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Balance of Payments and International Investment Position, Australia methodology

Reference period
March 2020
Released
2/06/2020

Explanatory notes

Introduction

This publication contains comprehensive estimates of Australia's international accounts statistics, including the Balance of Payments (BoP) and International Investment Position (IIP).

The conceptual framework used in compiling Australia's international accounts statistics is based on the International Monetary Fund's Balance of Payments and International Investment Position Manual, Sixth Edition (BPM6). Descriptions of the underlying concepts and structure of the BoP, IIP and the sources, methods and terms used in compiling estimates are presented in the publication Balance of Payments and International Investment Position, Australia: Concepts, Sources and Methods (cat. no. 5331.0).

The BoP and IIP for an economy summarise the economic relationships between residents of that economy and the rest of the world. They comprise:

  • the balance of payments, which summarises transactions between residents and non-residents during a specific time period
  • the international investment position, which shows at a point in time, the value of financial assets of residents of an economy that are claims on non-residents or are gold bullion held as reserve assets and the liabilities of residents of an economy to non-residents
  • the other changes in financial assets and liabilities account, a statement that shows other flows, such as valuation changes, which reconcile the BoP and IIP for a specific period by showing changes due to economic events other than transactions between residents and non-residents.
     

Relationship between BoP and IIP

Diagram: This image shows the relationship between the Balance of Payments system and the International investment position

Relationship between BoP and IIP

An image of two rectangles, one representing the balance of payments and the other representing international investment position. These rectangles overlap in the financial account area.

The balance of payments begins at the top of the image, descending down, with the current account box. Within current account are 5 sub headings: goods, services, primary income and secondary income. Within each of these categories fall credits and debts. At the end of this section is balance on current account.

The next box is capital account. Within capital account are acquisitions/disposals of non-produced non-financial assets, and capital transfers. At the end of this section is balance on capital account.

The next box is financial account. Within financial account are 5 subheadings: direct investment, portfolio investment, financial derivatives, other investment, and reserve assets. Underneath the first 4 subheadings (direct investment, portfolio investment, financial derivatives, and other investment) fall assets and liabilities. At the end of this section is balance on the financial account. Note, this section overlaps with international investment position.

The final box contains net errors and omissions.

The international investment position begins on the left side of the image, moving right, with position at beginning of period. Within position at beginning of period are 2 subheadings: assets and liabilities. Under each of the headings are direct investment, portfolio investment, financial derivatives, other investment, and reserve assets. At the end of this section is net international investment position.

The next box is financial account. Within financial account are 5 subheadings: direct investment, portfolio investment, financial derivatives, other investment, and reserve assets. Underneath the first 4 subheadings (direct investment, portfolio investment, financial derivatives, and other investment) fall assets and liabilities. At the end of this section is balance on the financial account. Note, this section overlaps with balance of payments.

The next box is other changes in position. Within this are market price changes, exchange rate changes, and other volume changes.

The final box contains position at end of period. Within position at beginning of period are 2 subheadings: assets and liabilities. Under each of the headings are direct investment, portfolio investment, financial derivatives, other investment, and reserve assets. At the end of this section is net international investment position.

Below the image is the text: opening stock plus transactions plus other changes equals closing stock.

Balance of payments

The BoP is a statistical statement that systematically summarises the economic transactions of an economy with the rest of the world for a specific time period. It also draws a series of balances between inward and outward transactions, provides an overall net flow of transactions between Australian residents and the rest of the world and reports how that flow is funded.

BoP statements cover a wide range of economic transactions which are classified into:

  • the current account, which measures exports and imports of goods and services, primary income and secondary income
  • the capital account, which records acquisitions/disposals of non-produced, non-financial assets and capital transfers
  • the financial account, which records transactions in foreign financial assets and liabilities (such as shares, bonds and loans) between residents and non-residents.
     

The BoP uses the double entry system of accounting. In principle, the sum of all credit entries is identical to the sum of all debit entries and the net balance of all entries in the BoP is zero. However, for any intermediate balance drawn from a selection of items, it is possible for credit entries to exceed debit entries and vice versa.

The balance on current account is derived by aggregating all relevant transactions (i.e. trade in goods, trade in services, primary income and secondary income). A balance is said to be in surplus if credit entries exceed debit entries or in deficit if debit entries exceed credit entries.

A summary of Australia's BoP can be found in table 1 of Balance of Payments and International Investment Position, Australia (cat. no. 5302.0).

Net errors and omissions

In theory, the sum of transactions recorded in the current account is equal to the sum of all transactions recorded in the capital account and financial account. In practice, this is not usually the case. Data sources used to compile the accounts measure different components and may not always do so consistently. Some transactions are not measured accurately and some are not measured at all. This difference is known as the net errors and omissions.

International investment position

The IIP measures the stock of Australia's foreign financial liabilities and foreign financial assets at a point in time. The difference between foreign financial liabilities and foreign financial assets is referred to as Australia's net IIP.

The IIP may be split to separately show Australia's foreign debt and equity positions. The latter provides a measure of the foreign ownership of Australian enterprises (through share holdings) and Australian ownership of foreign enterprises. Viewed more broadly, the IIP provides a reconciliation of the stock of investment at two points in time.

Classifications such as assets and liabilities, type of investment (direct investment, portfolio investment, financial derivatives, other investment and reserve assets) and instrument of investment are used consistently in both the BoP and the IIP.

Financial transactions which are included in the reconciliation statement of the IIP are the transactions measured in the financial account of the BoP. For the relevant accounting period, the financial account shows the financial transactions which arise from, or are the counterparts to, the transactions in the current and capital accounts. It also reflects the change in Australia's IIP over the reference period due to transactions in financial assets and liabilities.

A summary of Australia's IIP can be found in tables 2 and 3 of Balance of Payments and International Investment Position, Australia (cat. no. 5302.0).

Concepts

Sign convention

BoP credit entries are shown with an implied positive sign and debit items are shown as negative entries. References to BoP debit items in Key Points and the Analysis and Comments sections in the publication are made without regard to sign. The ABS does not follow the sign convention detailed in BPM6. The BPM5 approach for the financial account has been retained so that the total transactions of the BoP plus the net errors and omissions add to zero.

For foreign liabilities, position data and any transaction increase (BoP credits) or increase in other flows in liabilities is shown without sign. A negative sign for transactions (BoP debits) and other flows in liabilities denotes a fall in liabilities. For foreign assets, position data and any transaction increase (BoP debits) or other flow increase in assets is shown with a negative sign. Transactions (BoP credits) and other flows in assets shown without sign denote a decrease in assets.

Movements over time are expressed as percentage changes. A minus sign means either a decrease in credit entries, a decrease in the magnitude of debit entries, a decrease in a surplus or an increase in the magnitude of a deficit. The absence of a sign means either an increase in credit entries, an increase in debit entries, an increase in a surplus or a decrease in a deficit. The percentage change is not applicable if there is a change from a surplus to a deficit, or vice versa, or from an asset to a liability, or vice versa.

Economic territory

On a BoP and IIP basis, Australia's economic territory is the area under the effective control of the Australian government. It includes the land area, airspace and territorial waters (including jurisdiction over fishing rights and rights to fuels and minerals). The Australian economic territory also includes territorial enclaves in the rest of the world. These are clearly demarcated areas of land, located in other countries, which are owned or rented by the Australian government for diplomatic, military, scientific or other purposes. Specifically, the economic territory of Australia consists of:

  • Geographic Australia which includes Cocos (Keeling) Islands and Christmas Island
  • Norfolk Island
  • Australian Antarctic Territory
  • Heard Island and McDonald Islands
  • Territory of Ashmore Reef and Cartier Island
  • Coral Sea Islands
  • Australia's territorial enclaves overseas
     

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 BoP and IIP 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.

Residency

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.

In compiling the Australian BoP and IIP, 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:
    • Australian general government entities in Australia and abroad (e.g. embassies)
    • businesses located in Australia
    • individuals normally residing in Australia.
  • Non-resident entities include:
    • overseas tourists in Australia for a limited period of time (less than 12 months)
    • foreign embassies (including their diplomats) located in Australia.
       

The current account

Balance on goods and services

The trade in goods components include physical produced items which change ownership between Australian residents and non-residents, whether or not they actually cross the customs frontier. The items included are valued at their market value and recorded in the period in which the change of ownership occurs. Items not included relate to a small number of items such as goods acquired for their own use by non-residents while travelling, working or studying in Australia. These are classified as services in the international statistical standards.

The following tables show the standard components for trade in goods credits and trade in goods debits. This information is published in tables 6 and 7 of Balance of Payments and International Investment Position, Australia (cat. no. 5302.0). The standard components for goods credits and goods debits are listed below.

Goods credits table

Goods credits

General merchandise
 Rural goods
  Meat and meat preparations
  Cereal grains and cereal preparations
  Wool and sheepskins
  Other rural
 Non-rural goods
  Metal ores and minerals
  Coal, coke and briquettes
  Other mineral fuels
  Metals (excl. non-monetary gold)
  Machinery
  Transport equipment
  Other manufactures
  Other non-rural (incl. sugar and beverages)
   Beverages
   Sugar, sugar preparations & honey
   Other
  Goods procured in ports by carriers
Net exports of goods under merchanting
 Goods acquired under merchanting (negative exports)
 Goods sold under merchanting
Non-monetary gold

Goods debits table

Goods debits

General merchandise
 Consumption goods
  Food and beverages, mainly for consumption
  Household electrical items
  Non-industrial transport equipment
  Textiles, clothing and footwear
  Toys, books and leisure goods
  Consumption goods n.e.s.
 Capital goods
  Machinery and industrial equipment
  ADP equipment
  Telecommunications equipment
  Civil aircraft and confidentialised items
  Industrial transport equipment n.e.s.
  Capital goods n.e.s.
 Intermediate and other merchandise goods
  Food and beverages, mainly for industry
  Primary industrial supplies n.e.s.
  Fuels and lubricants
  Parts for transport equipment
  Parts for ADP equipment
  Other parts for capital goods
  Organic and inorganic chemicals
  Paper and paperboard
  Textile yarn and fabrics
  Iron and steel
  Plastics
  Processed industrial supplies n.e.s.
  Other merchandise goods
  Goods procured in ports
Non-monetary gold


Commodity breakdowns of trade in goods credits are provided in table 6 at current prices, at current prices seasonally adjusted, chain volume measures seasonally adjusted and implicit price deflators seasonally adjusted. The groupings shown are based on the United Nations' Standard International Trade Classification, Revision 4 (SITC Rev. 4).

Commodity breakdowns of trade in goods debits are provided in table 7 at current prices, at current prices seasonally adjusted, chain volume measures seasonally adjusted and implicit price deflators seasonally adjusted. The three broad end-use categories - consumption goods, capital goods and intermediate and other merchandise goods - are based on the United Nations' Classification of Broad Economic Categories (BEC). These broad end-use categories are further divided into a total of 25 SITC based commodity groupings.

The key data source for the goods component of the current account is international merchandise trade statistics sourced from records collected by the Department of Home Affairs, the ABS Survey of Principal Transport Enterprises (SPTE), the ABS Survey of International Trade in Services (SITS), media and internet. For more detailed information on these data sources refer to Chapters 5 and 6 of Balance of Payments and International Investment Position, Australia: Concepts, Sources and Methods (cat. no. 5331.0).

Services is the second major category of the current account. The services components cover services rendered by Australian residents to non-residents (credits) and by non-residents to residents (debits). Services transactions are generally recorded when the services are rendered (delivered or received).

There are twelve main categories of services identified in the BoP current account. The standard components are listed below.

Services table

Services

Manufacturing services on physical inputs owned by others
Maintenance and repair services n.i.e.
Transport
 Passenger
 Freight
 Other
 Postal and courier transport
Travel
 Business
 Personal
  Education-related personal travel
  Other personal travel
Construction
Insurance and pension services
 Direct insurance
  Freight
  Life
  Other
 Reinsurance
 Auxiliary insurance
 Pension services
 Standardised guarantee services
Financial services
 Explicitly charged and other financial services
 Financial Intermediation Services Indirectly Measured
Charges for the use of intellectual property n.i.e.
 Licences to reproduce and/or distribute computer services
  Software
  Hardware and design
 Licences to reproduce and/or distribute audiovisual and related services
 Outcomes of research and development
 Franchise and trademarks licensing fees
 Other charges
  Royalties on education
  Royalties on telecommunication services
  Music
  Other
Telecommunications, computer and information services
 Telecommunication services
  Telephone
  Other telecommunication services
 Computer and information services
  Computer services
   Hardware and software consultancy
   Data processing
  Information services
   Databases
   Newsagency subscription
  Other computer and information services
Other business services
 Research and development services
 Professional and management consulting services
  Legal, accounting, management consulting, public relations and other professional services
   Legal
   Accounting and auditing
   Business and management consultancy
   Other professional services
   Management fees n.i.e.
  Advertising, market research and public opinion polling
 Technical, trade-related and other business services
  Architectural, engineering and other technical services
   Architectural
   Engineering
   Surveying services
   Scientific and other technical services
  Waste treatment and de-pollution, agricultural and mining services
   Waste treatment and de-pollution
   Services incidental to agriculture, forestry and fishing
   Services incidental to mining, and oil and gas extraction
   Other on-site processing services
  Operational leasing services
   Air operational leasing services
   Sea operational leasing services
   Other operational leasing services
  Trade-related commission services
  Other business services n.i.e.
Personal, cultural and recreational services
 Audiovisual and related services
  Royalties on film, television, home entertainment and other audiovisual
   Film
   Television
   Home entertainment royalties
   Other Audiovisual related royalties
   Other film, TV and multimedia royalties
  Audiovisual services n.i.e.
 Other personal, cultural and recreational services
  Health services
  Education services
   Education consultancy
   Correspondence courses
   Services through educational institutions
   Other educational services
  Other
   Sporting and entertainment services
   Off-shore gambling services
   Other recreational n.i.e.
Government goods and services n.i.e.
 Embassies and consulates
  Missions expenditure
  Employees expenditure
 Military units and agencies
 Other
Gross inward/outward insurance premiums receivable/payable
Gross inward/outward insurance claims payable/receivable
Tourism related services


International trade in services data is presented in tables 8 and 9 of Balance of Payments and International Investment Position, Australia (cat. no. 5302.0). This data also includes memorandum items for gross inward insurance premiums receivable and payable and tourism related services.

Gross insurance premiums receivable/payable and gross insurance claims payable/receivable provide an estimate of resident/non-resident insurance activity and are provided for analytical purposes only. These figures do not represent an estimate for the Insurance Services Charge (ISC), however are used to calculate the value of the ISC which are published under insurance and pension services. The data is sourced primarily from the Australian Prudential Regulation Authority (APRA) and is modelled to take into account factors such as residency and exchange rates.

The tourism related services memorandum items provide timely indicators of the movements in tourism related activities, not an absolute measure of the level of these activities. The tourism related indicator has been derived by combining total travel services (business, education-related and other personal travel) and passenger transportation services (which includes agency fees and commissions for air transport).

The key data sources for the services component of the current account are:

  • Survey of International Trade in Services (SITS)
  • Trade (Customs) data
  • Department of Home Affairs
  • Department of Education and Training (DET)
  • Tourism Research Australia (TRA)
  • Australian Prudential Regulation Authority (APRA)
  • Australian Taxation Office (ATO)
  • Department of Foreign Affairs and Trade (DFAT).
     

The major items in the current account are:

  • the goods balance, which refers to the difference between what Australia receives for exports (credits, or receipts for goods sold overseas) and what it pays for imports (debits, payments for goods we purchased from overseas). A surplus exists if export credits exceed import debits and a deficit exists if export credits are less than import debits.
  • the services balance, which involves the balance of service exports and imports such as tourism, education, insurance, shipping and finance. Services imported are debits and services exported are credits.
  • the balance on goods and services, which is the sum of the goods balance and the services balance.
     

Balance on goods and services = goods balance + services balance

Primary income

In Australia's BoP, income credits refer to the return from providing non-residents with the use of Australian labour or Australian financial capital, while income debits refer to the return to non-residents made for use by residents of foreign labour and foreign financial capital. Income should be recorded in the period in which the economic benefits arising from the use of the factors of production are enjoyed by the user.

Income is made up of three major components - compensation of employees, investment income and other primary income. Most of the standard components can represent income payable to residents by non-residents (credits) or vice versa (debits). Income credits and debits are recorded in tables 10 and 11. The standard components for primary income are listed below.

Primary income table

Primary income

Compensation of employees
Investment income
 Direct investment
  Income on equity and investment fund shares
   Dividends and withdrawals from income of quasicorporations
    Direct investor in direct investment enterprises
    Direct investment enterprises in direct investor (reverse investment)
    Between fellow enterprises
   Reinvested earnings
  Interest
   Direct investor in direct investment enterprises
   Direct investment enterprises in direct investor (reverse investment)
   Between fellow enterprises
 Portfolio investment
  Investment income on equity and investment fund shares
   Dividends on equity excluding investment fund shares
   Investment income attributable to investment fund shareholders
    Dividends
    Reinvested earnings
   General government
   Depository corporations
   Other sectors
  Interest
   Short-term
    Central bank
    General government
    Depository corporations
    Other sectors
   Long-term
    Central bank
    General government
    Depository corporations
    Other sectors
 Other investment
  Withdrawals from income of quasicorporations
  Interest
   Memorandum: FISIM
  Investment income attributable to policy holders in insurance, pension schemes and standardised guarantee schemes
  Central bank
  General government
  Depository corporations
  Other sectors
 Reserve assets
  Income on equity and investment fund shares
  Interest
Other primary income
 Rent
 Taxes on production and imports
 Subsidies


The key data sources for compensation of employees are Overseas Arrivals and Departures (OAD) conducted by Department of Home Affairs, the ABS Survey of Returned Australian Travellers, the ABS Survey of Embassies and Consulates, the International Visitors Survey conducted quarterly by Tourism Research Australia and Commonwealth Government Ledgers for non-residents working in Australian Embassies. Investment income is sourced from the Survey of International Investment. For more detailed information on these data sources refer to the Balance of Payments and International Investment Position, Australia: Concepts Sources and Methods (cat. no. 5331.0).

Secondary income

Secondary income captures redistribution of income through current transfers. Current transfers are offset items needed to balance transactions where real resources or financial items are provided without anything being provided in return by the recipient. This includes insurance claims, pensions and foreign aid to developing countries in the form of money for food or famine relief (if these funds are being used for capital investment they will be included in the capital and financial account).

The key data sources for the secondary income are:

  • Survey of International Investment (SII), Survey of International Trade in Services (SITS) and the Australian Tax Office (ATO) for tax data
  • Department of Foreign Affairs and Trade (DFAT) and the Australian Council for International Development (ACFID) for international cooperation data
  • Employee Earnings, Benefits and Trade Union Membership Survey (EEBTUMS) for workers' remittances
  • Australian Prudential Regulatory Authority (APRA), Department of Human Services (DHS) and Department of Veteran's Affairs (DVA) for social contributions and benefits data
  • APRA for non-life insurance premiums and claims.
     

Balance on current account

The balance on current account is calculated by adding net primary income and net secondary income to the balance on goods and services.

Balance on current account = balance on goods and services + net primary income + net secondary income

The capital account

The capital account in the System of National Accounts, 2008 (2008 SNA) shows capital formation for the full range of produced and non-produced assets. The corresponding parts of the international accounts show only transactions in non-produced, non-financial assets. Transactions in produced assets are included in the goods and services account, which does not distinguish whether those goods or services are destined for capital or current purposes.

The capital account is made up of acquisition and disposals of non-produced, non-financial assets and capital transfers. Capital transfers are further classified into two institutional sectors: general government and other sectors. In addition, capital transfers are further subdivided by type of transfer. The capital account is presented in table 12 of Balance of Payments and International Investment Position, Australia (cat. no. 5302.0). The standard components of the capital account are listed below.

Capital account table

Capital account

Acquisition/disposals of non-produced non-financial assets
Capital transfers
 General government
  Debt forgiveness
  Other capital transfers
 Other sectors
  Debt forgiveness
  Other capital transfers


The key data sources and methods for the capital account are the Survey of International Trade in Services (SITS), media and government departments, Commonwealth Government transactions and the Department of Foreign Affairs and Trade (DFAT).

The financial account

The financial account records transactions that involve financial assets and liabilities and that take place between residents and non-residents. This includes the creation and liquidation of financial claims associated with the change of ownership in international financial assets and liabilities during a period.

The IIP measures Australia's stock of external financial assets and liabilities, whereas the BoP financial account measures transactions in Australia's foreign financial assets and liabilities, such as equity investments, bonds and other debt securities, loans and other liabilities such as trade credit.

Consistent with international standards the ABS uses various classifications to present the data. Classifications such as assets/liabilities, type of capital and functional category (direct investment, portfolio investment, financial derivatives, other investment and reserve assets) and instrument of investment are used consistently in both the financial account of the BoP and the IIP.

Assets and liabilities

The primary classification in financial accounts and international investment statistics is the asset/liability classification.

  • Financial assets are financial claims by Australian residents on non-residents, i.e. Australian investment abroad, e.g. an Australian bank lends money to a non-resident.
  • Financial liabilities are financial claims on Australian residents by non-residents, e.g. an Australian company issues Euro Bonds which are held by non-residents.
     

Instrument of investment

Financial accounts record transactions of different instruments; these include equity capital, reinvestment of earnings, debt securities, trade credit, loans etc. These instruments can be combined to show foreign equity and foreign debt. This classification is used to present data in tables 2 and 3 of Balance of Payments and International Investment Position, Australia (cat. no. 5302.0).

International accounts uses two broad categories of financial assets and liabilities:

  • equity and investment fund shares
  • debt instruments.
     

Equity consists of all instruments and records that acknowledge claims on the residual value of a corporation or quasi-corporation, after the claims of all creditors have been met. Equity is treated as a liability of the issuing institutional unit (a corporation or other unit) and represents the owners' funds in the institutional unit. Equity has the distinguishing feature that the holders own a residual claim on the assets of the institutional unit that issued the instrument. In contrast to debt, equity does not generally provide the owner with a right to a predetermined amount or an amount determined according to a fixed formula. Reinvestment of earnings contribute to an owner's equity position.

Debt instruments are all other instruments and generally require the payment of principal and/or interest at some point(s) in the future. Debt instruments consist of Special Drawing Rights (SDRs), currency and deposits, debt securities (bonds, notes, money market instruments), loans, insurance technical reserves, pension and related entitlements, provision for calls under standardised guarantees and other accounts receivable/payable. The term debt instrument is applicable to both the liability and the corresponding claim. Some instruments, such as financial derivatives, employee stock options, currency and some deposits, pay no interest. The income flow with insurance and pension schemes is called investment income attributable to policyholders, rather than interest.

Other financial assets and liabilities capture all other instruments that are also treated as debt instruments in Australia's international accounts. It includes monetary gold, financial derivatives and employee stock options.

Functional category

There are five functional categories used in Australia's BoP and IIP, which are based on economic motivations and patterns of behaviour to assist in the analysis of cross-border transactions and positions:

  • direct investment, which refers to financial transactions and positions between two parties in a direct investment relationship. These investors include individuals, enterprises or groups of related individuals or enterprises. A direct investment relationship exists if an investor has an equity interest in an enterprise resident in another economy of 10 percent or more of the voting power (i.e. ordinary shares or voting stock). The direct investment relationship extends to branches, subsidiaries and to other businesses where the enterprise has immediate or indirect ownership of 10 percent or more of the voting power).
  • portfolio investment, which refers to transactions and positions in equity and debt securities (apart from direct investment and reserve assets). Debt securities comprise bonds, notes and money market instruments. In comparison with direct investment, it indicates investment where the investor is not assumed to have any influence in the operation of the enterprise.
  • financial derivatives, which are instruments linked to, but separate from a specific financial instrument, or indicator or commodity through which specific financial risk can be traded in its own right. Financial derivatives are used for risk management (hedging), arbitrage and to generate return.
  • other investment, which is a residual category that captures transactions not classified to direct investment, portfolio investment, financial derivatives, employee stock options or reserve assets of the compiling economy. Other investment covers trade credits, loans (including financial leases), currency and deposits, and a residual category for any other assets and liabilities. Generally these instruments are not tradable except currency.
  • reserve assets, which refer to those foreign financial assets that are available to, and controlled by, monetary authorities (the Reserve Bank of Australia (RBA)) for financing or regulating payments imbalances. Reserve assets include monetary gold, SDRs, reserve position in the International Monetary Fund (IMF) and foreign exchange held by the RBA.
     

The financial account is presented in table 13 of Balance of Payments and International Investment Position, Australia (cat. no. 5302.0). The standard components of the financial account are listed below.

Direct investment table

Direct investment

Assets
 Equity and investment fund shares
  Equity other than reinvestment of earnings
   Direct investor in direct investment enterprises
   Direct investment enterprises in direct investor (reverse investment)
   Between fellow enterprises
  Reinvestment of earnings
 Debt instruments
  Direct investor claims on direct investment enterprises
  Direct investment enterprises claims on direct investor (reverse investment)
  Between fellow enterprises
Liabilities
 Equity and investment fund shares
  Equity other than reinvestment of earnings
   Direct investment enterprises to direct investor
   Direct investor to direct investment enterprises (reverse investment)
   Between fellow enterprises
  Reinvestment of earnings
 Debt instruments
  Direct investment enterprises liabilities to direct investor
  Direct investor liabilities to direct investment enterprises (reverse investment)
  Between fellow enterprises

Portfolio investment table

Portfolio investment

Assets
 Equity and investment fund shares
  Central bank
  Deposit-taking corporations, except the central bank
  General government
  Other sectors
   Other financial corporations
   Nonfinancial corporations, households, and NPISHs
 Debt securities
  Central bank
   Short-term
   Long-term
  Deposit-taking corporations, except the central bank
   Short-term
   Long-term
  General government
   Short-term
   Long-term
  Other sectors
   Short-term
   Long-term
   Other financial corporations
    Short-term
    Long-term
   Nonfinancial corporations, households, and NPISHs
    Short-term
    Long-term
Liabilities
 Equity and investment fund shares
  Deposit-taking corporations, except the central bank
  Other sectors
   Other financial corporations
   Nonfinancial corporations, households, and NPISHs
 Debt securities
  Central bank
   Short-term
   Long-term
  Deposit-taking corporations, except the central bank
   Short-term
   Long-term
  General government
   Short-term
   Long-term
  Other sectors
   Short-term
   Long-term
   Other financial corporations
    Short-term
    Long-term
   Nonfinancial corporations, households, and NPISHs
    Short-term
    Long-term

Financial derivatives table

Financial derivatives

Assets
 Central bank
 Deposit-taking corporations, except the central bank
 General government
 Other sectors
  Other financial corporations
  Nonfinancial corporations, households, and NPISHs
Liabilities
 Central bank
 Deposit-taking corporations, except the central bank
 General government
 Other sectors
  Other financial corporations
  Nonfinancial corporations, households, and NPISHs

Other investment table

Other investment

Assets
 Other equity
 Currency and deposits
  Central bank
   Short-term
   Long-term
  Deposit-taking corporations, except the central bank
   Short-term
   Long-term
  General government
   Short-term
   Long-term
  Other sectors
   Short-term
   Long-term
   Other financial corporations
    Short-term
    Long-term
   Nonfinancial corporations, households, and NPISHs
    Short-term
    Long-term
 Loans
  Central bank
   Short-term
   Long-term
  Deposit-taking corporations, except the central bank
   Short-term
   Long-term
  General government
   Short-term
   Long-term
  Other sectors
   Short-term
   Long-term
   Other financial corporations
    Short-term
    Long-term
   Nonfinancial corporations, households, and NPISHs
    Short-term
    Long-term
 Insurance, pension, and standardised guarantee schemes
  Central bank
  Deposit-taking corporations, except the central bank
  General government
  Other sectors
   Other financial corporations
   Nonfinancial corporations, households, and NPISHs
 Trade credit and advances
  Central bank
   Short-term
   Long-term
  Deposit-taking corporations, except the central bank
   Short-term
   Long-term
  General government
   Short-term
   Long-term
  Other sectors
   Short-term
   Long-term
   Other financial corporations
    Short-term
    Long-term
   Nonfinancial corporations, households, and NPISHs
    Short-term
    Long-term
 Other accounts receivable
  Central bank
   Short-term
   Long-term
  Deposit-taking corporations, except the central bank
   Short-term
   Long-term
  General government
   Short-term
   Long-term
  Other sectors
   Short-term
   Long-term
   Other financial corporations
    Short-term
    Long-term
   Nonfinancial corporations, households, and NPISHs
    Short-term
    Long-term
Liabilities
 Other equity
 Currency and deposits
  Central bank
   Short-term
   Long-term
  Deposit-taking corporations, except the central bank
   Short-term
   Long-term
  General government
   Short-term
   Long-term
  Other sectors
   Short-term
   Long-term
   Other financial corporations
    Short-term
    Long-term
   Nonfinancial corporations, households, and NPISHs
    Short-term
    Long-term
 Loans
  Central bank
   IMF credit and loans from IMF
   Short-term
   Long-term
  Deposit-taking corporations, except the central bank
   Short-term
   Long-term
  General government
   Short-term
   Long-term
  Other sectors
   Short-term
   Long-term
   Other financial corporations
    Short-term
    Long-term
   Nonfinancial corporations, households, and NPISHs
    Short-term
    Long-term
 Insurance, pension, and standardised guarantee schemes
  Central bank
  Deposit-taking corporations, except the central bank
  General government
  Other sectors
   Other financial corporations
   Nonfinancial corporations, households, and NPISHs
 Trade credit and advances
  Central bank
   Short-term
   Long-term
  Deposit-taking corporations, except the central bank
   Short-term
   Long-term
  General government
   Short-term
   Long-term
  Other sectors
   Short-term
   Long-term
   Other financial corporations
    Short-term
    Long-term
   Nonfinancial corporations, households, and NPISHs
    Short-term
    Long-term
 Other accounts payable
  Central bank
   Short-term
   Long-term
  Deposit-taking corporations, except the central bank
   Short-term
   Long-term
  General government
   Short-term
   Long-term
  Other sectors
   Short-term
   Long-term
   Other financial corporations
    Short-term
    Long-term
   Nonfinancial corporations, households, and NPISHs
    Short-term
    Long-term
Special drawing rights

Reserve assets table

Reserve assets

Monetary gold
 Gold bullion
 Unallocated gold accounts
Special drawing rights
Reserve position in the IMF
Other reserve assets
 Currency and deposits
  Claims on monetary authorities
  Claims on other entities
 Securities
  Debt securities
   Short-term
   Long-term
Equity and investment fund shares
Financial derivatives
Other claims

International investment position

The IIP is the balance sheet showing the stock of foreign financial assets and liabilities at a point in time. The IIP may be viewed more broadly as a reconciliation statement, showing levels (or stocks) of Australia's foreign financial assets and liabilities at two successive points in time and the components of change between those two points in time. These components are financial transactions (as recorded in the BoP financial account) and non-transaction changes (such as price changes, exchange rate changes and other volume changes).

The IIP consists of financial claims on non-residents and liabilities to non-residents. The assets and liabilities, instrument of investment and functional category classifications applied to transactions in the financial account also apply the positions in the IIP.

The IIP is presented in tables 14 and 15 of Balance of Payments and International Investment Position, Australia (cat. no. 5302.0). The presentation is the same as the financial accounts presentation above.

Various data sources are used to compile both the financial accounts and the IIP, such as:

  • The Survey of International Investment (Form 90). This survey measures the investment position, financial transactions and other changes in position, and investment income associated with claims on and liabilities to non-residents by Australian residents.
  • The security-by-security collection is a quarterly survey of nominees (Form 85L), in respect of their holdings on behalf of non-residents, of securities issued in Australia (shares, debt securities and all types of derivatives). The nominees are surveyed quarterly to collect investments on behalf of non-residents on a security-by-security by country of investor basis.
  • The RBA provides data on financial transactions, level of investment and price and exchange rate changes of official reserves as well as the monetisation/demonetisation of gold and the allocation and cancellation of SDRs.
  • Where statistics are not available directly, the following models are used to supplement the collected data:
    • Reinvested Earning Model
    • Pension Model (super funds and households)
    • Insurance Model (life insurance and other non-financial corporations)
    • Compensation of Employees and Worker Remittances
    • Migrant Model (households and banks, also known as OVC Model)
    • Financial Intermediation Indirectly Measured (FISIM)
    • Real Estate estimates.
       

Foreign debt

Foreign debt levels

Within the BoP and IIP statistics, the instrument of investment may be assigned to either equity or debt. A country's foreign debt is a subset of the liabilities in its IIP statistics. To present a complete understanding of a nation's foreign debt situation, it is necessary to show its foreign debt assets (its debt claims on the rest of the world), its foreign debt liabilities (gross debt liabilities to the rest of the world) and its net foreign debt (the net sum of debt liabilities and debt assets). Table 16 of Balance of Payments and International Investment Position, Australia (cat. no. 5302.0) presents a time series of foreign debt levels presented by sector.

Gross external debt liabilities

As defined by the IMF's External Debt Statistics: Guide for Compilers and Users, gross external debt is 'the outstanding amount of those actual current, and not contingent, liabilities that require payment(s) of principal and/or interest by the debtor at some point(s) in the future and that are owed to non-residents by residents of an economy.'

External debt differs from the definition of foreign debt in table 16 in that external debt excludes financial derivatives. The IMF's guide includes only debt liabilities, with no provision for the presentation or netting of debt assets.

Australia's external debt statistics are presented in table 17 of Balance of Payments and International Investment Position, Australia (cat. no. 5302.0). Financial derivative liabilities are shown as a memorandum item to reconcile external debt with the foreign debt liabilities presented in table 16. Gross external debt data are also provided to and published by the World Bank facilitating international comparisons.

Currency

In table 18, currency refers to the currency in which assets or liabilities are likely to be repaid, while residual maturity refers to the time remaining until an asset or liability is due to be fully repaid. Reserve assets are not allocated by currency. All reserve assets are allocated to the repayment category, less than or equal to 90 days, although a range of maturities may be involved.

Exchange rates

Exchange rates of major trading partners are presented in table 19 of Balance of Payments and International Investment Position, Australia (cat. no. 5302.0). Exchange rates and the trade-weighted index are provided by the RBA as a geometric average of a basket of currencies that are representative of Australia's trading patterns.

Foreign assets and liabilities by industry

Table 20 in the Balance of Payments and International Investment Position, Australia (cat. no. 5302.0) presents data on Australia's foreign assets and liabilities by industry. 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. The statistical unit (i.e. the unit of observation in a 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. Financial enterprises such as trading and merchant banks may also borrow funds as principals and then on-lend to clients in other industries.

Industry data presented in Balance of Payments and International Investment Position, Australia (cat. no. 5302.0) is based on an assets/liabilities basis. Direct investment statistics are organised according to whether the investment relates to an asset or a liability for the country compiling the statistics. For example, a country's assets include equity investments by parent companies resident in that country in their foreign affiliates because those investments are claims that they have on assets in foreign countries. Similarly, a country's liabilities include foreign parents' equity investments in affiliates resident in that country because those investments represent claims that foreigners have on assets in the reporting country. The asset/liability presentation does not show the direction of influence as the directional presentation does. An alternative industry presentation for direct investment statistics is published in International Investment Position, Australia: Supplementary Statistics (cat. no. 5352.0) where the data are presented on a directional principle.

Selected international accounts ratios

Current account data ratios are presented in table 23 of Balance of Payments and International Investment Position, Australia (cat. no. 5302.0) and are calculated by dividing the data for reference quarter/year for the relevant item by the corresponding current price Gross Domestic Product (GDP) or Gross National Income (GNI) value. GDP and GNI are estimated according to the 2008 SNA and will not be directly comparable with countries which have not implemented this. Refer to the Explanatory Notes of the Australian National Accounts: National Income, Expenditure and Product (cat. no. 5206.0) publication for more detail on GDP.

Seasonally adjusted GDP and GNI are used in these ratios. Quarterly series use seasonally adjusted data (unless otherwise indicated). Original data are used for series that do not have seasonality. These series are footnoted accordingly.

Ratios for the net IIP are derived using levels for those series at the end of the period and the sum of the four quarters for GDP or GNI for the year ended with that period. As the international accounts are released prior to the national accounts, the current quarter's GDP and GNI are not available and are annotated 'nya'. The previous quarter's value is used to calculate a preliminary ratio for the current quarter. For net IIP data, this will mean that the sum of the four quarters for GDP or GNI ending the previous quarter will be used for the current quarter's ratios.

Supplementary information

Seasonally adjusted and trend estimates

Quarterly BoP statistics are subject to large, short-term movements which make the interpretation of trends in the original series difficult. Seasonally adjusted current account series are presented alongside the original, unadjusted series to aid analysis of the underlying movements and trends.

Seasonally adjusted estimates are derived by estimating and removing systematic calendar related effects from the original series. These include seasonal (e.g. Christmas), trading day and moving holiday (e.g. Easter) influences. Seasonal adjustment does not aim to remove the irregular or non-seasonal influences which may be present in any particular quarter. These irregular influences may reflect both random economic events and difficulties of statistical recording.

Though efforts are made to align monthly and quarterly data, monthly seasonally adjusted estimates released in International Trade in Goods and Services, Australia (cat. no. 5368.0) may not align with the quarterly estimates released in this publication due to different compilation procedures necessary for monthly and quarterly data.

The seasonally adjusted statistics in this publication use the concurrent seasonal adjustment technique and Autoregressive Integrated Moving Average (ARIMA) modelling to estimate factors for the current and previous quarters. Under concurrent seasonal adjustment, the estimates of seasonal factors are fine-tuned as new or revised original estimates become available each period. The seasonally adjusted estimates are subject to revisions at each reference quarter as the estimates of seasonal factors are improved. In most cases, chain volume measures are adequately seasonally adjusted by using the seasonal factors from the corresponding current price values. However, in some cases, this is not an adequate method of seasonal adjustment due to the distorting effects of large price changes on the seasonal factors derived from current price values. These cases are outlined below and require direct seasonal adjustment as the chain volume measures are conceptually the only source of seasonality, not prices.

  • Goods credits (exports)
    • metal ores and minerals
    • coal, coke and briquettes
    • other mineral fuels
       

Important points that should be noted are:

  • the methods used in seasonal adjustment do not force the sum of the adjusted current price estimates for each quarter of a year to equal the original annual total
  • where chain volume estimates have no apparent seasonality in their implicit price deflators, the estimates are adjusted using the corresponding factors for current price estimates.
     

Trend estimates are published as the quarter-to-quarter movements of the seasonally adjusted estimates may not be reliable indicators of underlying behaviour. Trend estimates reduce the effect of irregular movements as they are derived by applying a seven-term Henderson moving average to the seasonally adjusted series. The seven-term Henderson moving average is symmetric, but as the end of a time series is approached, asymmetric forms of the average are applied. While the asymmetric weights enable trend estimates for recent quarters to be produced, it does result in revisions to the estimates for the most recent three quarters as additional observations become available. Revisions to trend estimates can also occur because of revisions to the original data and as a result of the re-estimation of the seasonal factors. Trend estimates should be used with caution, especially around the time of unusual influences. Refer to the footnotes in tables that include trend estimates.

Information papers and articles on time series methods are available on the ABS website:

Chain volume measures

To enable analysis of the movement of goods and services in 'real' terms, estimates of chain volume measures are compiled and published each quarter. Chain volume measures are derived by deflating the original current price series by specially compiled measures of price change. The reference year for chain volume measures is the year prior to the latest complete financial year. The reference year is updated with the release of each September quarter issue of the Balance of Payments and International Investment Position, Australia (cat. no. 5302.0) publication. Prior to the reference year, chain volume measures are non-additive, meaning the sum of chain volume measures of a lower component will not add up to the aggregate. From September quarter 2012, chain volume measures for goods are derived by deflating the original current price series by International Trade Price Indexes. For more information on chain volume measures refer to Information Paper: Australian National Accounts, Introduction of Chain Volume and Price Indexes (cat. no. 5248.0).

Price indexes and implicit price deflators

The Balance of Payments and International Investment Position, Australia (cat. no. 5302.0) publication and the International Trade Price Indexes, Australia (ITPI) (cat. no. 6457.0) provide detailed Australian export and import price information for analysts. The ITPI measures changes in the prices of goods imported into Australia (the Import Price Index (IPI)) and goods exported from Australia (the Export Price Index (EPI)). Differences can occur between ITPI measurements and BoP measurements due to coverage, scope, timing adjustments and weighting patterns.

The quarterly Implicit Price Deflators (IPDs) are derived by dividing current price estimates by the corresponding chain volume measures. The quarterly IPDs derived from seasonally adjusted data are preferred to those using original data because the seasonal adjustment process removes some of the seasonal changes in the composition of this series. However, the seasonal adjustment process itself is also a possible source of distortion. Movements in IPDs can also be greatly affected by changes in the physical composition of the aggregates and their components.

Terms of trade

 Quarterly estimates of the terms of trade shown in table 5 of Balance of Payments and International Investment Position, Australia (cat. no. 5302.0) are derived from seasonally adjusted data. The terms of trade index is a ratio that measures the relative prices of a country's exports to imports. The ABS calculates the terms of trade index using the following formula:
 

\(\Large\frac{\text{Implicit price deflator for the export item}}{\text{Implicit price deflator for the import item}}\times 100\)

 

Related products and publications

Current publications and other products released by the ABS are available from the Statistics link on the ABS website. The ABS also issues a daily Release Advice on the website which details products to be released in the week ahead.

Appendix - related articles

Show all

ArticleSource(a)Issue / Release
Investment
 Economic Activity of Foreign Owned Businesses in Australia, 2014-15 
5494.0
2018
 Foreign currency exposure
5308.0
Mar qtr 2017
 Foreign ownership of equity
5302.0
Sep qtr 2007
 Kangaroo bonds
1301.0
2006
 Gross external debt
5302.0
Sep qtr 2003
Balance of payments
 Quarterly state data on a balance of payments basis
5302.0
Dec qtr 2014
 International comparison of balance of payments statistics
5363.0
1998-99
Merchandise trade
 Preliminary international trade in goods
5368.0.55.024
Mar 2020
 Export and Import Invoice Currencies
5368.0
Oct 2016
 100 years of international trade statistics
5368.0
Oct 2007
 New methodology for deriving counts of Australian exports
5368.0
Feb 2006
 Australia's Importers, 2003-04
5368.0
Nov 2004
 Australia's Exporters, 2003-04
5368.0
Oct 2004
 Foreign ownership of Australian exporters and importers, 2002-03
5496.0.55.001
Jun 2004
 Australia's trade with the USA
5368.0
Mar 2004
 Major commodities traded by Australia, 1991 to 2000
5422.0
Dec qtr 2000
Trade in services
 ABS International Tourism Estimates
5302.0
Dec 2011
 Australian outward finance and insurance foreign affiliate trade, 2009-10
5485.0
Jun 2011
 International trade in services by partner country, 2006, preliminary
5368.0
Dec 2006
 Changes to International trade in services statistics, August 2006
5368.0
Aug 2006
 Changes to International trade in services travel statistics
5368.0
Aug 2005
Finance
 Impact of the farm season on Australian production in 2002-03 and 2003-04
1301.0
2005
 Recent trends in construction and first home buyers finance
5609.0
Mar 2002
 Household sector data in the financial accounts
5232.0
Mar qtr 2002
Technical information
 Discussion Paper: Proposed Changes to Statistical Codes in the Australian Harmonized Export Commodity Classification, 2017
5368.0.55.022
July 2016
 A view into United States dollar exposure
5302.0
Dec qtr 2015
 A Country Case Study - China
5302.0
Jun qtr 2015
 Outcomes of the Review of International Accounts Statistical Outputs
5302.0
Jun qtr 2015
 Technical note - Low Value Threshold update
5368.0
Aug 2014
 Technical note - Improvements in nominee estimates
5302.0
Jun qtr 2014
 Revision to correspondences to AHECC and Customs Tariff, Aug 2014
5368.0.55.021
Aug 2014
 Technical note - Low Value Threshold
5368.0
Aug 2013
 Proposed Implementation of the New International Standard for International Merchandise Trade Statistics, 2013
5368.0.55.020
Aug 2013
 Amendments to Schedule 4 of Customs Tariff, March 2013
5368.0.55.019
Mar 2013
 Experimental Statistics on International Shipping Container Movements, 2009-10
5368.0.55.018
Sep 2011
 Implementation of new international statistical standards in ABS National and International Accounts, September 2009
5310.0.55.002
Oct 2009
 Impact of revised international standards on monthly International Trade in Goods and Services, August 2009
5368.0.55.014
Oct 2009
 Estimation of Workers' Remittances based on Balance of Payments and International Investment Position Manual, Sixth Edition, September 2009
5302.0.55.003
Aug 2009
 Revisions to international standards in quarterly Balance of Payments and International Investment Position statistics from September 2009, 2009
5302.0.55.002
Jul 2009
 Changes to International Trade in Goods Statistics - Countries and Ports, July 2009
5368.0.55.013
Jul 2009
 Revisions to international standards in monthly international trade in goods and services statistics from August 2009, 2009
5368.0.55.012
Jun 2009
 Changes to International Trade in Goods Industry Statistics, July 2009
5368.0.55.011
Dec 2008
 Technical note 1 - Income on debt
5302.0
Jun qtr 2008
 Technical note 2 - Use of CDI data
5302.0
Jun qtr 2008
 Impact of introducing Revision 4 of the Standard International Trade Classification, 2008
5368.0.55.010
May 2008
 Changes to international trade statistics July 2008, 2007 to 2008
5368.0.55.009
Jan 2008
 Introduction of revised international standards in ABS economic statistics in 2009, 2007
5310.0.55.001
Sep 2007
 Changes on 1 January 2007 to Statistical Codes in the AHECC and the Customs Tariff, 2007
1233.0.55.001
Nov 2006
 ABS implementation in January 2007 of revisions to international trade classifications, 2007
5368.0.55.005
Jun 2006
 Revised treatment of Goods for Processing in Merchandise Trade and Balance of Payments Statistics
5368.0
May 2006
 Impact of Customs and ABS changes on import statistics from October 2005
5439.0
Oct 2005
 ABS management of the impact of the implementation of the imports component of the New Customs System
5439.0
Aug 2005
 Changes to country and port classifications
5368.0
May 2003
 Implementation of New Customs Systems
5368.0
Aug 2004
 The effect of customs changes on export statistics
5422.0
Jun qtr 2002
 Data confidentiality
5422.0
Dec qtr 1999
a. On the ABS website home page, enter the catalogue number in the search bar and select the specified catalogue number and issue. Note: in some instances, a particular issue of the publication can be found in the Past & Future Releases page of the catalogue.

Glossary

Show all

Balance

Balance is the sum (net) of credit and debit entries for a subset of balance of payments components, for example, 'balance of trade', 'balance on current account'. See also the definition of 'deficit and surplus'.

Balance of payments

Balance of payments is a statistical statement that systematically summarises the economic transactions occurring between residents of Australia and residents of the rest of the world (non-residents) over a specific period of time. The balance of payments is a system of consolidated accounts in which many balances can be derived, such as the balance on goods and services, current account, capital account and financial account.

Balance of payments basis

Balance of payments basis is an accounting record for compiling international trade statistics which records transactions between residents and non-residents at the time of change of ownership rather than the time at which the import/export documents are lodged with a particular country's customs agency.

Balance on capital account

Balance on capital account is the sum (net) of credit and debit entries for acquisition/disposal of non-produced, non-financial assets and capital transfers.

Balance on current account

Balance on current account is an indicator frequently used for analysing the balance of payments. It is derived as the sum (net) of credit and debit entries for goods, services, primary income and secondary income.

Balance on financial account

Balance on financial account is the sum (net) of transactions in:

  • direct investment (assets less liabilities)
  • portfolio investment (assets less liabilities)
  • financial derivatives (assets less liabilities)
  • other investment (assets less liabilities)
  • net change in the level of reserve assets.
     

BPM6

BPM6 is the International Monetary Fund's Balance of Payments and International Investment Position Manual, Sixth Edition (BPM6). It is the current international standard adopted by Australia for the compilation of balance of payments and international investment position statistics.

Capital account

Capital account comprises both acquisitions and disposals of non-produced, non-financial assets (such as patents and copyrights) and capital transfers.

Capital transfers

Capital transfers include the offsets to one-sided transactions of a capital nature, for example, Australian grants or gifts to developing countries for capital works projects such as the building of schools, roads and bridges.

Chain price indexes

Chain price indexes are annually-reweighted chain Laspeyres price indexes referenced to the same year as the chain volume measures. They can be thought of as a series of indexes measuring price change from a base year to quarters in the following year using current price values in the base year as weights, linked together to form a continuous time series. In other words, chain price indexes are constructed in a similar fashion to the chain volume indexes. Quarterly chain price indexes are benchmarked to annual chain price indexes in the same way as their chain volume counterparts. Unlike implicit price deflators, chain price indexes measure only the impact of price change.

Chain volume measures

Chain volume measures are annually-reweighted chain Laspeyres volume indexes referenced to the current price values in a chosen reference year (i.e. the year when the quarterly chain volume measures sum to the current price annual values). Chain Laspeyres volume measures are compiled by linking together (compounding) movements in volumes, calculated using the average prices of the previous financial year and applying the compounded movements to the current price estimates in a chosen reference year (i.e. the year when the quarterly chain volume measures sum to the current price annual values). The reference year is updated with the release of each September quarter issue of this publication.

Compensation of employees

Compensation of employees is the total remuneration, in cash or in kind, payable by enterprises to employees in return for work done during the accounting period.

Composite corporate benchmark yield

Composite corporate benchmark yield refers to the representative yield of long-term corporate bonds.

Current account

Current account comprises of transactions between Australia and the rest of the world in goods, services, primary income and secondary income. It is distinguished from the capital and financial accounts.

Deficit and surplus

A deficit occurs when the sum of all debit entries exceeds the sum of all credit entries and a surplus occurs when the sum of all credit entries exceeds the sum of all debit entries. The term deficit (or surplus) can therefore be used in relation to various balances, e.g. balance on current account.

Dividends

Dividends are the distribution of earnings allocated to shares and other forms of participation in the equity of incorporated private enterprises, co-operatives and public corporations. It is a form of investment income to which shareholders become entitled as a result of placing funds at the disposal of corporations (e.g. by buying shares). Dividends are recorded on an accrual basis (on the date the underlying equity becomes ex-dividend).

Double entry system

Double entry system is the internationally accepted accounting principle of recording two equal entries for each transaction. Credit entries are used to record exports of goods and services, income receivable and financial transactions involving either a reduction in Australia's foreign financial assets or an increase in foreign liabilities. Conversely, debit entries are used to record imports of goods and services, income payable and financial transactions involving either an increase in Australia's foreign financial assets or decrease in foreign liabilities. Any entries that are not automatically paired are matched by special offsetting entries (current or capital transfers).

Exchange rate changes (exchange rate variations)

Exchange rate changes (exchange rate variations) are the impact on the stock of financial liabilities and assets due to the changes in exchange rate between the Australian dollar and other currencies in which these liabilities and assets are denominated.

Exports

Exports are commodities and other goods or services sold by residents to non-residents.

Financial account

Financial account, as a part of the balance of payments, records all transactions between residents and non-residents associated with a change of ownership of foreign financial assets and liabilities during the period including the creation and liquidation of financial claims.

Foreign financial assets (and foreign financial liabilities)

Foreign financial assets and their matching liabilities are claims by a resident of one economy upon a resident of another economy. The existence of such claims, therefore, generally will be recorded on two balance sheets, namely the balance sheet of the transactor against which the claims are held as liabilities and the balance sheet of the holder of the claims who will record the transactions as assets. Foreign financial assets include resident owned corporate equities, bonds and notes issued by foreign enterprises.

Gross domestic product

Gross Domestic Product (GDP) is the total market value of goods and services produced in Australia within a given period after deducting the cost of goods and services used up in the process of production but before deducting allowances for the consumption of fixed capital. It is defined 'at market prices'. It is equivalent to gross national expenditure plus exports of goods and services less imports of goods and services.

Gross national income

Gross National Income (GNI) is the aggregate value of gross primary incomes for all institutional sectors, including net primary income receivable from non-residents.

Imports

Imports are commodities and other goods or services purchased by residents from non-residents.

Income on equity and investment fund shares

Income on equity and investment fund shares includes dividends and distributed branch profits and any distributions made by investment funds. It also includes reinvested earnings on direct investments and reinvested earnings on investment fund shares.

Interest

Interest is income earned by holders of traded debt securities and non-traded debt assets such as loans, deposits and trade credits.

International accounts ratios

International account ratios provide an indication of a country's ability to service debt and to sustain current account balances.

Investment fund shares

Investment fund shares are units or shares in pooled investment vehicles such as wholesale equity funds and cash management trusts.

Investment income

Investment income is income generated by financial assets. This includes dividends paid on direct and portfolio equity investments and interest paid on debt securities and other debt instruments.

Non-produced, non-financial assets

Non-produced, non-financial assets comprise intangible assets recorded in the capital account such as sales of patents, copyrights, trademarks, franchises and certain transactions in embassy land (tangible assets, transacted infrequently).

Non-resident

Non-resident refers to any economic entity (individual, enterprise or other organisation) ordinarily domiciled in a country other than Australia. Note that foreign branches and foreign subsidiaries of Australian enterprises and other external territories are regarded as non-residents.

Price changes

Price changes show the change in the market value of positions between the beginning and the end of the period that is due to a change in market prices. For equity positions the relevant market prices may be listed share prices or some other estimate of market value and for debt positions the relevant market prices may be interest rates.

Primary income

Primary income account shows primary income flows between resident and non-resident institutional units. The international accounts distinguish the following types of primary income:

  • compensation of employees
  • dividends
  • reinvested earnings
  • interest
  • investment income attributable to policy holders in insurance, standardised guarantees, and pension funds
  • rent
  • taxes and subsidies on products and production.
     

Reinvested earnings

Reinvested earnings are the earnings of a business enterprise that are not paid out as dividends or other distributions to investors in the enterprise. Reinvested earnings are retained by the enterprise to fund future business activities.

Remitted profits

Remitted profits are the earnings which overseas branches and other unincorporated enterprises remit to or from their Australian corporate head office.

Reserve Bank of Australia

Reserve Bank of Australia (RBA) is Australia's central bank. The RBA's main functions include monetary policy development, the issue of national currency, provision of banking services to the Commonwealth government sector and acting as a custodians of the country's reserve deposits and international reserves.

Resident

Residents include all economic entities that have a closer association (geographic and economic) with the territory of Australia than with any other territory. Residents include any individual, enterprise or other organisation ordinarily domiciled in Australia. See also 'Non-resident'.

Please note that Australian registered branches and incorporated subsidiaries of foreign enterprises are regarded as Australian residents.

Rest of the world

Rest of the world consists of all non-resident institutional units which undertake international trade or have other economic links with resident units.

Secondary income

Secondary income includes current transfers that offset the provision of resources that are normally consumed within a short period (less than twelve months) after the transfer is made. Examples include food aid, remittances from residents temporarily abroad and remuneration received by international students undertaking university studies.

Transaction

A transaction is an economic flow that reflects the creation, transformation, exchange, transfer, or extinction of economic value and involves changes in ownership of goods and/or financial assets, the provision of services, or the provision of labour and capital. The transactions recorded in the international investment position reconciliation statement are the same as the transactions recorded in the financial account of the balance of payments.

Transfer

Transfer is a one-sided transaction such as gifts, grants, taxes, etc. where one transactor provides something of economic value to another but does not receive a quid pro quo to which an economic value can be assigned. In order to maintain the double entry system of accounting, the value provided is matched in the accounts by an offsetting entry which is referred to as a transfer. See also the definitions for 'Secondary income' and 'Capital transfers'.

Volume changes

Volume changes show the change in the market value of positions between the beginning and the end of the period that is due to factors other than transactions, price changes and exchange rate changes. Volume changes include those due to the write-off of debt, reclassifications and changes in financial assets and liabilities due to migration.

Quality declaration

Institutional environment

Balance of payments and international investment position statistics are produced using a combination of data collected directly by the Australian Bureau of Statistics (ABS) under the authority of the Census and Statistics Act 1905 and exports and imports declarations collected by the Department of Home Affairs (Home Affairs).

Please refer to ABS Institutional Environment for more information about the institutional environment of the ABS, including its legislative obligations, financing and governance arrangements and mechanisms for security of ABS operations.

Relevance

Australia's balance of payments is a statistical statement providing a systematic record of Australia's economic transactions with the rest of the world. It may be described as a system of consolidated accounts where the accounting entity is the Australian economy and the entries are the transactions between residents of Australia and non-residents. Australia's international investment position summarises the level of Australia's foreign financial assets and liabilities at a point in time, together with details of changes in these levels since the previous reference point. The changes in level result from financial transactions, changes in prices and exchange rates and other adjustments. The international investment position is fully integrated with Australia's balance of payments.

A number of data sources are used in compiling balance of payments statistics across the current, capital and financial accounts. Sources include business surveys, Home Affairs' records and other administrative by-products. The main source of Australia's financial account and international investment position data is the Survey of International Investment conducted quarterly by the ABS.

Australian balance of payments and international investment position (BoP/IIP) statistics are used in a variety of ways. The main users are economic and industry analysts and policy advisers in Australian government agencies, private sector economic analysts and dealers, academics, the media and international organisations.

The statistics are used to analyse Australia's external performance, formulate and evaluate macro-economic policy (including trade policy, trade treaties and foreign investment policy), analyse trends in income, capital flows and patterns of investment into and out of the economy and to undertake international comparisons. The international accounts are inputs to the Australian national accounts, providing the external transactions accounts and the external assets and liabilities components of the national balance sheet.

Timeliness

The quarterly balance of payments and international investment position are compiled using data from three consecutive months (e.g. January, February, March), with the release of this information generally occurring on the first Tuesday of the third month following the end of the quarter (e.g. data for June quarter will be released on the first Tuesday in September).

The main data sources for goods, selected services, income, financial account and the international investment position provide timely information relating to the latest quarter. Some data are collected with a lag of one or two quarters (e.g. expenditure by travellers), are available annually (e.g. fees paid by foreign students studying in Australia) or less frequently (e.g. information about embassies and consulates in Australia).

The ABS uses several estimation methods to account for the less timely source data. Extrapolation methods are used to project particular series forward until survey or administrative results are available. Similarly, when data sources or data models provide data on a less frequent basis than quarterly, data are interpolated between periods to obtain sufficiently frequent estimates.

Accuracy

Sound data collection and methodological systems, conformity to international standard frameworks and the use of analytical tools all contribute to high quality outputs. The ABS ensures that survey based information are designed, tested and evaluated to a high quality standard. Data based on administrative data sources are subject to classification, processing, coverage and timing adjustments and modelling as appropriate. Where possible, data are validated against independent sources both within the ABS and externally to ensure significant transactions are reflected appropriately. For example, the financial press is monitored for large international transactions relating to the export and import of goods and services, change of ownership and direct and portfolio investments. Announced profits and dividends for investment income components, share market movements and interest rate movements for price changes, and movements in exchange rates for exchange rate impacts are also monitored. The statistics are investigated to ensure that these transactions are reflected appropriately. Data confrontation studies are used to compare and reconcile data items from different collections on an enterprise basis if possible.

Despite the quality assurance undertaken, the data may not be completely accurate for a number of reasons. Sampling error occurs when estimates are derived from a sample survey and the whole population is not enumerated. Estimation methods are applied to incomplete source data. Extrapolation methods are used to project particular series forward until survey or administrative results become available and for data provided on an irregular basis.

The general policy adopted in relation to revisions is to incorporate more accurate data for recent quarters into the estimates as they become available. However, to minimise disruption to the historical time series, revisions affecting periods prior to the previous financial year are usually applied once a year - in the June quarter issue for income, capital account, financial account and international investment position and in the September quarter issue for goods and services.

For more information please refer to Balance of Payments and International Investment Position, Australia: Concepts, Sources and Methods (cat. no. 5331.0).

Coherence

The conceptual framework and classification structure of the Australian international accounts follow both the International Monetary Fund (IMF) Balance of Payments and International Investment Position Manual, Sixth Edition, 2008 (BPM6) and the System of National Accounts, 2008 (2008 SNA) and other relevant international frameworks. Modifications and extensions take account of domestic user requirements for additional details and views of the data. The other international frameworks include the Organisation of Economic Cooperation and Development (OECD) Benchmark Definition of Foreign Direct Investment, 4th Edition, 2008 and the Manual on Statistics of International Trade in Services (MSITS).

The ABS provides aggregated statistics (by partner country where possible) to international organisations like the IMF and the OECD, which reconcile information across countries.

The ABS makes available historical time series dating back to 1959. Some quarterly balance of payments series are available in original, seasonally adjusted, and trend terms. When changes in source data, methodology or statistical techniques are introduced, historical time series are revised back as far as reasonably possible.

Balance of payments and international investment position statistics are consistent and reconcilable with the international merchandise trade, national accounts, monetary, financial and external debt statistics. For further information please refer to Balance of Payments and International Investment Position, Australia: Concepts, Sources and Methods (cat. no. 5331.0).

Interpretability

The analytic presentation of balance of payments provides balances for the current, capital and financial accounts, with subsidiary balances for goods, services, primary income and secondary income. In the current account, gross credits and debits series for goods, services, income and current transfers are distinct from each other. The current account series, in current prices, are provided in original, seasonally adjusted and trend estimates terms. Implicit price deflators, chain Laspeyres price indices and terms of trade are also included. The capital account presents balances for capital transfers and acquisition/disposal of non-produced, non-financial assets. Balances of net asset and liability for direct investment, portfolio investment, financial derivatives, other investment, and international reserve assets are published in the financial account.

For more information on seasonal adjustment and trend estimation, please refer to the Information Paper: A Guide to Interpreting Time Series - Monitoring Trends (cat. no. 1349.0).

Analytic presentations of international investment position data provide Australia's net international investment position as the difference between the levels of gross foreign financial assets and liabilities, as well as the sum of net foreign equity and net foreign debt. International investment statistics align with BPM6. Data are presented in time series and reconciliation formats.

If major changes are anticipated to any of the classifications, information papers associated with the publication are released in advance to advise the change and implementation plans. Although out of date in some details, the Balance of Payments and International Investment Position, Australia: Concepts, Sources and Methods (cat. no. 5331.0) gives a good description of the scope, methods and concepts underpinning the balance of payments and international investment position statistics.

The Balance of Payments and International Investment Position, Australia: Concepts, Sources and Methods (cat. no. 5331.0) publication provides users with detailed information on the international accounts. It describes in detail the conceptual framework underlying the international accounts statistics, classification of data items, presentations and publications. Information is also presented on data sources, compilation methodologies, data quality, relationships with national accounts and emerging issues.

Accessibility

Balance of payments and international investment position statistics are available free of charge from the ABS website. The publication is available with time series and data cubes for major data series. The publication and ABS website contain analysis of the latest data and supporting graphs and charts.

Balance of payments and international investment position statistics are published quarterly. Tables are available in spreadsheet format, many with data series beginning in September 1959.

There are a range of information papers, notes, publications and feature articles that provide information on a number of data quality issues. These include changes to the classifications, systems, concepts, standards or methodology, major data revisions and changes in data dissemination practices. The purpose of this information is to supplement and update the concepts, sources and methods.

More detailed data are available on request as a 'user pays' service which can be tailored to suit individual requirements. This service can be accessed through the ABS Information and Referral Service on 1300 135 070 or the Information Consultancy link on the ABS website. The ABS Privacy Policy outlines how the ABS will handle any personal information that you provide to us.

Abbreviations

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$bbillion (thousand million) dollars
$mmillion dollars
ABSAustralian Bureau of Statistics
AHECCAustralian Harmonised Export Commodity Classification
ANZSICAustralian and New Zealand Standard Industrial Classification
ARIMAautoregressive integrated moving average
BECClassification by Broad Economic Categories
BOPBalance of Payments
BPM6Balance of Payments and International Investment Position Manual, Sixth Edition
CVMchain volume measure
EPIexport price index
FISIMfinancial intermediary services indirectly measured
GDPgross domestic product
GNIgross national income
IIPInternational Investment Position
IPDimplicit price deflator
IPIimport price index
ITPIInternational Trade Price Indexes
n.e.s.not elsewhere specified
n.i.e.not included elsewhere
RBAReserve Bank of Australia
SITCStandard International Trade Classification
TWITrade-weighted Index
UKUnited Kingdom
USAUnited States of America