COMPONENTS OF THE INTERNATIONAL ACCOUNTS

The STATISTICAL OVERVIEW section in this chapter provides details of the current, capital and financial accounts of Australia’s balance of payments. Current and capital account transactions are generally recorded 'gross'. This means that, for each item in the current and capital accounts, the credit entries are recorded separately from the debit entries. For example, exports (goods credits) are shown separately from imports (goods debits). For each item in the financial account, however, debit and credit transactions are combined to produce a single result for the item, which may be either a net credit or a net debit. For example, in a given period, non-resident purchases of shares issued by companies in Australia (credit) are netted against sales of Australian shares to residents by non-residents (debit) and the net result is recorded in the financial account as either a net credit or a net debit.

The current account records transactions between Australian residents and non-residents in goods, services, primary income and secondary income. The capital account records capital transfers and the acquisition/disposal of non-produced non-financial assets. The financial account shows transactions in foreign financial assets and liabilities.


INTERNATIONAL TRADE IN GOODS

In addition to the transactions in goods presented in the current account of the balance of payments, Australia compiles more detailed international merchandise trade statistics. The international merchandise trade statistics are compiled in broad agreement with the UN recommendations for the compilation of international merchandise trade statistics. More information on the concepts, sources and methods used is included in International Merchandise Trade, Australia, Concepts, Sources and Methods (5489.0). Various adjustments relating to coverage, timing, classification and valuation are necessary to put international merchandise trade statistics on a balance of payments basis in accordance with the Balance of Payments and International Investment Position Manual, Sixth Edition (BPM6). As a result of these adjustments, the merchandise exports and imports statistics by country and by commodity (graphs 31.7 and 31.8 and tables 31.9 and 31.10) differ from the data shown in table 31.2, which are on a balance of payments basis. More information on the concepts, sources and methods used is included in Balance of Payments and International Investment Position, Australia: Concepts, Sources and Methods (5331.0).

The merchandise trade statistics are compiled from information submitted by importers and exporters to the Australian Customs and Border Protection Service. These statistics cover all movable goods which add to (imports) or subtract from (exports) Australia’s stock of material resources, although some goods are excluded for conceptual or practical reasons, for example, those goods temporarily brought to Australia for subsequent forwarding to foreign destinations, and low-value imports and exports in the parcel post system.

International merchandise trade is classified by commodity, by country of origin/destination, by Australian state of production/destination, and by industry of origin.

The international standard for the classification of internationally traded goods by commodity is the Harmonized System, a World Customs Organization classification which groups goods according to their component materials, from raw materials through to processed and manufactured products.

The Harmonized System is the basis of the exports classification, the Australian Harmonized Export Commodity Classification, and the imports classification, the Combined Australian Customs Tariff Nomenclature and Statistical Classification (Customs Tariff).

The Australian Bureau of Statistics (ABS) also classifies export and import statistics according to:

• the United Nations (UN) Standard International Trade Classification (SITC Rev. 4), which groups goods according to the degree of processing they have undergone, from food and crude raw materials through to highly transformed manufactures. Commodity statistics in this section are presented according to SITC Rev. 4
• the UN classification Broad Economic Categories, which classifies international trade for the purposes of general economic analysis according to the main end use of the commodities traded.

INTERNATIONAL TRADE IN SERVICES

International trade in services covers all services rendered by Australian residents to non-residents (exports) and by non-residents to residents (imports). Services are broadly defined as products other than tangible goods, although they also include transactions in certain goods such as those purchased by travellers.

Australia’s international trade in services statistics are compiled in accordance with the International Monetary Fund's BPM6. This framework has been further elaborated in the Extended Balance of Payments Services Classification, as detailed in the UN publication Manual on Statistics of International Trade in Services, 2010. International trade in services statistics are compiled for services types including Transport; Travel; Construction; Telecommunications, computer and information services; Charges for the use of intellectual property n.i.e.; Other business services; Personal, cultural and recreational services; and Government goods and services. Some information is also available by partner country and state.

As international trade in services covers a diverse range of activities, a variety of data sources and methods are used to compile estimates of the different service types.

More information on the concepts, sources and methods used to produce Australia’s international trade in services statistics is included in Balance of Payments and International Investment Position, Australia: Concepts, Sources and Methods, 1998 (5331.0).


PRIMARY INCOME

Primary income, comprising investment income (e.g. dividends and interest) and compensation of employees (e.g. wages), covers income earned by Australian residents from non-residents (credits) or earned by non-residents from residents (debits).


SECONDARY INCOME AND THE CAPITAL ACCOUNT

Secondary income covers current transfers as the offsetting entries required when resources are provided, without something of economic value being received in return. When non-residents provide resources to Australian residents, offsetting credits are required. Similarly, when residents provide resources to non-residents, offsetting debits are required. General government current transfers (e.g. official foreign aid) are distinguished from current transfers by other sectors.

The capital account covers capital transfers (e.g. official foreign aid dedicated to infrastructure projects), with general government distinguished from other sectors, and the acquisition/disposal of non-produced, non-financial assets.


FINANCIAL ACCOUNT AND INTERNATIONAL INVESTMENT POSITION

The initial dissection of the financial account is by functional type of capital – direct investment, portfolio investment, financial derivatives, other investment and reserve assets. Where appropriate, these components are further dissected into assets and liabilities. Within the asset and liability categories, details are presented of instruments of investment and resident sectors (for other than direct investment), and in some cases the contractual maturity of the instruments.

The primary distinction used in international investment position statistics is between foreign assets and foreign liabilities. The difference between the two represents the net international investment position (graph 31.14 and table 31.15). Foreign assets primarily represent the stock of foreign financial assets owned by Australian residents and foreign liabilities refers to the stock of financial assets in Australia owned by non-residents. The breakdown below this asset/liability presentation is by functional type of capital (table 31.17).

While many types of instruments of investment are used in financial markets, similar instruments are combined for analytical reasons and ease of reporting.