5342.0 - Balance of Payments Statistics, Information Paper on Quality , 1996

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Contents >> Chapter 3. Analysis of reliability of the statistics >> Direction of one-year revisions

3.44. The previous subsection of this paper looked at the bias and dispersion of initial and revised estimates, when compared to the final or latest estimate, over a significant period of revision (24 months, 12 quarters and 6 years for monthly, quarterly and annual estimates respectively). The reference in the analysis to the final estimates provided a perspective on the shifts in estimation levels derived from conceptual/methodological changes as well as mapping the process of regular revision through at least one annual collection cycle.

3.45. However, many users want to review the performance of the estimates in the short term, without the concerns of the longer term shifts in estimation levels. These shifts are recognised as improvements in quality, but which usually do not change the direction of movement between periods nor alter the trends. For these users, there is a need to factor into their analyses of the estimates for the most recent periods the expectation of revision over the next year or so as quarterly data sources replace extrapolations, as annual survey results replace partial coverage quarterly estimates, and as revised annual results replace preliminary results. Once observation periods recede more than twelve months into the past, revisions become less significant to their day-to-day analysis - the focus has moved to the sharp end of the series.

3.46. Table 6 provides a view of the short term reliability of the statistics by quantifying the direction of revisions through a one year revision cycle. It shows, for each aggregate, measures of the direction of one-year revisions to initial monthly, quarterly and annual estimates. These measures indicate whether revisions have been predominately upward or downward in the short term. Median initial estimates and median revisions after one year are shown. For median revisions, unscaled and scaled statistics are given. Unscaled median revisions are expressed in millions of dollars and are not related to the size of the aggregate being revised. It needs to be noted that because these estimates are expressed in original dollar terms, no account is taken of inflationary effects. Where the size of an aggregate has grown significantly over the period covered by the study, unscaled median revisions of that aggregate are not directly comparable over time. Scaled revisions, on the other hand, express the change in the estimate as a percentage of the data value being revised. Scaled median revisions therefore overcome the problem of changing dollar values but raise another difficulty in that they may provide misleading information for those aggregates which represent net transactions (e.g. balance on merchandise trade, balance on goods and services, and some net capital account items) which are close to zero in magnitude or which change signs frequently.

6: DIRECTION OF ONE-YEAR REVISIONS TO INITIAL ESTIMATES: MEDIAN INITIAL ESTIMATES AND MEDIAN ONE-YEAR REVISIONS (a)
				Median initial estimates			Unscaled median one-year revisions			Scaled median one-year revisions
				Monthly $m	Quarterly $m	Annual $m	Monthly $m	Quarterly $m	Annual $m	Monthly %	Quarterly %	Annual %

Current account
	Merchandise exports			4 051	12 091	41 504	12	18	- 14	0.3	0.2	- 0.4
	Merchandise imports			3 972	12 192	40 386	0	- 2	- 1	0.0	0.0	0.0
	Balance, merchandise trade			-22	-65	-504	8	29	25	-2.1	-3.3	-1.1
	Non-merchandise credits			1 745	5 173	16 662	9	9	34	0.5	0.2	0.6
	Non-merchandise debits			3 115	9 435	27 767	86	271	532	3.2	3.4	1.4
	Net non-merchandise			-1 257	-3 734	-12 471	-47	-161	-352	4.4	4.3	2.2
	Services credits			987	2 971	9 517	22	- 11	- 44	2.7	- 0.5	- 0.3
	Services debits			1 258	3 795	11 397	8	42	51	0.6	1.3	0.6
	Net services			-258	-761	-2 960	8	16	-155	-1.3	-3.9	6.3
	Income credits			336	1 018	3 600	1	- 7	195	0.4	- 0.9	5.3
	Income debits			1 578	4 837	14 584	54	155	397	3.9	2.8	2.3
	Net income			-1 160	-3 551	-10 984	-58	-166	-303	5.2	5.0	4.0
	Unrequited transfers credits			314	940	3 045	0	0	0	0.0	0.0	0.0
	Unrequited transfers debits			174	512	1 786	1	2	13	0.3	0.4	0.6
	Net unrequited transfers			157	466	831	-1	-7	-8	-0.5	-1.4	-1.0
	Balance on goods & services			-256	-799	-1 974	33	65	252	-4.2	-8.0	-5.0
	Balance on current account			-1 263	-3 675	-12 380	-30	-142	-327	2.3	4.2	2.0
Capital account
	Official sector transactions			363	1 308	498	51	99	269	1.0	(b) -4.6	(b) -6.7
		General government transactions		452	1 037	2 732	67	99	270	5.1	(b) -3.4	16.0
			Foreign investment in Australia	n.a.	911	4 015	n.a.	108	625	n.a.	(b) -0.2	6.7
			Australian investment abroad	n.a.	- 5	192	n.a.	26	50	n.a.	0.0	0.4
		Reserve Bank transactions		-46	-85	-1 361	0	0	0	0.0	0.0	0.0
			Foreign investment in Australia	n.a.	0	0	n.a.	0	0	n.a.	0.0	0.0
			Australian investment abroad	n.a.	79	1 054	n.a.	0	0	n.a.	0.0	0.0
		Non-official sector transactions		n.a.	2 325	8 073	n.a.	48	314	n.a.	-14.2	3.5
			Foreign investment in Australia	n.a.	4 044	17 796	n.a.	394	2 561	n.a.	11.2	19.7
			Australian investment abroad	n.a.	1 794	590	n.a.	590	924	n.a.	45.4	13.6
	Balance on capital account			n.a.	3 912	13 950	n.a.	547	1 226	n.a.	-2.1	18.9
Balancing item				n.a.	384	550	n.a.	55	- 404	n.a.	33.5	- 22.5
(a) For monthly statistics, from January 1986 to December 1993, For quarterly statistics, from the March quarter 1986 to the December quarter 1993. For annual statistics, generally from 1981-82 to 1993-94 except for the following series for which analysis commences in 1985-86: direct investment capital; the net series for services, income and transfers; and balance on goods and services. (b) The median observations for initial estimates, one-year unscaled revisions and scaled revisions are each determined independently such that the sign of the scaled revision may be opposite to that of the unscaled revision.

3.47. To illustrate how the data in Table 6 can be used, consider income debits. The median initial monthly estimate of income debits is $1,578 million. The median revision after one year to initial estimates was an increase of $54 million, while the median-scaled one-year revision to initial estimates was 3.9%. The pattern for quarterly and annual estimates is similar. The median initial quarterly estimate was $4,837 million, the median one year revision was $155 million and the median-scaled revision was 2.8%. The corresponding annual estimates were $14,584 million, $397 million and 2.3%.

3.48. The direction in two or three years of revisions may also be calculated. However, for purposes of this paper, the advantage of using a shorter revision period to allow more recent data to be included in the analysis, and to reflect a common focus on the immediate past in balance of payments analyses, outweighed the advantages of presenting the analysis of a longer revisions process.

3.49. Table 7 (monthly statistics) and Table 8 (quarterly statistics) analyse the direction of revisions in the same way as Table 3.1 but with statistics included for the following sub-periods of the overall period covered in Table 6.


Periodicity of statistics	Sub-period 1	Sub-period 2

Monthly	Jan. 86 - Dec. 89	Jan. 90 - Dec. 93
Quarterly	Mar. 86 - Dec. 89	Mar. 90 - Dec. 93

3.50. Comparing patterns of directions of revisions between the different sub-periods can highlight trends in the quality of the statistics that are not apparent in the all periods total. Although annual statistics can be broken down in the same way, they are not presented here because the small number of observations for each sub-period means that any conclusions drawn from comparing data between sub-periods are likely to be of questionable validity.

7. DIRECTION OF ONE-YEAR REVISIONS TO INITIAL MONTHLY ESTIMATES: MEDIAN INITIAL ESTIMATES AND MEDIAN ONE-YEAR REVISIONS TO INITIAL ESTIMATES FOR JANUARY 1986 TO DECEMBER 1993 (a)
			Median initial estimates			Unscaled median one-year revisions			Scaled median one-year revisions

			Period 1	Period 2	All	Period 1	Period 2	All	Period 1	Period 2	All
					periods			periods			periods
			$m	$m	$m	$m	$m	$m	%	%	%

Current account
	Merchandise exports		3 306	4 665	4 051	2	21	12	0.1	0.5	0.3
	Merchandise imports		3 429	4 436	3 972	-6	1	0	0.2	0.0	0.0
	Balance on merchandise trade		-133	167	-22	6	22	8	-3.3	-0.4	-2.1
	Non-merchandise credits		1 314	1 884	1 745	37	-39	9	3.0	-2.1	0.5
	Non-merchandise debits		2 344	3 358	3 115	94	21	86	4.4	0.6	3.2
	Net non-merchandise		-1 018	-1 435	-1 257	-58	8	-47	6.0	-0.4	4.4
	Services credits		706	1 163	987	18	35	22	2.6	3.0	2.7
	Services debits		954	1 423	1 258	26	-10	8	2.6	-0.8	0.6
	Net services		-264	-246	-258	-15	26	8	5.4	-9.1	-1.3
	Income credits		291	365	336	8	-3	1	2.8	-1.0	0.4
	Income debits		1 229	1 726	1 578	65	24	54	6.6	1.5	3.9
	Net income		-952	-1334	-1 160	-72	-33	-58	8.3	2.5	5.2
	Unrequited transfers credits		297	365	314	0	0	0	0.0	0.0	0.0
	Unrequited transfers debits		153	178	174	2	0	1	0.9	0.0	0.3
	Net unrequited transfers		154	157	157	0	-2	-1	0.0	-1.5	-0.5
	Balance on goods & services		-428	-137	-256	-14	63	33	-3.0	-4.7	-4.2
	Balance on current account		-1 179	-1 326	-1 263	-70	43	-30	6.9	-3.8	2.3
Capital account
	Official sector transactions		47	485	363	25	94	51	0.7	3.8	1.0
		General government transactions	338	552	452	57	94	67	2.8	5.6	5.1
		Reserve Bank transactions	-120	25	-46	0	0	0	0.0	0.0	0.0
(a) Data are shown for the full period and for the following two sub-periods: Period 1: Jan 1986-Dec 1989; Period 2: Jan 1990-Dec 1993.

8: DIRECTION OF ONE-YEAR REVISIONS TO INITIAL QUARTERLY ESTIMATES: MEDIAN INITIAL ESTIMATES AND MEDIAN ONE-YEAR REVISIONS TO INITIAL ESTIMATES FOR MARCH QUARTER 1986 TO DECEMBER QUARTER 1993 (a)
			Median initial estimates[			Unscaled median one-year revisions			Scaled median one-year revisions

			Period 1	Period 2	All	Period 1	Period 2	All	Period 1	Period 2	All
					periods			periods			periods
			$m	$m	$m	$m	$m	$m	%	%	%

Current account
	Merchandise exports		10 167	13 831	12 091	-19	40	18	-0.2	0.3	0.2
	Merchandise imports		10 146	12 859	12 192	-9	1	-2	-0.1	0.0	0.0
	Balance on merchandise trade		-672	463	-65	-2	35	29	-6.2	3.8	-3.3
	Non-merchandise credits		3 952	5 724	5 173	9	11	9	0.2	0.2	0.2
	Non-merchandise debits		7 056	10 130	9 435	314	211	271	5.5	2.1	3.4
	Net non-merchandise		-3 024	-4 413	-3 734	-134	-170	-161	5.0	4.3	4.3
	Services credits		2 146	3 474	2 971	-15	74	-11	-0.7	2.1	-0.5
	Services debits		2 878	4 202	3 795	67	-10	42	2.6	-0.3	1.3
	Net services		-763	-726	-761	-33	46	16	4.0	-9.8	-3.9
	Income credits		871	1 091	1 018	-7	-27	-7	-0.9	-0.9	-0.9
	Income debits		3 704	5 193	4 837	127	155	155	3.7	2.8	2.8
	Net income		-2 723	-3 959	-3 551	-72	-171	-166	3.2	5.3	5.0
	Unrequited transfer credits		892	1 117	940	-2	5	0	-0.2	0.5	0.0
	Unrequited transfer debits		469	593	512	6	0	2	1.3	0.0	0.4
	Net unrequited transfers		439	504	466	-8		-7	-1.9	-0.2	-1.4
	Balance on goods& services		-1 376	-97	-799	-80	90	65	-5.2	-13.9	-8.0
	Balance on current account		-3 658	-3717	-3 675	-146	-102	-142	5.1	3.4	4.2
Capital account
	Official sector transactions		387	1 300	1 308	287	-106	99	-5.6	-4.5	(a)-4.6
	General government transactions		838	1 230	1 037	287	-106	99	2.7	-1.7	(a)-3.4
		Foreign investment in Australia	911	756	911	470	-123	108	14.4	-8.9	(a)-0.2
		Australian investment abroad	22	-18	-5	61	0	26	-16.4	0.0	0.0
	Reserve Bank transactions		-465	119	-85	0	0	0	0.0	0.0	0.0
		Foreign investment in Australia	-1	7	0	0	0	0	0.0	0.0	0.0
		Australian investment abroad	452	-79	79	0	0	0	0.0	0.0	0.0
	Non-official sector transactions		2 376	2 292	2 325	-182	186	48	-14.2	-14.1	-14.2
		Foreign investment in Australia	4 468	3 487	4 044	294	652	394	7.8	17.3	11.2
		Australian investment abroad	1 845	1 744	1 794	659	214	590	56.7	22.9	45.4
	Balance on capital account		3 498	4 462	3 912	547	33	547	7.6	-11.8	-2.1
Balancing item			675	-247	384	55	-1	55	-0.2	112.6	33.5
(a) Data are shown for the full period and for the following two sub-periods: Period 1: March quarter 1986-December quarter 1989; Period 2: March quarter 1990-December quarter 1993.

3.51. The picture that Table 6 presents is largely consistent with that shown in Appendix 1. Most median revisions to gross statistics are positive or a small negative value - indicating a generally positive bias to revisions to offset the mainly negative biases present in initial estimates shown in Appendix 1. Bias present in revisions to net aggregates may be positive or negative depending on whether revisions to the credit or debit components of the net item are larger.

3.52. Looking at current account items shown in Tables 6, 7 and 8 it can be seen that, on average, revisions to merchandise exports and imports are very small both in dollar terms and in scaled form. This is true for all periodicities and all sub-periods. Amongst the other current account components, median revisions to unrequited transfers are small both absolutely and proportionally for all periodicities of statistics and all subperiods.

3.53. Services are a little less reliable with median proportional revisions lying between -0.5% for quarterly credit estimates and 2.7% for monthly credit estimates. Interestingly, the all-period proportional revisions to monthly services debits are lower than the quarterly revisions. This reflects delays in obtaining information from several annual surveys with the result that one-year monthly revisions for some component series often exclude survey data for the reference period. The revisions to the quarterly series would capture some of the revisions sourced from these surveys. New quarterly data sources have been developed in recent years (particularly new quarterly data collections within the ABS Survey of International Trade in Services) which means both that the one-year revisions analysis for monthly series now captures survey data revisions to extrapolations (which are still required for up to six months ahead of the survey results becoming available), and that the quarterly series are only extrapolated one quarter in advance, reducing the scale of one-year revisions to these series.

3.54. Income estimates appear the least reliable of the current account items. The median one-year revisions performance for the annual credits series (5.3%) reflects the major revisions necessary to extrapolations for reinvested earnings on investment abroad when annual survey results become available. Since 1988-89, extrapolations have varied from between about half the final result to eight times the final result. Because the one-year revisions to monthly series only capture survey data for the January to June period, the monthly series (0.4% revision) appears more reliable than either the quarterly counterpart (-0.9%) that captures more of the survey data in the first year of revision, or the annual series.

3.55. For income debits the median proportional revisions to both monthly and quarterly estimates improve in the second subperiod (January 1990 to December 1993), reflecting on average improved coverage of income debits transactions within the first year of revision.

3.56. The net effect of all revisions to the current account components are reflected in revisions to the balance on current account. For all periodicities, median revisions to this balance show a bias of between 2.0% (annual estimates) and 4.2% (quarterly estimates). While the performance between sub-periods is more volatile, in general median proportional revisions to both monthly and quarterly estimates are smaller in the more recent sub-periods.

3.57. Turning to the capital account aggregates shown in Tables 6, 7 and 8, it can be seen that proportional and absolute median revisions are generally larger than those applied to aggregates in the current account. Because monthly capital account statistics only include net official sector transactions, only limited comparisons can be made with quarterly and annual statistics. Within monthly statistics, the size of revisions to general government sector transactions has approximately doubled from sub-period 1 (median revision of $57 million or 2.8%) to sub-period 2 (median revision of $94 million or 5.6%). This deterioration in reliability largely reflects the increased significance of, and revisions to, data reported to ABS in respect of State government borrowing. Estimates for the other component of the official sector the Reserve Bank are completely reliable over both sub-periods.

3.58. General government sector transactions are dominated by transactions classified to FIA. While the median revision to the FIA component for all quarterly periods combined is only $108 million, the scaled one-year revisions for the two sub-periods are 14.4% and -8.9%. The annual median one-year revision is $625 million (6.7%).

3.59. Median one-year revisions to transactions of the non-official sector are large both absolutely and proportionally. Median revisions to initial annual estimates of FIA ($2,561 million or 19.7%) are considerably larger than revisions to the initial quarterly estimates ($394 million or 11.2%). This reflects the different pattern of revisions between the quarterly and annual estimation cycles that arises because comprehensive survey data are generally only available about six months after the end of the reference year. In particular, the one-year revision to each annual estimate includes results from the annual collections within the ABS Survey of Foreign Investment for that year. One-year revisions to the March and June quarters' estimates, will also pick up annual survey revisions to those periods. However, for the September quarter one-year revision, no annual survey results are available; and for some years for the December quarter one-year revision, only interim annual survey results are available. It should be noted that the quarterly scaled revision in the second sub-period is very much larger (17.3%) than in the first sub-period (7.8%) reflecting improvement over time in capturing annual survey data more quickly.

3.60. However, users need to bear in mind the limitations of using median estimates when assessing the reliability of net series such as foreign investment in the non-official sector. For example, while the median one-year revision to quarterly observations for this series is only $394 million, the mean revision in absolute terms is in excess of $1 billion.

3.61. Median one-year revisions to initial quarterly estimates of Australian investment abroad by the non-official sector ($590 million or 45.4%) are, as expected, more biased than the equivalent revisions to annual estimates ($924 million or 13.6%). Revisions to the quarterly estimates are large in both sub-periods shown in Table 3.3, although there has been some decline in the relative size of the median revision in the more recent period.