International Investment Position, Australia: Supplementary Statistics methodology

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).

Balance of payments(BOP) credit entries are shown with an implied positive sign, while debit items are shown as negative entries. References to balance of payments debit items in 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 errors and omissions add up to zero.

For foreign liabilities, position data and any transaction increase (BOP credits) or other flow increase in liabilities are 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 are shown with a negative sign. Transactions (BOP credits) and other flows in assets shown without a sign denote a decrease in assets.

Movements over time are expressed as percentage changes. A minus sign indicates 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.

On a balance of payments and international investment position 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 balance of payments and international investment position statistics. Most of the transactions involving Norfolk Island are not material to Australia's trade performance, and not capturing these transactions will not distort these statistics. However, any significant transactions will be identified and included in the relevant statistics.

An economic entity (person, organisation, or enterprise) has its centre of predominant economic interest (or residency) in Australia if it has a 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 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 balance of payments and international investment position, the Australian economy is conceived as comprising the economic entities that have a closer association with the territory of Australia than with any other territory. Each such economic entity is described as a resident of Australia. Any economic entity which is not regarded as a resident of Australia is described as a non-resident.

Resident entities include:

• 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.

Foreign direct investment statistics are presented according to the directional principle rather than the asset/liability principle used in the quarterly Balance of Payments and International Investment Position publication. Under the directional presentation, the direct investment flows and positions are organised according to the direction of the investment for the reporting economy—either outward or inward. For a particular country, all flows and positions of direct investors resident in that economy are shown under outward investment, and all flows and positions for direct investment enterprises resident in that economy are shown under inward investment. The diagram below illustrates how outward and inward investment are compiled.

Reverse investment occurs when an affiliate invests in its parent. Under the directional presentation, reverse investment is subtracted to derive the total outward or inward investment of the reporting country. For example, if a resident parent borrows money from one of its foreign affiliates, this is subtracted when calculating the reporting country’s outward investment because it reduces the amount of money that the resident country’s parent entity have invested in their foreign affiliates on a net basis. Similarly, if a resident affiliate lends money to its foreign parent, this is subtracted when calculating inward investment because it reduced the amount of money that the foreign parent has invested in the resident country on a net basis. While reverse equity investment is treated the same way as reverse debt investment, it is so rare that most of the difference between the two presentations is due to differences in the treatment of reverse debt investment.

Total debt and equity levels shown for foreign investment in Australia (table 2 - International Investment Position, Australia: Supplementary Statistics ) and Australian investment abroad (table 5 - International Investment Position, Australia: Supplementary Statistics) are recorded on a gross basis for liabilities and assets. The levels shown for foreign investment in Australia and Australian investment abroad through the seperate debt and equity instruments are recorded net of any reverse investment by a direct investment enterprise (affiliate) in its direct investor (parent) (see above paragraph). Hence, total debt and equity levels for foreign investment in Australia and Australian investment abroad may differ from the sum of the debt and equity instruments in table 2 and table 5 respectively if reverse investment is present. 

Most portfolio equity liabilities are measured through a different process to other instruments and portfolio equity assets. This process allows the ABS to determine the levels of portfolio equity liabilities by country (table 2 - International Investment Position, Australia: Supplementary Statistics). The process does not provide information on transactions in portfolio equity liabilities (table 1 - International Investment Position, Australia: Supplementary Statistics) or income accrued on these liabilities (table 3 - International Investment Position, Australia: Supplementary Statistics) and results in the unallocated category being a significant proportion of the total.

Care should be exercised in interpreting country data. The country allocation of financial transactions and levels is based on the immediate country of residence of the creditor in the case of Australia's foreign liabilities, or of the debtor in the case of Australia's foreign assets. The country of residence of the ultimate beneficial owner/recipient is not identified.

This category is used for securities issued on several markets at once (e.g. Eurobonds) and loans made by a syndicate of lenders in several countries (e.g. Euro-currency or Asian dollar loans).

This category is used for securities issued and loans made by non-countries, which include organisations such as the International Monetary Fund (IMF), International Bank of Reconstruction and Development and International Institutions Unspecified.

Includes Brunei Darussalam, Canada, Chile, China (excludes SARs and Taiwan), Hong Kong (SAR of China), Indonesia, Japan, Korea (Republic of South), Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, Philippines, Russian Federation, Singapore, Taiwan, Thailand, United States of America and Vietnam.

Includes Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam.

Includes Austria, Belgium, Bulgaria, Croatia, Cyprus, Czechia (former Czech Republic), Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and Sweden. More recent changes to EU membership are stated below:

• Cyprus, Czechia, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia are introduced (2004–)
• Bulgaria and Romania (2007–)
• Croatia (2013–)
• United Kingdom (excluded from 2020 onward)

Includes Austria, Belgium, Canada, Chile, Czechia (formerly Czech Republic), Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Republic of South Korea, Latvia, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, Switzerland, Turkiye, United Kingdom and the United States of America. Countries introduced in later years include:

• Chile, Estonia, Israel and Slovenia (2010–)
• Latvia (2016–)
• Lithuania (2018–)
• Colombia (2020–)
• Costa Rica (2021–)

Includes Cook Islands, Fiji, French Polynesia, Kiribati, Marshall Islands, Micronesia, Federated States of Nauru, New Caledonia, Niue, Palau, Papua New Guinea, Samoa, Solomon Islands, Tonga, Tuvalu, Vanuatu.

The sectors used in publication tables 8-12 reference the Standard Economic Sector Classifications of Australia (SESCA). Classification of individual enterprises to subsectors used four–digit classes specified in the Standard Institutional Sector Classification of Australia (SISCA), grouping units according to similar economic functions and structural characteristics.

The basic unit that is classified by sector is the institutional unit, which is defined as an economic entity that is capable, in its own right, of incurring liabilities and engaging in economic activities and transactions with other entities.

The unit for which statistics were reported in the survey was the Australian enterprise unit. This consists of all the entities within an Australian enterprise group that are in the same SESCA subsector. For this publication, the SISCA classes were classified into sectors as follows:

• 2110 Reserve Bank of Australia

• 2121 Banks

• 2132 Life Insurance Corporations
• 2133 Non–Life Insurance Corporations

• 2131 Superannuation Funds

• 2129 Other Depository Corporations
• 2141 Money Market Funds
• 2142 Non–Money Market Financial investment Funds
• 2191 Securitisers
• 2199 Other Financial Intermediaries
• 2200 Financial Auxiliaries
• 2301 Central Borrowing Authorities
• 2309 Money Lenders and Other Captive Financial Institutions

• 3000 General Government

• 1001 Non–Financial Investment Funds (non-government affiliated)
• 1009 Other Non–Financial Corporations (non-government affiliated)

• 4000 Households

• 1001 Non-Financial Investment Funds (government affiliated)
• 1009 Other Non–Financial Corporations (government affiliated)
• 4000 Households
• 5000 Not–for–profit Institutions Serving Households

 The following symbols and abbreviations are used in this publication: