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BALANCE SHEET FOR AUSTRALIA IN REAL OR VOLUME TERMS

An experimental real/volume balance sheet for Australia was introduced in the March quarter 2001 issue of Australian National Accounts: National Income, Expenditure and Product (5206.0). National balance sheets in current prices have been included as part of the Australian system of national accounts for some time. The real/volume balance sheet is designed to remove the effect of price changes, in much the same way as for other real and volume estimates, and allow for comparisons of changes in the value of Australia's assets and liabilities over time free of the direct effects of inflation.

Volume estimates for the major categories of fixed asset stocks described as 'produced assets' - such as dwellings, other buildings and structures and machinery and equipment - have been available for many years in the Australian national accounts. However, volume estimates for stocks of non-produced, non-financial assets (land and other natural resources, etc.) and real estimates of financial assets, liabilities and net worth (wealth) have not been available previously. The calculation of volume and real estimates for some of these components is subject to some practical and conceptual difficulties, and therefore the term 'experimental' has been attached to these initial estimates.

The values of non-financial assets, such as dwellings, equipment and standing timber, can be decomposed into prices and volumes. Volume indexes, which measure the volume change of an aggregate between one period and another, can thus be derived by holding prices the same in the two periods. The ABS calculates an annual volume index of an aggregate by dividing its value in one year with its value in the previous year, using the prices of the earlier of the two years - termed the base year - to derive the values for both years. Chain volume indexes are then derived by multiplying successive annual volume indexes from a reference year to the current year. For example, starting with a year 1 reference year the chain volume index in year 3 is derived by multiplying the volume index for year 1 to year 2 by the volume index for year 2 to year 3. ABS practice is to re-reference the chain indexes to the current price value of the aggregate in the year of the latest base year.

Financial assets and liabilities cannot be decomposed into prices and volumes, and so it is impossible to derive volume indexes for them. The same is true of gross operating surplus and other income flows, and is the reason why chain volume estimates of GDP cannot be derived by aggregating volume indexes of its income components. However, it is possible to deflate income flows, financial assets and liabilities by a price index in order to measure the purchasing power of the aggregate in question over a designated numeraire set of goods and services. Such measures are called 'real' estimates.

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


Real/volume balance sheet estimates

Table 29.26 presents real/volume balance sheet data for Australia. The data show that Australia's real net worth (total assets less total liabilities to the rest of the world) grew by 12.7% between 30 June 1992 and 30 June 2000, compared with an increase of 49.5% in current prices. This represents a real average annual growth rate of 1.5%.

Total assets, in real terms, grew by 25.8% during this period, driven mainly by increased volumes of dwellings (32%), machinery and equipment (28.8%), subsoil assets (49.5%), and real total financial assets with the rest of the world (120.3%). Real financial liabilities to the rest of the world increased by 94.8% between 30 June 1992 and 30 June 2000.

The ABS plans to publish both current and real/volume balance sheets in future editions of the Australian System of National Accounts (5204.0). There is also a program of research underway to further develop the balance sheet and to use it to derive alternative measures of income and saving to that used in the conventional national accounts.