2008-09 STATEMENT OF STOCKS AND FLOWS

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

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

3 By definition, the value of a stock at the end of a period is the sum of the stock at the beginning of the period and all the flows affecting that stock which took place during the period, 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 currently published as part of the GFS operating statement. Revenues are defined as transactions which increase net worth whereas expenses are transactions which decrease net worth. The difference between revenues and expenses, therefore, represents the change in net worth due to transactions. This equates to the GFS net operating balance.

5 Other economic flows can be 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 three independently reported components (i.e. change in net worth as derived via the balance sheet, change in net worth due to transactions, and change in net worth due to other economic flows) will be consistent with each other.


COMMONWEALTH GENERAL GOVERNMENT - STATEMENT OF STOCKS AND FLOWS

11 The change in the treatment of Defence Weapons Platforms, which are now capitalised to align with the System of National Accounts 2008, has impacted on the Statement of Stocks and Flows for the Commonwealth General Government. The time series has been revised to reflect this change which has altered the value of the opening stocks as at June 2008, along with other revisions. The statement for 2008-09 is not comparable to previously published data.

12 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 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.

13 The statement of stocks and flows for the Commonwealth general government sector is presented in Table 1. During 2008-09 the net worth of the Commonwealth general government sector decreased by $47,880 million. This was the result of a GFS net operating balance (which reflects the change in net worth due to transactions) of -$24,534 million combined with revaluations of -$23,627 million. The key contributor to revaluations on the liabilities side was revaluations to unfunded superannuation and other employee entitlements ($25,221 million). Revauations on the assets side of the statement were driven by equity ($6,186 million) and other non-equity assets ($4,684 million), offset by advances paid (-$9,316 million).

TABLE 1. COMMONWEALTH, General Government - Statement of Stocks and Flows
			Opening Stocks as at June 2008	Transactions	Revaluations	Other Volume Changes(a)	Closing Stocks as at June 2009
			$m	$m	$m	$m	$m
Assets
	Financial assets
		Cash and deposits	1 784	156	-318	-	1 622
		Advances paid	33 159	7 905	-9 316	-	31 748
		Investments, loans and placements	89 323	16 185	1 526	-	107 034
		Other non-equity assets	42 138	-	4 684	-	46 822
		Equity	43 970	9	6 186	-	50 165
		Total	210 375	24 255	2 761	-	237 391
	Non-financial assets
		Land and fixed assets	76 900	5 304	3 728	281	86 213
		Other non-financial assets	219	1 635	-1 232	-	622
		Total	77 118	6 938	2 496	281	86 835
	Total		287 493	31 194	5 257	281	324 226
Liabilities
	Deposits held		3 179	209	360	-	3 748
	Advances received		-	-	-	-	-
	Borrowing		66 103	47 665	65	-	113 833
	Unfunded superannuation and other employee entitlements		108 997	-	25 221	-	134 218
	Other provisions		7 886	-	3 990	-	11 876
	Other non-equity liabilities		21 341	7 855	-752	-	28 444
	Total		207 506	55 729	28 884	-	292 119
GFS Net worth			79 987	-24 534	-23 627	281	32 107
Net debt			-54 985	. .	. .	. .	-22 823
Net financial worth			2 869	. .	. .	. .	-54 728
. . 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 2009, December 2009.

STATE AND LOCAL GENERAL GOVERNMENT - STATEMENT OF STOCKS AND FLOWS

14 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. The net worth of state governments increased by $61,526 million during 2008-09, driven by $61,333 million from other economic flows. On the asset side the largest contributors were land and fixed assets ($66,140 million) and Equity ($22,763 million). The most significant contributor to liabilities was Unfunded superannuation and other employee entitlements ($29,376 million).

15 The net worth of local government increased by $25,119 million in 2008-09, driven by $20,742 million from other economic flows. The largest contributor to assets was land and fixed assets ($19,661 million).The most significant contributor to liabilities was other non-equity liabilities ($25,726 million) which was offset by other provisions (-$12,064 million).

TABLE 2. STATE, General Government - Statement of Stocks and Flows
			Opening Stocks as at June 2008	Transactions	Other Economic Flows	Closing Stocks as at June 2009
			$m	$m	$m	$m
Assets
	Financial assets
		Cash and deposits	13 266	1 347	-508	14 105
		Advances paid	6 061	-96	-562	5 403
		Investments, loans and placements	42 471	606	-447	42 630
		Other non-equity assets	16 435	250	1 154	17 839
		Equity	209 704	2 230	22 763	234 697
		Total	287 937	4 336	22 401	314 674
	Non-financial assets
		Land and fixed assets	404 099	9 886	66 140	480 125
		Other non-financial assets	2 252	987	-1 300	1 939
		Total	406 351	10 873	64 840	482 064
	Total		694 288	15 210	87 240	796 738
Liabilities
	Deposits held		3 246	-91	-1 790	1 365
	Advances received		3 309	-242	445	3 512
	Borrowing		4 309	10 874	961	45 569
	Unfunded superannuation and other employee entitlements		94 815	-145	29 376	124 046
	Other provisions		6 900	-	601	7 501
	Other non-equity liabilities		16 683	4 621	-3 688	17 616
	Total		158 685	15 017	25 908	199 610
GFS Net worth			535 602	193	61 333	597 128
Net debt			-21 510	. .	. .	-11 691
Net financial worth			129 252	. .	. .	115 064
. . not applicable
- nil or rounded to zero (including null cells)

TABLE 3. LOCAL, General Government - Statement of Stocks and Flows
			Opening Stocks as at June 2008	Transactions	Other Economic Flows	Closing Stocks as at June 2009
			$m	$m	$m	$m
Assets
	Financial assets
		Cash and deposits	6 128	1 110	-243	6 995
		Advances paid	5	188	-189	4
		Investments, loans and placements	6 477	23	-127	6 373
		Other non-equity assets	2 563	-7 577	7 630	2 616
		Equity	952	-1 760	1 869	1 061
		Total	16 125	-8 016	8 941	17 050
	Non-financial assets
		Land and fixed assets	245 978	4 438	19 661	270 077
		Other non-financial assets	1 916	309	-244	1 981
		Total	247 894	4 747	19 417	272 058
	Total		264 020	-3 270	28 358	289 108
Liabilities
	Deposits held		603	24	5	632
	Advances received		35	34	-35	34
	Borrowing		6 554	-256	-178	6 120
	Unfunded superannuation and other employee entitlements		2 192	6 087	-5 836	2 443
	Other provisions		53	12 065	-12 064	54
	Other non-equity liabilities		2 879	-25 602	25 726	3 003
	Total		12 317	-7 647	7 616	12 286
GFS Net worth			251 703	4 377	20 742	276 822
Net debt			-5 418	. .	. .	-6 587
Net financial worth			3 809	. .	. .	4 764
. . not applicable

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