Balance of Payments and International Investment Position, Australia methodology

This publication contains comprehensive estimates of Australia's international accounts statistics, including the Balance of Payments (BoP) and International Investment Position (IIP).

The conceptual framework used in compiling Australia's international accounts statistics is based on the International Monetary Fund's Balance of Payments and International Investment Position Manual, Sixth Edition (BPM6). Descriptions of the underlying concepts and structure of the BoP, IIP and the sources, methods and terms used in compiling estimates are presented in the publication Balance of Payments and International Investment Position, Australia: Concepts, Sources and Methods (cat. no. 5331.0).

The BoP and IIP for an economy summarise the economic relationships between residents of that economy and the rest of the world. They comprise:

• the balance of payments, which summarises transactions between residents and non-residents during a specific time period
• the international investment position, which shows at a point in time, the value of financial assets of residents of an economy that are claims on non-residents or are gold bullion held as reserve assets and the liabilities of residents of an economy to non-residents
• the other changes in financial assets and liabilities account, a statement that shows other flows, such as valuation changes, which reconcile the BoP and IIP for a specific period by showing changes due to economic events other than transactions between residents and non-residents.

The BoP is a statistical statement that systematically summarises the economic transactions of an economy with the rest of the world for a specific time period. It also draws a series of balances between inward and outward transactions, provides an overall net flow of transactions between Australian residents and the rest of the world and reports how that flow is funded.

BoP statements cover a wide range of economic transactions which are classified into:

• the current account, which measures exports and imports of goods and services, primary income and secondary income
• the capital account, which records acquisitions/disposals of non-produced, non-financial assets and capital transfers
• the financial account, which records transactions in foreign financial assets and liabilities (such as shares, bonds and loans) between residents and non-residents.
   

The BoP uses the double entry system of accounting. In principle, the sum of all credit entries is identical to the sum of all debit entries and the net balance of all entries in the BoP is zero. However, for any intermediate balance drawn from a selection of items, it is possible for credit entries to exceed debit entries and vice versa.

The balance on current account is derived by aggregating all relevant transactions (i.e. trade in goods, trade in services, primary income and secondary income). A balance is said to be in surplus if credit entries exceed debit entries or in deficit if debit entries exceed credit entries.

A summary of Australia's BoP can be found in table 1 of Balance of Payments and International Investment Position, Australia (cat. no. 5302.0).

In theory, the sum of transactions recorded in the current account is equal to the sum of all transactions recorded in the capital account and financial account. In practice, this is not usually the case. Data sources used to compile the accounts measure different components and may not always do so consistently. Some transactions are not measured accurately and some are not measured at all. This difference is known as the net errors and omissions.

The IIP measures the stock of Australia's foreign financial liabilities and foreign financial assets at a point in time. The difference between foreign financial liabilities and foreign financial assets is referred to as Australia's net IIP.

The IIP may be split to separately show Australia's foreign debt and equity positions. The latter provides a measure of the foreign ownership of Australian enterprises (through share holdings) and Australian ownership of foreign enterprises. Viewed more broadly, the IIP provides a reconciliation of the stock of investment at two points in time.

Classifications such as assets and liabilities, type of investment (direct investment, portfolio investment, financial derivatives, other investment and reserve assets) and instrument of investment are used consistently in both the BoP and the IIP.

Financial transactions which are included in the reconciliation statement of the IIP are the transactions measured in the financial account of the BoP. For the relevant accounting period, the financial account shows the financial transactions which arise from, or are the counterparts to, the transactions in the current and capital accounts. It also reflects the change in Australia's IIP over the reference period due to transactions in financial assets and liabilities.

A summary of Australia's IIP can be found in tables 2 and 3 of Balance of Payments and International Investment Position, Australia (cat. no. 5302.0).

BoP credit entries are shown with an implied positive sign and debit items are shown as negative entries. References to BoP debit items in Key Points and the Analysis and Comments sections in the publication are made without regard to sign. The ABS does not follow the sign convention detailed in BPM6. The BPM5 approach for the financial account has been retained so that the total transactions of the BoP plus the net errors and omissions add to zero.

For foreign liabilities, position data and any transaction increase (BoP credits) or increase in other flows in liabilities is shown without sign. A negative sign for transactions (BoP debits) and other flows in liabilities denotes a fall in liabilities. For foreign assets, position data and any transaction increase (BoP debits) or other flow increase in assets is shown with a negative sign. Transactions (BoP credits) and other flows in assets shown without sign denote a decrease in assets.

Movements over time are expressed as percentage changes. A minus sign means either a decrease in credit entries, a decrease in the magnitude of debit entries, a decrease in a surplus or an increase in the magnitude of a deficit. The absence of a sign means either an increase in credit entries, an increase in debit entries, an increase in a surplus or a decrease in a deficit. The percentage change is not applicable if there is a change from a surplus to a deficit, or vice versa, or from an asset to a liability, or vice versa.

On a BoP and IIP basis, Australia's economic territory is the area under the effective control of the Australian government. It includes the land area, airspace and territorial waters (including jurisdiction over fishing rights and rights to fuels and minerals). The Australian economic territory also includes territorial enclaves in the rest of the world. These are clearly demarcated areas of land, located in other countries, which are owned or rented by the Australian government for diplomatic, military, scientific or other purposes. Specifically, the economic territory of Australia consists of:

Geographic Australia which includes

• Cocos (Keeling) Islands and Christmas Island
• Norfolk Island
• Australian Antarctic Territory
• Heard Island and McDonald Islands
• Territory of Ashmore Reef and Cartier Island
• Coral Sea Islands
• Australia's territorial enclaves overseas
   

Because of administrative complexities and measurement difficulties, transactions between Norfolk Island and the rest of the world will not always be captured in all relevant BoP and IIP statistics. Most of the transactions involving Norfolk Island are not material to Australia's trade performance and not capturing these transactions will not distort these statistics. However, any significant transactions will be identified and included in the relevant statistics.

An economic entity (person, organisation, or enterprise) has its centre of predominant economic interest (or residency) in Australia if it has closer association with the economic territory of Australia than any other economic territory. To have a centre of predominant economic interest in a territory is to have ownership of land or ownership of structures or to engage in production in a territory on a significant basis (generally interpreted as at least one year). An exception to this is made in determining the residency status of students as they are generally expected to return to their home economies upon completion of study. Medical patients abroad are also considered to be residents of their economies of origin regardless of the length of stay in the other economies in which they are receiving treatment.

In compiling the Australian BoP and IIP, the Australian economy is conceived as comprising the economic entities that have a closer association with the territory of Australia than with any other territory. Each such economic entity is described as a resident of Australia. Any economic entity which is not regarded as a resident of Australia is described as a non-resident:

• Resident entities include:
  • Australian general government entities in Australia and abroad (e.g. embassies)
  • businesses located in Australia
  • individuals normally residing in Australia.
• Non-resident entities include:
  • overseas tourists in Australia for a limited period of time (less than 12 months)
  • foreign embassies (including their diplomats) located in Australia.

The trade in goods components include physical produced items which change ownership between Australian residents and non-residents, whether or not they actually cross the customs frontier. The items included are valued at their market value and recorded in the period in which the change of ownership occurs. Items not included relate to a small number of items such as goods acquired for their own use by non-residents while travelling, working or studying in Australia. These are classified as services in the international statistical standards.

The following tables show the standard components for trade in goods credits and trade in goods debits. This information is published in tables 6 and 7 of Balance of Payments and International Investment Position, Australia (cat. no. 5302.0). The standard components for goods credits and goods debits are listed below.

Commodity breakdowns of trade in goods credits are provided in table 6 at current prices, at current prices seasonally adjusted, chain volume measures seasonally adjusted and implicit price deflators seasonally adjusted. The groupings shown are based on the United Nations' Standard International Trade Classification, Revision 4 (SITC Rev. 4).

Commodity breakdowns of trade in goods debits are provided in table 7 at current prices, at current prices seasonally adjusted, chain volume measures seasonally adjusted and implicit price deflators seasonally adjusted. The three broad end-use categories - consumption goods, capital goods and intermediate and other merchandise goods - are based on the United Nations' Classification of Broad Economic Categories (BEC). These broad end-use categories are further divided into a total of 25 SITC based commodity groupings.

The key data source for the goods component of the current account is international merchandise trade statistics sourced from records collected by the Department of Home Affairs, the ABS Survey of Principal Transport Enterprises (SPTE), the ABS Survey of International Trade in Services (SITS), media and internet. For more detailed information on these data sources refer to Chapters 5 and 6 of Balance of Payments and International Investment Position, Australia: Concepts, Sources and Methods (cat. no. 5331.0).

Services is the second major category of the current account. The services components cover services rendered by Australian residents to non-residents (credits) and by non-residents to residents (debits). Services transactions are generally recorded when the services are rendered (delivered or received).

There are twelve main categories of services identified in the BoP current account. The standard components are listed below.

International trade in services data is presented in tables 8 and 9 of Balance of Payments and International Investment Position, Australia (cat. no. 5302.0). This data also includes memorandum items for gross inward insurance premiums receivable and payable and tourism related services.

Gross insurance premiums receivable/payable and gross insurance claims payable/receivable provide an estimate of resident/non-resident insurance activity and are provided for analytical purposes only. These figures do not represent an estimate for the Insurance Services Charge (ISC), however are used to calculate the value of the ISC which are published under insurance and pension services. The data is sourced primarily from the Australian Prudential Regulation Authority (APRA) and is modelled to take into account factors such as residency and exchange rates.

The tourism related services memorandum items provide timely indicators of the movements in tourism related activities, not an absolute measure of the level of these activities. The tourism related indicator has been derived by combining total travel services (business, education-related and other personal travel) and passenger transportation services (which includes agency fees and commissions for air transport).

The key data sources for the services component of the current account are:

• Survey of International Trade in Services (SITS)
• Trade (Customs) data
• Department of Home Affairs
• Department of Education and Training (DET)
• Tourism Research Australia (TRA)
• Australian Prudential Regulation Authority (APRA)
• Australian Taxation Office (ATO)
• Department of Foreign Affairs and Trade (DFAT).
   

The major items in the current account are:

• the goods balance, which refers to the difference between what Australia receives for exports (credits, or receipts for goods sold overseas) and what it pays for imports (debits, payments for goods we purchased from overseas). A surplus exists if export credits exceed import debits and a deficit exists if export credits are less than import debits.
• the services balance, which involves the balance of service exports and imports such as tourism, education, insurance, shipping and finance. Services imported are debits and services exported are credits.
• the balance on goods and services, which is the sum of the goods balance and the services balance.

               Balance on goods and services = goods balance + services balance

In Australia's BoP, income credits refer to the return from providing non-residents with the use of Australian labour or Australian financial capital, while income debits refer to the return to non-residents made for use by residents of foreign labour and foreign financial capital. Income should be recorded in the period in which the economic benefits arising from the use of the factors of production are enjoyed by the user.

Income is made up of three major components - compensation of employees, investment income and other primary income. Most of the standard components can represent income payable to residents by non-residents (credits) or vice versa (debits). Income credits and debits are recorded in tables 10 and 11. The standard components for primary income are listed below.

The key data sources for compensation of employees are Overseas Arrivals and Departures (OAD) conducted by Department of Home Affairs, the ABS Survey of Returned Australian Travellers, the ABS Survey of Embassies and Consulates, the International Visitors Survey conducted quarterly by Tourism Research Australia and Commonwealth Government Ledgers for non-residents working in Australian Embassies. Investment income is sourced from the Survey of International Investment. For more detailed information on these data sources refer to the Balance of Payments and International Investment Position, Australia: Concepts Sources and Methods (cat. no. 5331.0).

Secondary income captures redistribution of income through current transfers. Current transfers are offset items needed to balance transactions where real resources or financial items are provided without anything being provided in return by the recipient. This includes insurance claims, pensions and foreign aid to developing countries in the form of money for food or famine relief (if these funds are being used for capital investment they will be included in the capital and financial account).

The key data sources for the secondary income are:

• Survey of International Investment (SII), Survey of International Trade in Services (SITS) and the Australian Tax Office (ATO) for tax data
• Department of Foreign Affairs and Trade (DFAT) and the Australian Council for International Development (ACFID) for international cooperation data
• Employee Earnings, Benefits and Trade Union Membership Survey (EEBTUMS) for workers' remittances
• Australian Prudential Regulatory Authority (APRA), Department of Human Services (DHS) and Department of Veteran's Affairs (DVA) for social contributions and benefits data
• APRA for non-life insurance premiums and claims.

The balance on current account is calculated by adding net primary income and net secondary income to the balance on goods and services.
 

         Balance on current account = balance on goods and services + net primary income + net secondary income

The capital account in the System of National Accounts, 2008 (2008 SNA) shows capital formation for the full range of produced and non-produced assets. The corresponding parts of the international accounts show only transactions in non-produced, non-financial assets. Transactions in produced assets are included in the goods and services account, which does not distinguish whether those goods or services are destined for capital or current purposes.

The capital account is made up of acquisition and disposals of non-produced, non-financial assets and capital transfers. Capital transfers are further classified into two institutional sectors: general government and other sectors. In addition, capital transfers are further subdivided by type of transfer. The capital account is presented in table 12 of Balance of Payments and International Investment Position, Australia (cat. no. 5302.0). The standard components of the capital account are listed below.

The key data sources and methods for the capital account are the Survey of International Trade in Services (SITS), media and government departments, Commonwealth Government transactions and the Department of Foreign Affairs and Trade (DFAT).

The financial account records transactions that involve financial assets and liabilities and that take place between residents and non-residents. This includes the creation and liquidation of financial claims associated with the change of ownership in international financial assets and liabilities during a period.

The IIP measures Australia's stock of external financial assets and liabilities, whereas the BoP financial account measures transactions in Australia's foreign financial assets and liabilities, such as equity investments, bonds and other debt securities, loans and other liabilities such as trade credit.

Consistent with international standards the ABS uses various classifications to present the data. Classifications such as assets/liabilities, type of capital and functional category (direct investment, portfolio investment, financial derivatives, other investment and reserve assets) and instrument of investment are used consistently in both the financial account of the BoP and the IIP.

The primary classification in financial accounts and international investment statistics is the asset/liability classification.

• Financial assets are financial claims by Australian residents on non-residents, i.e. Australian investment abroad, e.g. an Australian bank lends money to a non-resident.
• Financial liabilities are financial claims on Australian residents by non-residents, e.g. an Australian company issues Euro Bonds which are held by non-residents.

Financial accounts record transactions of different instruments; these include equity capital, reinvestment of earnings, debt securities, trade credit, loans etc. These instruments can be combined to show foreign equity and foreign debt. This classification is used to present data in tables 2 and 3 of Balance of Payments and International Investment Position, Australia (cat. no. 5302.0).

International accounts uses two broad categories of financial assets and liabilities:

• equity and investment fund shares
• debt instruments.
   

Equity consists of all instruments and records that acknowledge claims on the residual value of a corporation or quasi-corporation, after the claims of all creditors have been met. Equity is treated as a liability of the issuing institutional unit (a corporation or other unit) and represents the owners' funds in the institutional unit. Equity has the distinguishing feature that the holders own a residual claim on the assets of the institutional unit that issued the instrument. In contrast to debt, equity does not generally provide the owner with a right to a predetermined amount or an amount determined according to a fixed formula. Reinvestment of earnings contribute to an owner's equity position.

Debt instruments are all other instruments and generally require the payment of principal and/or interest at some point(s) in the future. Debt instruments consist of Special Drawing Rights (SDRs), currency and deposits, debt securities (bonds, notes, money market instruments), loans, insurance technical reserves, pension and related entitlements, provision for calls under standardised guarantees and other accounts receivable/payable. The term debt instrument is applicable to both the liability and the corresponding claim. Some instruments, such as financial derivatives, employee stock options, currency and some deposits, pay no interest. The income flow with insurance and pension schemes is called investment income attributable to policyholders, rather than interest.

Other financial assets and liabilities capture all other instruments that are also treated as debt instruments in Australia's international accounts. It includes monetary gold, financial derivatives and employee stock options.

There are five functional categories used in Australia's BoP and IIP, which are based on economic motivations and patterns of behaviour to assist in the analysis of cross-border transactions and positions:

• direct investment, which refers to financial transactions and positions between two parties in a direct investment relationship. These investors include individuals, enterprises or groups of related individuals or enterprises. A direct investment relationship exists if an investor has an equity interest in an enterprise resident in another economy of 10 percent or more of the voting power (i.e. ordinary shares or voting stock). The direct investment relationship extends to branches, subsidiaries and to other businesses where the enterprise has immediate or indirect ownership of 10 percent or more of the voting power).
• portfolio investment, which refers to transactions and positions in equity and debt securities (apart from direct investment and reserve assets). Debt securities comprise bonds, notes and money market instruments. In comparison with direct investment, it indicates investment where the investor is not assumed to have any influence in the operation of the enterprise.
• financial derivatives, which are instruments linked to, but separate from a specific financial instrument, or indicator or commodity through which specific financial risk can be traded in its own right. Financial derivatives are used for risk management (hedging), arbitrage and to generate return.
• other investment, which is a residual category that captures transactions not classified to direct investment, portfolio investment, financial derivatives, employee stock options or reserve assets of the compiling economy. Other investment covers trade credits, loans (including financial leases), currency and deposits, and a residual category for any other assets and liabilities. Generally these instruments are not tradable except currency.
• reserve assets, which refer to those foreign financial assets that are available to, and controlled by, monetary authorities (the Reserve Bank of Australia (RBA)) for financing or regulating payments imbalances. Reserve assets include monetary gold, SDRs, reserve position in the International Monetary Fund (IMF) and foreign exchange held by the RBA.
   

The financial account is presented in table 13 of Balance of Payments and International Investment Position, Australia (cat. no. 5302.0). The standard components of the financial account are listed below.

The IIP is the balance sheet showing the stock of foreign financial assets and liabilities at a point in time. The IIP may be viewed more broadly as a reconciliation statement, showing levels (or stocks) of Australia's foreign financial assets and liabilities at two successive points in time and the components of change between those two points in time. These components are financial transactions (as recorded in the BoP financial account) and non-transaction changes (such as price changes, exchange rate changes and other volume changes).

The IIP consists of financial claims on non-residents and liabilities to non-residents. The assets and liabilities, instrument of investment and functional category classifications applied to transactions in the financial account also apply the positions in the IIP.

The IIP is presented in tables 14 and 15 of Balance of Payments and International Investment Position, Australia (cat. no. 5302.0). The presentation is the same as the financial accounts presentation above.

Various data sources are used to compile both the financial accounts and the IIP, such as:

• The Survey of International Investment (Form 90). This survey measures the investment position, financial transactions and other changes in position, and investment income associated with claims on and liabilities to non-residents by Australian residents.
• The security-by-security collection is a quarterly survey of nominees (Form 85L), in respect of their holdings on behalf of non-residents, of securities issued in Australia (shares, debt securities and all types of derivatives). The nominees are surveyed quarterly to collect investments on behalf of non-residents on a security-by-security by country of investor basis.
• The RBA provides data on financial transactions, level of investment and price and exchange rate changes of official reserves as well as the monetisation/demonetisation of gold and the allocation and cancellation of SDRs.
• Where statistics are not available directly, the following models are used to supplement the collected data:
  • Reinvested Earning Model
  • Pension Model (super funds and households)
  • Insurance Model (life insurance and other non-financial corporations)
  • Compensation of Employees and Worker Remittances
  • Migrant Model (households and banks, also known as OVC Model)
  • Financial Intermediation Indirectly Measured (FISIM)
  • Real Estate estimates.

Within the BoP and IIP statistics, the instrument of investment may be assigned to either equity or debt. A country's foreign debt is a subset of the liabilities in its IIP statistics. To present a complete understanding of a nation's foreign debt situation, it is necessary to show its foreign debt assets (its debt claims on the rest of the world), its foreign debt liabilities (gross debt liabilities to the rest of the world) and its net foreign debt (the net sum of debt liabilities and debt assets). Table 16 of Balance of Payments and International Investment Position, Australia (cat. no. 5302.0) presents a time series of foreign debt levels presented by sector.

As defined by the IMF's External Debt Statistics: Guide for Compilers and Users, gross external debt is 'the outstanding amount of those actual current, and not contingent, liabilities that require payment(s) of principal and/or interest by the debtor at some point(s) in the future and that are owed to non-residents by residents of an economy.'

External debt differs from the definition of foreign debt in table 16 in that external debt excludes financial derivatives. The IMF's guide includes only debt liabilities, with no provision for the presentation or netting of debt assets.

Australia's external debt statistics are presented in table 17 of Balance of Payments and International Investment Position, Australia (cat. no. 5302.0). Financial derivative liabilities are shown as a memorandum item to reconcile external debt with the foreign debt liabilities presented in table 16. Gross external debt data are also provided to and published by the World Bank facilitating international comparisons.

In table 18, currency refers to the currency in which assets or liabilities are likely to be repaid, while residual maturity refers to the time remaining until an asset or liability is due to be fully repaid. Reserve assets are not allocated by currency. All reserve assets are allocated to the repayment category, less than or equal to 90 days, although a range of maturities may be involved.

Exchange rates of major trading partners are presented in table 19 of Balance of Payments and International Investment Position, Australia (cat. no. 5302.0). Exchange rates and the trade-weighted index are provided by the RBA as a geometric average of a basket of currencies that are representative of Australia's trading patterns.

Table 20 in the Balance of Payments and International Investment Position, Australia (cat. no. 5302.0) presents data on Australia's foreign assets and liabilities by industry. The industry categories shown are based on the Australian and New Zealand Standard Industrial Classification (ANZSIC), 2006 (cat. no. 1292.0). Industry statistics should be treated with some caution as they do not necessarily reflect the industry of the end use of the funds. The statistical unit (i.e. the unit of observation in a classification) generally consists of all enterprises in an enterprise group within a single resident institutional sector. The industry of this statistical unit, which may cover a broad range of activities, is determined on the basis of the predominant activity of the unit as a whole which may be quite different from the industry in which funds are used. Financial enterprises such as trading and merchant banks may also borrow funds as principals and then on-lend to clients in other industries.

Industry data presented in Balance of Payments and International Investment Position, Australia (cat. no. 5302.0) is based on an assets/liabilities basis. Direct investment statistics are organised according to whether the investment relates to an asset or a liability for the country compiling the statistics. For example, a country's assets include equity investments by parent companies resident in that country in their foreign affiliates because those investments are claims that they have on assets in foreign countries. Similarly, a country's liabilities include foreign parents' equity investments in affiliates resident in that country because those investments represent claims that foreigners have on assets in the reporting country. The asset/liability presentation does not show the direction of influence as the directional presentation does. An alternative industry presentation for direct investment statistics is published in International Investment Position, Australia: Supplementary Statistics (cat. no. 5352.0) where the data are presented on a directional principle.

Current account data ratios are presented in table 23 of Balance of Payments and International Investment Position, Australia (cat. no. 5302.0) and are calculated by dividing the data for reference quarter/year for the relevant item by the corresponding current price Gross Domestic Product (GDP) or Gross National Income (GNI) value. GDP and GNI are estimated according to the 2008 SNA and will not be directly comparable with countries which have not implemented this. Refer to the Explanatory Notes in the Methodology of the Australian National Accounts: National Income, Expenditure and Product (cat. no. 5206.0) publication for more detail on GDP.

Seasonally adjusted GDP and GNI are used in these ratios. Quarterly series use seasonally adjusted data (unless otherwise indicated). Original data are used for series that do not have seasonality. These series are footnoted accordingly.

Ratios for the net IIP are derived using levels for those series at the end of the period and the sum of the four quarters for GDP or GNI for the year ended with that period. As the international accounts are released prior to the national accounts, the current quarter's GDP and GNI are not available and are annotated 'nya'. The previous quarter's value is used to calculate a preliminary ratio for the current quarter. For net IIP data, this will mean that the sum of the four quarters for GDP or GNI ending the previous quarter will be used for the current quarter's ratios.

Quarterly BoP statistics are subject to large, short-term movements which make the interpretation of trends in the original series difficult. Seasonally adjusted current account series are presented alongside the original, unadjusted series to aid analysis of the underlying movements and trends.

Seasonally adjusted estimates are derived by estimating and removing systematic calendar related effects from the original series. These include seasonal (e.g. Christmas), trading day and moving holiday (e.g. Easter) influences. Seasonal adjustment does not aim to remove the irregular or non-seasonal influences which may be present in any particular quarter. These irregular influences may reflect both random economic events and difficulties of statistical recording.

Though efforts are made to align monthly and quarterly data, monthly seasonally adjusted estimates released in International Trade in Goods and Services, Australia (cat. no. 5368.0) may not align with the quarterly estimates released in this publication due to different compilation procedures necessary for monthly and quarterly data.

The seasonally adjusted statistics in this publication use the concurrent seasonal adjustment technique and Autoregressive Integrated Moving Average (ARIMA) modelling to estimate factors for the current and previous quarters. Under concurrent seasonal adjustment, the estimates of seasonal factors are fine-tuned as new or revised original estimates become available each period. The seasonally adjusted estimates are subject to revisions at each reference quarter as the estimates of seasonal factors are improved. In most cases, chain volume measures are adequately seasonally adjusted by using the seasonal factors from the corresponding current price values. However, in some cases, this is not an adequate method of seasonal adjustment due to the distorting effects of large price changes on the seasonal factors derived from current price values. These cases are outlined below and require direct seasonal adjustment as the chain volume measures are conceptually the only source of seasonality, not prices.

• Goods credits (exports)
  • metal ores and minerals
  • coal, coke and briquettes
  • other mineral fuels
     

Important points that should be noted are:

• the methods used in seasonal adjustment do not force the sum of the adjusted current price estimates for each quarter of a year to equal the original annual total
• where chain volume estimates have no apparent seasonality in their implicit price deflators, the estimates are adjusted using the corresponding factors for current price estimates.
   

Trend estimates are published as the quarter-to-quarter movements of the seasonally adjusted estimates may not be reliable indicators of underlying behaviour. Trend estimates reduce the effect of irregular movements as they are derived by applying a seven-term Henderson moving average to the seasonally adjusted series. The seven-term Henderson moving average is symmetric, but as the end of a time series is approached, asymmetric forms of the average are applied. While the asymmetric weights enable trend estimates for recent quarters to be produced, it does result in revisions to the estimates for the most recent three quarters as additional observations become available. Revisions to trend estimates can also occur because of revisions to the original data and as a result of the re-estimation of the seasonal factors. Trend estimates should be used with caution, especially around the time of unusual influences. Refer to the footnotes in tables that include trend estimates.

Information papers and articles on time series methods are available on the ABS website:

• for seasonal adjustment methods, see Time Series Analysis Frequently Asked Questions (cat. no. 1346.0.55.002)
• for ARIMA modelling, see Feature article: Use of ARIMA modelling to reduce revisions in the October 2004 issue of Australian Economic Indicators (cat. no. 1350.0)
• for trend estimates methods, see Information Paper: A Guide to Interpreting Time Series - Monitoring Trends (cat. no. 1349.0).

To enable analysis of the movement of goods and services in 'real' terms, estimates of chain volume measures are compiled and published each quarter. Chain volume measures are derived by deflating the original current price series by specially compiled measures of price change. The reference year for chain volume measures is the year prior to the latest complete financial year. The reference year is updated with the release of each September quarter issue of the Balance of Payments and International Investment Position, Australia (cat. no. 5302.0) publication. Prior to the reference year, chain volume measures are non-additive, meaning the sum of chain volume measures of a lower component will not add up to the aggregate. From September quarter 2012, chain volume measures for goods are derived by deflating the original current price series by International Trade Price Indexes. For more information on chain volume measures refer to Information Paper: Australian National Accounts, Introduction of Chain Volume and Price Indexes (cat. no. 5248.0).

The Balance of Payments and International Investment Position, Australia (cat. no. 5302.0) publication and the International Trade Price Indexes, Australia (ITPI) (cat. no. 6457.0) provide detailed Australian export and import price information for analysts. The ITPI measures changes in the prices of goods imported into Australia (the Import Price Index (IPI)) and goods exported from Australia (the Export Price Index (EPI)). Differences can occur between ITPI measurements and BoP measurements due to coverage, scope, timing adjustments and weighting patterns.

The quarterly Implicit Price Deflators (IPDs) are derived by dividing current price estimates by the corresponding chain volume measures. The quarterly IPDs derived from seasonally adjusted data are preferred to those using original data because the seasonal adjustment process removes some of the seasonal changes in the composition of this series. However, the seasonal adjustment process itself is also a possible source of distortion. Movements in IPDs can also be greatly affected by changes in the physical composition of the aggregates and their components.

Current publications and other products released by the ABS are available from the Statistics link on the ABS website. The ABS also details products to be released in the next 6 months through the Release calendar, viewable as a list or a monthly calendar.