5512.0 - Government Finance Statistics, Australia, 2004-05  
ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 29/03/2006   
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1 The international GFS standard as promulgated by the International Monetary Fund recommends that opening and closing 'stock' values be reconciled with all 'flows' occurring throughout the year. The standard is based on an analytical framework in which all changes in the values of stocks from one year to the next can be fully explained by the flows that have occurred during that year.

2 Institutional units hold assets (financial and non-financial) and incur liabilities (which by definition are financial). The level of these assets and liabilities at any point in time is the stock. The difference between assets and liabilities is Net Worth, which is a measure of the 'wealth' of units or of government. Anything which causes a change in these stocks of assets and liabilities is a flow. Flows are disaggregated into transactions and 'other economic flows'. A transaction is, for the most part, an interaction between two units by mutual agreement, whereas an 'other economic flow' is a change in the volume or value of a stock of a unit not resulting from a transaction.

3 By definition, the value of a stock at the end of a period is the sum of the stock at the beginning of the period and all the flows affecting that stock which took place during the period. This can be expressed by the identity, Equation: Tech Note Eq, where S0 and S1 represent the values of a specific stock at the beginning and end of an accounting period respectively and F1 represents the net value of all flows during the period relevant to that particular stock.

4 Statistics on transactions giving rise to revenues and expenses are currently published as part of the GFS Operating Statement. Revenues are defined as transactions which increase Net Worth whereas expenses are transactions which decrease Net Worth. The difference between revenues and expenses, therefore, represents the change in Net Worth due to transactions. This equates to the GFS Net Operating Balance.

5 'Other economic flows' can be further disaggregated into movements in asset/liability values resulting from price changes ('revaluations') and those resulting from volume changes ('other volume changes').

6 Revaluations result from changes to the value of the assets and liabilities whilst held. Revaluations can accrue to financial assets such as bonds and bills, shares and other forms of equity, as well as non-financial assets such as land and buildings.

7 Other volume changes refer to events that include:

  • the recognition or de-recognition of assets or liabilities on the balance sheet - e.g. when resources become economically exploitable, or when an asset is no longer providing an economic benefit, and so is removed from the balance sheet.
  • changes in the quantity or quality of the existing asset - these typically result from catastrophic losses through natural disasters, changes in the volume of natural assets such as fish or forest stocks, creation, discovery, cancellation or seizure of assets, or quality differences arising from events such as a change in the expected life of the asset.
  • changes in the classification of assets - these usually arise when the use of an asset changes, e.g. if the use of a parcel of public land changes from recreational use to industrial use.

8 The net effect of all revaluations and other volume changes occurring through the year represents the change in Net Worth due to 'other economic flows'.

9 Since the values of stocks at the end of a year must be equal to their values at the start of a year plus all transactions and 'other economic flows' affecting them during the year, it follows that the total change in Net Worth during a given year is equal to the change in Net Worth due to transactions, plus the change in Net Worth arising from 'other economic flows'.

10 When working with actual reported data, it is often assumed that the difference between opening and closing Net Worth and the change in Net Worth due to transactions is attributable to the change in Net Worth due to 'other economic flows' (i.e. 'other economic flows' is effectively used as a balancing item). However, to ensure data quality it is necessary to independently collect and calculate the change in Net Worth due to 'other economic flows'. In situations where the reported data do not add through, it is not necessarily the case that the data quality issue is in the 'other economic flows' component of the framework. Where data quality is high throughout the reported data set, the three independently reported components (i.e. change in Net Worth as derived via the balance sheet, change in Net Worth due to transactions, and change in Net Worth due to 'other economic flows') will be consistent with each other.

11 The significance of 'other economic flows' can be seen by referring to the Commonwealth general government sector Statement of Stocks and Flows for 2004-05 shown below. During that year, the Net Worth of the Commonwealth general government sector increased by $4,677 million. However, GFS Net Operating Balance (which reflects the change in Net Worth due to transactions) was $11,097 million. There is therefore -$6,423 million of 'other economic flows' which are explicitly shown in the Statement of Stocks and Flows. This -$6,423 million change in Net Worth due to 'other economic flows' can be disaggregated further: -$5,262 million was due to revaluations whereas -$1,161 million was due to other volume changes. The decrease in Net Worth due to other volume changes was caused by a $1,792 million other volume change to 'other non-equity liabilities', due to a change in recognition of family tax benefits and some other expenses from a cash to accrual basis. Offsetting this was a $631 million other volume change to 'land and fixed assets', due to the initial recognition of land, buildings, infrastructure and inventories.

Commonwealth, General Government - Statement of Stocks and Flows

Opening Stock as at June 2004
Other Volume Changes
Closing Stock as at June 2005

Financial Assets
Cash and deposits
1 572
1 793
Advances paid
23 113
1 140
24 539
Investments, loans and placements
24 188
11 015
35 012
Other non-equity assets
20 571
20 636
49 560
50 200
119 004
12 369
132 180
Non-financial Assets
Land and fixed assets
40 284
2 062
42 175
Other non-financial assets
40 481
1 097
42 364
159 484
12 523
1 903
174 544
Deposits held
2 591
2 771
Advances received
65 892
1 234
67 262
Unfunded superannuation and other employee entitlements
96 617
2 718
99 335
Other provisions
3 768
4 313
Other non-equity liabilities
20 938
1 144
2 634
1 792
26 508
189 806
1 426
7 165
1 792
200 189
GFS Net worth
-30 322
11 097
-5 262
-1 161
-25 645
Net debt
19 610
8 688
Net financial worth
-70 803
-68 008

- nil or rounded to zero (including null cells)
na not available

12 ABS has compiled and published an integrated Statement of Stocks and Flows for 2004-05 for the Commonwealth general government sector only. In the 2005-06 release of this publication, ABS proposes to extend this analysis to each of the States.

13 ABS would welcome feedback on the usefulness of this presentation and these statistics as this new work progresses.

14 For more information on the Statement of Stocks and Flows, refer to Table 2.1 in Australian System of Government Finance Statistics: Concepts, Sources and Methods (cat. no. 5514.0) and Chapter 4 of the International Monetary Fund's Government Finance Statistics Manual 2001.