Balance of Payments and International Investment Position, Australia

The trend series attempts to measure underlying behaviour of international trade activity. In the short term, this measurement will be significantly affected by the current COVID-19 pandemic and subsequent changes to regular patterns in international trade that will occur during this time. If the trend estimates in this publication were to be calculated without fully accounting for this unusual event, they would provide a misleading view of underlying international trade activity.

It may be some time before the underlying trend in international trade activity can be accurately estimated. The trend series has therefore been suspended from June quarter 2019 and will be reinstated when more certainty emerges in the underlying trend in international trade.

International Accounts uses the concurrent seasonal adjustment method, meaning that seasonal factors are re-estimated each time new data becomes available. If not appropriately accounted for, unusual events, such as COVID-19, can distort estimates calculated using this method. From March quarter 2020, seasonal factors for series that have been notably impacted by COVID-19 will be calculated using data up to and including December quarter 2019, then projected from March quarter 2020 onwards. This approach, known as the forward factor method, ensures that the seasonal factors are not distorted by COVID-19 impacts.

The ABS has advised users that it had moved to using forward factors for seasonal analysis of a number of series, including Travel Services. Current ABS (and international practice) requires at least three years of data to assess whether a change in the seasonal pattern has occurred. Should COVID-19 result in a long-term change to the seasonal pattern then revisions to these series may occur in the future. The ABS will consult with users on any future methods changes to seasonal adjustment and potential revisions.

For more information on interpreting seasonally adjusted estimates of International travel services please see the May 2020 feature article International Travel Services time series which outlines the matter in greater detail.

The seasonally adjusted and trend estimates of goods, services, primary income and secondary income will be revised in the September quarter 2021 issue of this publication as a result of the annual seasonal re-analysis. This re-analysis reviews the seasonal and trading day factors in more detail than is possible in the quarterly processing cycle and assesses the appropriateness of any prior corrections.

A new base year 2019-20 will be introduced into chain volume estimates and implicit price deflators in the September quarter 2021 issue. As a result, the chain volume estimate series and implicit price deflators series will be re-referenced to 2019-20.

Upcoming changes to the Australian Bureau of Statistics (ABS) publication, Balance of Payments and International Investment Position, Australia. From September quarter 2021, the ABS will implement Economic and Financial Statistics Collection (EFS) for derivative asset and liability activity.

The Australian Prudential Regulatory Authority (APRA) collects data from the financial sector (Authorised Deposit-taking Institutions (ADIs) and Registered Financial Corporations (RFCs) on behalf of the ABS and the Reserve Bank of Australia (RBA). Over the past few years, APRA, the ABS, the RBA, and the financial sector have been working together to modernise the data collection and develop a new set of forms and related guidance called the EFS collection. The fourth and final phase of the EFS collection collects data on derivative activity.

What’s changing?

From the September quarter 2021 reference period, derivative liability and derivative asset data will no longer be reported by banks to the ABS via the Survey of International Investment. Derivatives data for banks will be collected by APRA on behalf of the ABS. The aggregated data will be used in the quarterly ABS Balance of Payments and International Investment Position statistics.

Enhanced data quality

The derivatives data received via APRA through the EFS collection will enhance data quality for the ABS Balance of Payments and International Investment Position statistics. For example, it provides:

• enhanced reporting guidance for financial institutions on derivatives data
• updated definitions to align with international standards for compiling economic statistics

The enhanced derivatives data in the quarterly ABS Balance of Payments and International Investment Position statistics may require backcasting using approved ABS methodological techniques. This will be implemented from the September 2021 reference period. The ABS will consult users prior to implementing any backcasting and will publish a note before publication.

The derivatives data will appear in several estimates in the Balance of Payments and International Investment Position, Australia publication (see Table 1).

Australia's seasonally adjusted terms of trade on net goods and services for the June quarter 2021 rose 7.0% to 123.3, with an increase of 9.3% in the implicit price deflator (IPD) for goods and services credits and an increase of 2.2% in the IPD for goods and services debits.

Differences between the IPD and International Trade Price Indexes can arise due to a number of methodological factors including differences in pricing points, timing, coverage and weights.

In seasonally adjusted terms at current prices, income to residents (credits) fell $529m (3.1%) to $16,523m. The main components contributing to this rise was:

• direct investment assets - income on equity and investment fund shares; down $459m (6.6%)
• portfolio investment assets - investment income on equity and investment fund shares; down $107m (1.4%)

In seasonally adjusted terms at current prices income to non-residents (debits) rose $604m (2.6%) to $23,900m. The main components contributing to this rise were:

• direct investment liabilities - income on equity and investment fund shares; up $2,824m (27.9%)
• portfolio investment liabilities - investment income on equity and investment fund shares; down $2,584m (38.8%)

In seasonally adjusted terms at current prices, the net secondary income deficit rose $797m to $1,063m in the June quarter 2021.

Goods credits data presented in this publication are based on information provided by exporters to the Department of Home Affairs (Home Affairs). At the time of initial reporting to Home Affairs, the final prices at which transactions take place are not known for some commodities. Final quantity and/or unit price information is updated progressively in international merchandise trade data as exporters revise the information provided to Home Affairs.

For commodities such as iron ore and coal, newly negotiated contract prices are not fully reflected in data first reported to Home Affairs. When additional information on quantity and/or unit price for these commodities is available, the ABS may adjust the data to reflect actual transaction values.

Iron ore adjustments are applied on an international merchandise trade basis at the Australian Harmonized Export Commodity Classification (AHECC) level. Coal, coke and briquettes are adjusted on a balance of payments basis in original current price terms. When actual final transaction prices become available estimates are replaced with these data.

In most instances, transfer of ownership occurs when goods cross the customs frontier. In certain circumstances the ownership of large value capital expenditure items can occur prior to the items crossing the customs frontier. The ABS may adjust the relevant balance of payments series to record the timing when transfer of ownership was affected.

Iron ore (in original terms)

• Adjustments have been applied to iron or lump in the December quarter 2020 (+$20m), March quarter 2021 (+$25m) and June quarter 2021 (+$85m)
• Adjustments have been applied to iron ore fines in the December quarter 2020 (+$165m), March quarter 2021 (+$15m) and June quarter 2021 (+$835m)
• When actual final transaction prices become available estimates are replaced with these data.

Coal (in original terms)

• Adjustments have been applied to coal, coke and briquettes in the balance of payments series for the March quarter (+$5m) and the June quarter (-$195m) 2021.  All previous adjustments have been removed.

Capital expenditure (in original terms)

• The balance of payments goods debits component capital goods n.e.s. includes an estimate of expenditure on capital goods that have changed ownership but have not yet crossed the customs frontier.

The following goods component has been revised since the release of the June 2021 issue of International Trade in Goods and Services, Australia.

• fuel and lubricants component of goods debits, revised in the December quarter 2020.
• other merchandise goods n.e.s. of goods debits, revised in the September quarter 2019. 
• parts for transport equipment of goods debits, revised in the September quarter 2019. 
• industrial transport equipment of goods debits, revised in the March quarter 2021. 

Table 28 summarises revisions, in original current price terms, since the last issue of this publication.

Incorporation of the latest survey and administrative data has resulted in revisions to the balance of payments series back to the September quarter 2017. In original current price terms, these revisions have:

• increased the current account surplus for the September quarter 2017 by $142m
• increased the current account surplus for the December quarter 2017 by $161m
• increased the current account surplus for the March quarter 2018 by $174m
• increased the current account surplus for the June quarter 2018 by $263m
• decreased the current account surplus for the September quarter 2018 by $40m
• decreased the current account surplus for the December quarter 2018 by $57m
• decreased the current account surplus for the March quarter 2019 by $42m
• decreased the current account surplus for the June quarter 2019 by $89m
• decreased the current account surplus for the September quarter 2019 by $116m
• decreased the current account surplus for the December quarter 2019 by $138m 
• increased the current account surplus for the March quarter 2020 by $306m 
• increased the current account surplus for the June quarter 2020 by $434m 
• increased the current account surplus for the September quarter 2020 by $427m 
• increased the current account surplus for the December quarter 2020 by $1435m 
• increased the current account surplus for the March quarter 2021 by $490m 

The International Investment Position (IIP) has been revised back to the June quarter 2013. These revisions have increased Australia's net IIP liability $40,318m to a net liability position of $914,959m at 31 March 2021. The financial account deficit has been revised down $542m to $14,630m at 31 March 2021.

Seasonally adjusted and trend series have been revised due to the incorporation of revised estimates and the incorporation of estimates for the latest quarter.

In seasonally adjusted terms, the revisions increased the volume surplus on goods and services by $33m for the March quarter 2021.

Data in this issue aligns with the data in the June quarter 2021 issue of Australian National Accounts: National Income, Expenditure and Product (cat. no. 5206.0) to be released on 1 September 2021.