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Chapter 17 The balance sheet

Australian System of National Accounts: Concepts, Sources and Methods
Reference period
2020-21 financial year

The balance sheet

17.1    2008 SNA defines a balance sheet as:

. . . a statement, drawn up in respect of a particular point in time, of the values of assets owned and of the liabilities owed by an institutional unit or group of units. A balance sheet may be drawn up for institutional units, institutional sectors and the total economy.⁵⁶

17.2    The ASNA provides details of the consolidated national and sectoral balance sheets. The balance sheet contains estimates of the value of some of Australia's natural resources as well as data on produced assets, and net financial claims on the rest of the world. The summary aggregate is net worth, which is defined as the difference between total assets and liabilities.

17.3    The balance sheet completes the sequence of accounts, showing the ultimate result of the entries in the production, distribution and use of income, and accumulation accounts.

Classification of assets in the balance sheet

17.4    According to the 2008 SNA, an asset must be an economic asset to be included in the national balance sheets:

  • over which ownership rights are enforced by institutional units, individually or collectively; and
  • from which economic benefits may be derived by its owner by holding it, or using it, over a period of time.

17.5    The 2008 SNA describes three types of assets that should be included in the national balance sheets:

Produced assets are non-financial assets that have come into existence as outputs from production processes that fall within the production boundary of SNA.⁵⁷

Non-produced assets are non-financial assets that have come into existence in ways other than through processes of production.⁵⁸

Financial assets consist of all financial claims, shares or other equity in corporations plus gold bullion held by monetary authorities as a reserve asset.⁵⁹

17.6    The definitions of the assets in the balance sheet are consistent with the definitions of assets in the capital and financial accounts.

17.7    The balance sheets shown in 2008 SNA as:

National balance sheet account
Non-financial assetsLiabilities to the rest of the world
 Produced assetsNet worth
  Fixed assets 
  Inventories Valuables (a) 
 Non-produced assets 
  Natural resources 
  Permissions to use natural resources 
Financial assets with the rest of the world 
Total assetsTotal liabilities and net worth
Memorandum Items 
  1. currently not compiled in the ASNA.

17.8    The financial and non-financial resources at the disposal of an institutional unit or sector shown in the balance sheet provide an indicator of economic status. These resources are summarised in the balancing item, net worth. Net worth is defined as the value of all the assets owned by an institutional unit or sector less the value of all its outstanding liabilities (including share capital). It is important to note that net worth is a balancing item and can be negative, for example if loans owed are greater than the value of assets held.

Differences between 2008 SNA and ASNA in the asset boundary

17.9    The balance sheet estimates are generally consistent with 2008 SNA recommendations, although there is one main area where the ABS has not followed the recommendations of 2008 SNA with regard to the asset boundary. This relates to the types of mineral and energy resources valued in the balance sheet. 2008 SNA defines these assets as:

. . . consisting of mineral and energy reserves located on or below the earth's surface that are economically exploitable, given current technology and relative prices.⁶⁰

17.10    The ASNA treatment of mineral and energy resources reflects the treatment adopted by Geoscience Australia for identifying Australia's mineral resources. In the ASNA, the volume of mineral and energy resources available for production is more accurately reflected by the term 'economically demonstrated resources' (EDRs), which equates to proven plus probable resources. EDRs are those resources which have a very high probability of existence, and are economically feasible to extract, given current technology and relative prices.

17.11    Further, while 2008 SNA recommends that some assets such as valuables; water resources; goodwill and marketing assets; and contracts, leases and licences be included in national balance sheets, they are not recorded in the ASNA with the exception of spectrum licences. The ASNA agrees, in principle, that these assets should be included, though at present there is insufficient data to do so.


  1. 2008 SNA, para.13.2.
  2. Ibid., para.10.9.
  3. Ibid., para.10.9.
  4. Ibid., para.3.36.
  5. 2008 SNA, para.10.179.

Valuation issues of the balance sheet

General principles of valuation

17.12    Ideally, assets should be valued based on current, observable market prices as this is the basis on which decisions by producers, consumers, investors, and other economic agents are made. In the ASNA, current prices can be approximated (in the absence of observable market prices) for balance sheet purposes in two ways:

  1. In some cases, market prices may be approximated by accumulating and revaluing acquisitions less disposals of the asset in question over its lifetime. This method has been used to value estimates of produced fixed assets as well as estimates of the value of consumer durables (the latter appears as a memorandum item in the balance sheet).
  2. In other cases, market prices may be approximated by the present, or discounted, value of future economic benefits expected from any given asset; this is the method used for mineral and energy resources and native forests in the balance sheets.

Non-financial produced assets

17.13    The principles of valuing produced non-financial assets (excluding plantation standing timber) in the balance sheet are consistent with the valuations in the ASNA capital account. These are mostly consistent with the approaches as recommended by the 2008 SNA.

17.14    The value of non-financial produced fixed assets and intellectual property products are calculated using the Perpetual Inventory Method. The end-year net capital stock for each type of asset is included in the balance sheet. The value of changes in inventories by sector type is obtained from the capital account.

Plantation standing timber

17.15    Standing timber assets include plantation and native forests (see section on non-financial non-produced assets). The 2008 SNA does not specifically identify the types of standing timber to be included in the national balance sheets, other than that the forests must be owned by an institutional unit and must bring economic benefits to their owners. All publicly-owned forests outside conservation reserves and all private forests in Australia are potentially available for timber production, either now or at some time in the future, although a number of constraints reduce the area of forest available for production.

17.16    Standing timber other than that recommended for inclusion in national balance sheets may also have an economic value according to 2008 SNA. For instance, conservation forests with timber values include national parks, wilderness areas, water catchment areas and those inscribed on the World Heritage List, such as the Lord Howe Island Group. Although these forests contain commercially viable timber, logging is prohibited so the ASNA does not include this potential timber value in its balance sheet estimates.

17.17    Forests also have a range of non-timber values, such as maintaining biodiversity, acting as a carbon sink, and preventing soil erosion. However, valuing these attributes is not within the scope of the ASNA balance sheet estimates.

17.18    As with mineral and energy resources, market transactions for forests are not common. For plantations, insurance values by tree age are considered to be an appropriate proxy for market values. However, due to a lack of data, this has been modelled since 2002. Data on plantation forest area and plantings currently comes from the ABARES publications, Australian plantation statistics (published every five years) and Australian plantation statistics update (annual publication). Prior to 1975, annual planting data was not available, and so annual plantings had to be estimated based on annual increases in total plantation area in each year up to 1975.

17.19    The estimates of the value of Australia's plantation timber resources are based on the estimated net area of forest available for production in each State and Territory. The valuation method for the different types of plantation standing timber is in line with the recommendations of 2008 SNA. Harvestings are calculated as the difference between the total plantation area and the sum of the annual plantings, over the insurance schedule. The following provides the valuations used for the two types of plantation standing timber:

  • Coniferous plantations – are valued using an insurance schedule provided by the insurance industry. The schedule shows the value of each hectare from 1 to 30 years of age (35 for South Australia, Northern Territory and Australian Capital Territory).
  • Broadleaved plantations – are also valued using insurance schedules showing the insured value of each hectare of forest according to tree age (12 years for Western Australia, 14 years for South Australia, Victoria and Queensland, and 30 years for Tasmania and New South Wales).

17.20    This approach does not fully account for net depletions in plantations due to drought, disease, land use change, fire, or other natural causes. No depletion adjustment is required where a forest is harvested sustainably.

Non-financial non-produced assets

17.21    The following section provides details on the valuation of non-financial non-produced assets, which are primarily calculated for the balance sheet.


17.22    Land is defined in the 2008 SNA as:

. . . the ground, including the soil covering and any associated surface waters.⁶¹

17.23    2008 SNA excludes from this definition any buildings or other produced structures situated on it; for example, cultivated crops, trees and livestock; mineral and energy resources; non-cultivated biological resources and water resources. Estimates for the value of land in the balance sheets include freehold and leasehold land in private hands, plus land owned by Commonwealth, State and Territory, and local governments and their business enterprises.

17.24    In principle, the value of land excludes the value of improvements (which include site clearance, preparation for the erection of buildings or planting crops and costs of ownership transfer) and buildings which fall into the scope of fixed assets. Land is valued at its current price paid by a new owner, excluding the costs of ownership transfer which are treated, by convention, as gross fixed capital formation (GFCF) and are subject to consumption of fixed capital (COFC). Because the current market value of land can vary considerably according to its location and the uses for which it is suitable or sanctioned, it is essential to identify the location and use of a specific piece or tract of land in order to value it accordingly.

17.25    When the value of land cannot be separated from the building, structure, or plantation, vineyard, etc. above it, the composite asset should be classified in the category representing the greater part of its value. Similarly, if the value of the land improvements cannot be separated from the value of land in its natural state, the value of the land may be allocated to one category or the other depending on which is assumed to represent the greater part of the value.

17.26    The tenure types of land in the ASNA are residential and non-residential land. Non-residential land includes commercial, rural, and other land. Estimates of commercial and rural land values are derived from data obtained from each of the State and Territory Valuers-General offices. These estimates are on a consistent basis with those supplied to the Commonwealth Grants Commission; that is, they represent the site value of land and are classified according to land purpose. Valuers-General value land at market prices and in practice there are several difficulties in applying observed prices to the whole of the land stock. Estimates for commercial land are allocated to the following sectors – non-financial corporations, financial corporations, and households. Rural land is allocated to the household and non-financial corporations sectors. The remaining stock of non-residential land is considered to be owned by the general government sector, and estimates are sourced directly from Government Finance Statistics (GFS).

17.27    For residential land, the ASNA uses data compiled for the ABS Residential Property Price Index (RPPI) on the value of residential dwelling stock, which includes the value of land.⁶² The estimate for residential land is the RPPI value of the dwelling stock, minus the capital estimates of the value of dwellings derived by the Perpetual Inventory Method (see Chapter 14). State and sectoral splits of residential land values are also derived from the RPPI data. The stock of residential land is allocated to the household, general government and non-financial corporations sectors. Estimates exclude vacant residential land owned by households.

17.28    Land underlying roads meets the two definitions for inclusion in the asset boundary (see paragraph 17.4). As such, land under roads is in scope of the general government balance sheet. The information used by the ASNA to value government non-residential land may include a land under roads value. Indeed, the Australian Accounting Standard (AASB 1051) specifies requirements for financial reporting of land under roads to jurisdictions. Users should be aware of the lack of consistency across jurisdictions in the initial recognition of land under roads, and in how they value it in practice. Hence, the estimates on government land should be viewed with some caution.

Mineral and energy resources

17.29    2008 SNA defines mineral and energy resources as consisting of:

. . . known reserves of coal, oil, gas or other fuels and metallic ores, and non-metallic minerals, etc., that are located below or on the earth's surface, including reserves under the sea that are economically exploitable given current technology and relative prices.⁶³

17.30    Estimates of EDRs and production of mineral resources in Australia are obtained from several sources, including Australia's Identified Mineral Resources (AIMR), published by Geoscience Australia and Australian Petroleum Statistics (APS), published by the Department of Industry, Science, Energy and Resources. Production costs are provided by a private consulting firm and are derived using company-reported financial information from a sample set of mines and industry trends. Prices are derived from several publicly available resources, including the Australian Financial Review (AFR) and the Resources and Energy Quarterly (REQ) publication, produced by the Department of Industry, Science, Energy and Resources.

17.31    The ASNA has used the net present value (NPV) approach as there are insufficient transactions in mineral and energy resources in Australia to determine market prices for these assets. Given the data constraints, this approach is considered to provide more reliable estimates than alternative approaches.

17.32    The NPV approach involves calculating the expected future net income flow generated by the asset, and then discounting this value by an appropriate interest rate over the expected life of the asset. This approach involves estimating (a) the value of net income; (b) gross output (price multiplied by production) less (c) costs (including a normal return on produced capital) over a year. This difference is taken to be the equivalent of economic rent. The future income flow has been calculated for each year and is discounted over the expected mine life to obtain a value in today's dollars. The ASNA uses a five-year lagged average to smooth prices, costs, and production.

17.33    Normal returns to produced capital are not included in economic rent as rent represents the returns from the resource only (and not returns on produced capital used to extract the resource). 'Normal' returns on capital should include a reward to cover the cost of risk and uncertainty in exploration and development, and an overall long-term risk premium to cover price volatility and the general level of inflation. Data on normal returns to produced capital are derived by the ASNA using ASNA capital stock estimates, an appropriate discount rate and extraction costs.

17.34    In the derivation of real (inflation adjusted) discount rates, the ASNA has assumed that a company's decision to commit resources (towards exploration and extraction) is significantly influenced by costs of borrowing. Consequently, the discount rate chosen has been aimed at reflecting the cost of capital, or the cost of borrowing, to the mining industry. Moreover, because the future stream of income is expressed in current dollar terms, a real (as opposed to a nominal) rate of discount is appropriate as the future income flow is calculated on the basis of current income and costs.

Native standing timber

17.35    Standing timber assets cover both native and plantation forests (see section on non-financial produced assets). As for plantation standing timber, the scope of native standing timber assets includes forests (excluding conservational) potentially available for timber production, either now or at some time in the future. Other non-timber values (such as biodiversity) are not within the scope of the national balance sheets, as discussed in the section on plantation standing timber.

17.36    Data have been obtained from the ABARES publication, Australian Forest and Wood Products Statistics, for estimating the value and proportion of private timber production and the harvesting of native forests. Forestry departments in each State and Territory provide average rotation cycles, as well as annual data on revenue earned from sales of harvested native timber under public ownership.

17.37    Native standing timber is valued differently from plantation forests as there is no suitable market price data available, proxies or otherwise. Accordingly, the ASNA has used the NPV of the future stream of royalty income to value native standing timber, based on the assumption that royalties approximate economic rent.

17.38    The estimates of the value of Australia's native timber resources are based on the estimated net area of forest available for production in each State and Territory. The valuation method for native standing timber is in line with the recommendations of 2008 SNA. The ASNA has valued native forests using the NPV method – a net value-of-production approach over the estimated rotation cycle of the forests, using an appropriate discount rate.

Radio spectrum and spectrum licences

17.39    Radio spectrum is an asset that is recognised as being of economic value from the time a licence is issued to use it. There is no specific definition for spectrum in 2008 SNA; however, spectrum licences fall under contracts, leases, and licences. More detail can be found in Chapter 17 of the 2008 SNA.

17.40    Data on the value of auctions of spectrum licences comes from the Australian Communications and Media Authority. These data are used to estimate a value for spectrum and the permission to use the natural resource, spectrum licences.

17.41    The value of the spectrum is based on the net present value method; that is, valuation involves estimating the discounted future stream of income which the asset is expected to generate beyond the life of the licence. The value of the spectrum licence is linked to an auction price.

17.42    Note the value of the spectrum is also linked to the licence price but may be higher due to a longer expected asset life. An offset, however, is required in the accounts to limit the total value that is added to net worth. In effect, the sum of the value of the two assets cannot be greater than the value of the spectrum. In practice, this approach requires that the initial value of the spectrum be reduced by the purchase value of the licence. Over time, a transfer of value between the licence and the spectrum will be recorded to ensure that overall net worth is unaffected as the licence declines in value, assuming no change in the overall value of the spectrum. The value of both the spectrum and licence may change to the extent that market conditions and expectations change following the issue of the licence. All these changes are reflected in the other changes in volume of assets account.

Financial assets and liabilities

17.43    The principles of valuing financial assets and liabilities in the balance sheet are consistent with the valuations in the financial account. Values for financial assets and liabilities are obtained from the ABS publication, Australian National Accounts: Finance and Wealth. These are mostly consistent with the approaches as recommended by 2008 SNA. For further discussion on financial accounts and financial balance sheets refer to Chapter 15.

Volume/real measures for national balance sheet

17.44    The national balance sheet is also presented in volume and real terms. Chain volume measures for the balance sheet values for produced non-financial assets are compiled in the Perpetual Inventory Method and published in the capital stock tables in both current prices and as chain volume measures. Volume estimates have also been developed for the non-produced non-financial assets presented in the national balance sheet.

17.45    Financial assets and liabilities cannot be decomposed into price and volume components, so it is impossible to derive volume indexes for them. However, it is possible to deflate income flows, and financial assets and liabilities by a price index in order to measure the purchasing power of the aggregate in question over a designated numeraire set of goods and services. Such measures are called "real" estimates.

17.46    Real net worth is derived by aggregating the chain volume estimates of the non-financial assets with the real estimates of financial assets less liabilities using the standard method of chain aggregation.

Sources and methods

17.47    Chain volume measures for produced assets are derived using the concepts, sources and methods outlined in Chapter 10. Chain volume measures for mineral and energy resources and native standing timber can be obtained as an extension of the process used to compile the current price estimates for these aggregates, as explicit price and volume information underlie the compilation of the current price estimates in the balance sheet. Effectively, unit resource rents and discount rates are kept constant to produce the volume estimates for these assets. For spectrum and spectrum licences, volume estimates are calculated by deflating the current price values using the domestic final demand implicit price deflator.

17.48    Deriving chain volume measures of land raises several important issues. Can the volume of land change over time, or is change in its value wholly due to price change? The land area of a nation does not change very much in the normal course of events. However, as volume change is also defined to include changes in quality, it seems clear that the volume of land can change due to natural processes, soil conservation, land degradation and other human activity. Urban land is more economically valuable than rural land because of the higher utility provided to urban dwellers. As urban boundaries expand and land is rezoned for urban use, it can therefore be argued that the volume of the resource changes because it is now available for higher value uses. Location is critical in determining the quality, and hence, the volume of land. For this reason, land in a central business district can be said to be of a higher quality than land in the suburbs of a city and is subject to more intensive development. The volume estimates for land are therefore compiled by assuming that land volumes do change over time. In practice, it is difficult to distinguish between price and volume changes for land. Consequently, the growth in the volume of land has been estimated by assuming that the volume of commercial land grows at half the rate of growth in the volume of the overlying non-dwelling construction, and residential land grows at one-third of the rate of growth in the volume of overlying dwelling construction. Rural land is estimated to have zero volume growth, assuming that rural land degradation, and rezoning net to zero.

17.49    Real estimates of financial assets and liabilities are derived by deflating their current price values using the domestic final demand implicit price deflator.

Reliability of the estimates of natural resources

17.50    In order to derive estimates of net worth, natural resources have been valued in monetary terms to provide a common basis for aggregation of all assets. However, the valuation of natural resources and permission to use natural resources, and the values should be interpreted with caution and used in conjunction with the physical stock data. When doing so, it must be borne in mind that the physical estimates are also subject to some uncertainty regarding the total resources which will ultimately become available for production.

17.51    The 2008 SNA acknowledges that valuation of expected net returns, resulting from the commercial exploitation of natural resources, is subject to great uncertainty and to possible considerable revision. It points out that, as ownership of these assets does not change frequently on markets, it is difficult to obtain appropriate market prices to use for valuation purposes, so that in practice it may be necessary to use the valuations which the owners of the assets place on them in their own accounts (2008 SNA, para.13.49). As such, data are not available in Australia, it is necessary for the ASNA to calculate the net present value of these resources.

17.52    Given the way that the estimates of non-produced non-financial assets are derived, only a very small proportion of the total resource is accounted for at any one time, and valuation can give a misleading impression of the size of the resource base. Monetary estimates are subject to considerable volatility, and accordingly can give a deceptively optimistic or pessimistic picture; hence, the estimates must be viewed with some caution.

Sectoral estimates

17.53    A sectoral breakdown of the national balance sheet is also provided. The ASNA identifies four domestic institutional sectors within the economy:

  • the household sector (including unincorporated enterprises and NPISHs);
  • financial corporations;
  • general government; and
  • non-financial corporations.

Transactor units are assigned to a sector according to their functional role in the economy.

17.54    The sectoral split is based on a variety of sources including published and unpublished ASNA data, taxation statistics, and data from the State and Territory Valuers-General. The sectoral estimates for non-produced assets due to inadequate data sources are derived using fixed ratios or related data as an indicator of sector ownership.

Memorandum items

17.55    Memorandum items are included in the national balance sheets to show items not separately listed as assets but are of particular interest to institutional sectors.

Consumer durables

17.56    2008 SNA defines a consumer durable as:

. . . a good that may be used for purposes of consumption repeatedly or continuously over a period of a year or more.⁶⁴

17.57    Households acquire durable goods, such as cars and electrical goods. These are not considered fixed assets and are not included in the calculation of net worth as they are not used in the production process that gives rise to household services. However, as they are goods consumed over a long period of time, it is useful to have data on these types of goods, and so they are included as a memorandum item in the national balance sheets.

17.58    Consumer durables include motor vehicles; furniture and floor coverings; household appliances; tools and equipment for house and garden; audio and visual equipment; other durable goods for recreation and culture; jewellery, clocks, and watches; and therapeutical medical appliances.

17.59    The current price estimates and price indexes are obtained from the ABS publication, Australian System of National Accounts for household final consumption expenditure. Estimates for asset lives, consumption of fixed capital and retirement patterns have been obtained from Katz and Herman (1997).⁶⁵

17.60    Consumer durables are valued using the Perpetual Inventory Method. Period to period investment is added to the consumer durables stock and retired assets and consumption of fixed capital are deducted.

Direct investment

17.61    It is analytically useful to have data on the stock of investment in Australia by non-residents and the stock of investment abroad by residents. These data come from the ABS publication, Balance of Payments and International Investment Position, Australia.

Uses of the balance sheet

17.62    The monetary estimates of natural resources contained in the balance sheet are underpinned by a dataset of physical estimates detailing levels of particular natural resources. The monetary estimates of natural resources should be considered in conjunction with the physical estimates, especially for mineral and energy resources and permission to use natural resources. The estimates provide information for monitoring the availability and exploitation of these resources and for assisting in the formulation of environmental policies.

17.63    Data on the level and composition of assets and liabilities indicate the economic resources of (and claims on) a nation, and are inputs to assessments of the nation's external debtor or creditor position.

17.64    Sectoral balance sheets provide information necessary for analysing several topics. Examples include determining household spending behaviour and liquidity and the computation of widely used ratios, such as assets to liabilities, net worth to total liabilities, non-financial to financial assets, and debt to income. The level of household saving and the household saving ratio in Australia are important analytical aggregates. Sector balance sheets provide additional information on the relationship between consumption and saving behaviour.

17.65    A quarterly balance sheet for the household sector is published in Australian National Accounts: Finance and Wealth. It permits an analysis of the short-run impact of wealth (acquisitions of assets, real holding gains and losses) on the saving and consumption behaviour of households, in conjunction with an analytical table on household income, consumption, saving and wealth. An example is how fluctuations in property prices or equity values can explain changes in quarterly household wealth, and, in turn, household saving and consumption (see paragraph 20.42 for more information). The 2008 SNA discusses household balance sheets in Chapter 24 The Household Sector (see paras. 24.73 - 24.83).


  1. 2008 SNA, para.10.175.
  2. The RPPI was published as the House Price Index (HPI)  in the House Price Indexes: Eight Capital Cities publication until the December quarter 2013 , when the title of the publication changed to Residential Property Price Indexes: Eight Capital Cities.
  3. 2008 SNA, para.10.179.
  4. 2008 SNA, para.9.42.
  5. Katz, A.J. & S.W. Herman (1997) 'Improved Estimates of Fixed Reproducible Tangible Wealth, 1929-95', Survey of Current Business, 77(5), pp.69-92.