STATEMENT OF STOCKS AND FLOWS, 2011–12


1 The international Government Finance Statistics (GFS) standard as promulgated by the International Monetary Fund (IMF) recommends that opening and closing 'stock' values be reconciled with all 'flows' occurring throughout the year. The standard is based on an analytical framework in which all changes in the values of stocks from one year to the next can be fully explained by the flows that have occurred during that year.

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

3 By definition, the value of a stock at the end of a period is the sum of the stock at the beginning of the period and all the flows affecting that stock which took place during the period, i.e. S₁ = S₀ + F₁, where S₀ and S₁ represent the values of a specific stock at the beginning and end of an accounting period, and F₁ represents the net value of all flows during the period relevant to that particular stock.

4 Statistics on transactions giving rise to revenues and expenses are published as part of the GFS operating statement. Revenues are defined as transactions which increase net worth whereas expenses are transactions which decrease net worth. The difference between revenues and expenses, therefore, represents the change in net worth due to transactions. This equates to the GFS net operating balance.

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

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

7 Other volume changes refer to events that include:

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

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

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

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


COMMONWEALTH GENERAL GOVERNMENT – STATEMENT OF STOCKS AND FLOWS

11 The Commonwealth Government publishes a statement of other economic flows for the general government sector. This statement outlines all revaluations and other volume changes occurring throughout the year, which allows a full reconciliation of stocks and flows. This information allows the Australian Bureau of Statistics (ABS) to disaggregate other economic flows into price and volume effects. While some states also publish a statement of other economic flows, the majority currently do not. For local government, information on the components of other economic flows are also generally unavailable. Accordingly, the ABS does not have enough information on which to disaggregate other economic flows into its two components across the state and local levels of government.

12 The statement of stocks and flows for the Commonwealth general government sector is presented in Table 1. During 2011–12 the net worth of the Commonwealth general government sector decreased by $150,894m. This was the result of a GFS net operating balance (which reflects the change in net worth due to transactions) of –$39,017m combined with revaluations of –$112,458m offset by other volume changes of $581m. The key contributor was revaluations on the liabilities side which was driven by unfunded superannuation and other employee entitlements ($93,208m), and borrowing ($21,439m). Revaluations on the assets side of the statement were less significant and driven by other non–equity assets ($4,246m) and land and fixed assets ($3,381m).

TABLE 1. COMMONWEALTH, General Government – Statement of Stocks and Flows
			Opening Stocks as at 1 July 2011	Transactions	Revaluations	Other Volume Changes(a)	Closing Stocks as at 30 June 2012
			$m	$m	$m	$m	$m
Assets
	Financial assets
		Cash and deposits	2 435	160	–116	–	2 479
		Advances paid	30 701	3 987	–726	–	33 962
		Investments, loans and placements	98 675	–1 031	848	–	98 492
		Other non–equity assets	52 862	–	4 246	–	57 108
		Equity	50 355	1 879	–2 196	–	50 038
		Total	235 029	4 995	2 055	–	242 079
	Non–financial assets
		Land and fixed assets	89 037	2 632	3 381	581	95 631
		Other non–financial assets	1 759	2 541	–2 084	–	2 216
		Total	90 796	5 173	1 297	581	97 847
	Total		325 825	10 168	3 352	581	339 926
Liabilities
	Deposits held		3 614	91	–4	–	3 701
	Advances received		–	–	–	–	–
	Borrowing		212 305	46 154	21 439	–	279 898
	Unfunded superannuation and other employee entitlements		156 649	–	93 208	–	249 857
	Other provisions		12 440	–	1 486	–	13 926
	Other non–equity liabilities		40 238	3 047	–427	–	42 858
	Total		425 247	49 293	115 701	–	590 241
GFS Net worth			–99 421	–39 017	–112 458	581	–250 315
Net debt			84 108	. .	. .	. .	148 666
Net financial worth			–190 218	. .	. .	. .	–348 162
. . not applicable
– nil or rounded to zero (including null cells)
(a) Source: Department of Finance and Deregulation, Consolidated Financial Statements for the Year Ended 30 June 2012, December 2012.

STATE AND LOCAL GENERAL GOVERNMENT – STATEMENT OF STOCKS AND FLOWS

13 Both the state and local general government Statements of Stocks and Flows (Table 2 and Table 3 respectively) highlight the significance of other economic flows. During 2011–12 the net worth of the state general government sector decreased by $46,501m, driven by –$47,518m from other economic flows. The key contributor was other economic flows on the liabilities side which was driven by unfunded superannuation and other employee entitlements ($44,857m). On the assets side, the main contributors to other economic flows were land and fixed assets ($10,767m) offset by equity (–$9,957m) and cash and deposits (–$2,657m).

14 The net worth of the local general government sector increased by $14,907m in 2011–12. Other economic flows contributed $8,602m to this movement.

TABLE 2. STATE, General Government – Statement of Stocks and Flows
			Opening Stocks as at 1 July 2011	Transactions	Other Economic Flows	Closing Stocks as at 30 June 2012
			$m	$m	$m	$m
Assets
	Financial assets
		Cash and deposits	17 935	471	–2 657	15 749
		Advances paid	6 053	–31	1 037	7 059
		Investments, loans and placements	53 197	1 275	1 188	55 660
		Other non–equity assets	21 401	268	–383	21 286
		Equity	266 301	1 274	–9 957	257 618
		Total	364 887	3 257	–10 773	357 371
	Non–financial assets
		Land and fixed assets	535 675	13 171	10 767	559 613
		Other non–financial assets	2 064	1 526	–1 526	2 064
		Total	537 740	14 698	9 239	561 677
	Total		902 627	17 955	–1 533	919 049
Liabilities
	Deposits held		3 905	391	129	4 425
	Advances received		3 388	–52	–14	3 322
	Borrowing		80 746	16 767	–190	97 323
	Unfunded superannuation and other employee entitlements		136 036	–123	44 857	180 770
	Other provisions		8 360	–	673	9 033
	Other non–equity liabilities		19 981	–46	531	20 466
	Total		252 416	16 937	45 986	315 339
GFS Net worth			650 211	1 017	–47 518	603 710
Net debt			10 853	. .	. .	26 603
Net financial worth			112 472	. .	. .	42 032
. . not applicable
– nil or rounded to zero (including null cells)

TABLE 3. LOCAL, General Government – Statement of Stocks and Flows
			Opening Stocks as at 1 July 2011	Transactions	Other Economic Flows	Closing Stocks as at 30 June 2012
			$m	$m	$m	$m
Assets
	Financial assets
		Cash and deposits	8 251	1 055	–273	9 033
		Advances paid	16	25	–22	19
		Investments, loans and placements	11 269	249	353	11 871
		Other non–equity assets	3 487	251	–207	3 531
		Equity	8 942	8	69	9 019
		Total	31 964	1 588	–80	33 472
	Non–financial assets
		Land and fixed assets	299 334	4 593	10 528	314 455
		Other non–financial assets	1 641	181	38	1 860
		Total	300 976	4 774	10 565	316 315
	Total		332 940	6 362	10 486	349 788
Liabilities
	Deposits held		420	26	–15	431
	Advances received		23	–1	–1	21
	Borrowing		9 066	924	74	10 064
	Unfunded superannuation and other employee entitlements		2 781	362	327	3 470
	Other provisions		328	162	–134	356
	Other non–equity liabilities		3 664	–1 417	1 633	3 880
	Total		16 282	56	1 885	18 223
GFS Net worth			316 658	6 305	8 602	331 565
Net debt			–10 027	. .	. .	–10 405
Net financial worth			15 682	. .	. .	15 249
. . not applicable

15 For more information on the statement of stocks and flows, refer to Table 2.1 in Australian System of Government Finance Statistics: Concepts, Sources and Methods (cat. no. 5514.0.55.001) electronic version or (cat. no. 5514.0) pdf version and Chapter 4 of the International Monetary Fund's Government Finance Statistics Manual 2001.