when an affiliate invests in its parent. Under the directional presentation, reverse investment is subtracted to derive the amount of total outward or inward investment of the reporting country. So, if a resident parent borrows money from one of its foreign affiliates, this is subtracted in calculating the reporting country’s outward investment because it reduces the amount of money that the resident country’s parent entity have invested in their foreign affiliates on a net basis. Similarly, if a resident affiliate lends money to its foreign parent, this is subtracted when calculating inward investment because it reduced the amount of money that the foreign parent has invested in the resident country on a net basis. While reverse equity investment is to be treated the same way as reverse debt investment, it is so rare that most of the difference between the two presentations is due to differences in the treatment of reverse debt investment.
TOTAL DEBT AND EQUITY LEVELS
11 Total debt levels shown for foreign investment in Australia (table 2) and Australian investment abroad (table 5) are recorded on a gross basis for liabilities and assets. Total equity levels shown for foreign investment in Australia (table 2) and Australian investment abroad (table 5) are recorded net of any reverse investment by a direct investment enterprise (affiliate) in its direct investor (parent) (see paragraph 9 above). Hence, total debt levels for foreign investment in Australia (table 2) and Australian investment abroad (table 5) will differ from the sum of the debt instruments in table 2 and table 5 respectively, while the total equity levels are the sum of direct investment equity and portfolio investment equity in each case.
PORTFOLIO EQUITY LIABILITIES - TRANSACTIONS AND INCOME
12 Most portfolio equity liabilities are measured through a different process to other instruments and portfolio equity assets. This process allows the ABS to determine the levels of portfolio equity liabilities by country (table 2). The process does not provide information on transactions in portfolio equity liabilities (table 1) or income accrued on these liabilities (table 3) and results in the unallocated category being a significant proportion of the total.
13 The industry categories shown are based on the Australian and New Zealand Standard Industrial Classification (ANZSIC), 2006 (cat. no. 1292.0). Industry statistics should be treated with some caution as they do not necessarily reflect the industry of the end use of the funds. First, the statistical unit (that is, the unit of observation and classification) generally consists of all enterprises in an enterprise group within a single resident institutional sector. The industry of this statistical unit, which may cover a broad range of activities, is determined on the basis of the predominant activity of the unit as a whole which may be quite different from the industry in which funds are used. Second, financial enterprises such as trading and merchant banks, may borrow funds as principals and then on-lend to clients in other industries.
CARE TO BE EXERCISED
14 Care should be exercised in interpreting country data. The country allocation of financial transactions and levels is based on the immediate country of residence of the creditor in the case of Australia's foreign liabilities, or of the debtor in the case of Australia's foreign assets. The country of residence of the ultimate beneficial owner/recipient is not identified.
RELATED PRODUCTS AND SERVICES
15 Users may also wish to refer to the following publications which are available on the ABS web site:
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