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 with significant and prolonged impacts from COVID-19 will be calculated using the forward factor method.

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 ABS is aware that since December quarter 2021 there have been differences between the Export Price Index (EPI) and Implicit Price Deflator (IPD) for Coal (Coal, coke & briquettes) and LNG (Other mineral fuels). With the current price volatility of bulk commodities and ongoing global uncertainty, the March quarter National Accounts and Balance of Payments volumes for Coal and LNG exports have been compiled using movements in the quantity data reported on Customs declarations. The ABS is undertaking further analysis on Coal and LNG export prices and will communicate the outcomes of the analysis in the next International Trade Price Index publication.

In early 2020 the ABS advised that the method used to produce seasonally adjusted estimates would be changed from the ‘concurrent adjustment’ method to the ‘forward factors’ method for series with significant and prolonged impacts from COVID-19. Given the ongoing disruption during the COVID-19 period and continuing use of forward factors, extraordinary annual reviews of seasonally adjusted series are progressively being undertaken across the ABS statistics programs. 

The extraordinary annual review process assesses each series individually to determine how observations from 2020 and 2021 should be treated and determine the most appropriate approach (concurrent adjustment or forward factors) for estimating seasonal adjustment factors in the immediate future. Revisions arising from the annual review are relatively minor for most series, but series which have used forward factors are likely to have larger revisions because the seasonal factor estimates are annually updated to incorporate information from the previous year's observations. 

The outcome of the review for Balance of Payments statistics is that the forward factor method will continue to be used for the Travel Services (credits and debits), Transport - passenger (credits and debits) and State Services (credits and debits). New forward factors have been calculated for the next 12 months and will be used from the March 2022 reference quarter.

Further information can be found here.

Australia's seasonally adjusted terms of trade on net goods and services for the March quarter 2022 rose 5.9% to 122.9, with an increase of 9.6% in the implicit price deflator (IPD) for goods and services credits and an increase of 3.5% 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.

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 ore lumps in the December quarter 2021 (+$80m) and March quarter 2022 (+$15m). 
• Adjustments have been applied to iron ore fines in the December quarter 2021 (+$180m) and March quarter 2022 (+$330m). 
• 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 December quarter (+$75m) and the March quarter (+$2,885m) 2022. 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.

Other mineral fuels (in original terms)

• Adjustments have been applied to other mineral fuels (+$1,000m) in the balance of payments series for the March quarter 2022.

The following goods component has been revised since the release of the March 2022 issue of International Trade in Goods and Services, Australia.

• Capital goods n.e.s. of good debits, revised in the March quarter 2022
• Other mineral fuels of good credits, revised in the March quarter 2022. 

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 2020. In original current price terms, these revisions have:

• increased the current account surplus for the September quarter 2020 by $4m 
• decreased the current account surplus for the December quarter 2020 by $44m 
• decreased the current account surplus for the March quarter 2021 by $114m 
• decreased the current account surplus for the June quarter 2021 by $247m 
• decreased the current account surplus for the September quarter 2021 by $1,061m 
• increased the current account surplus for the December quarter 2021 by $863m. 

The International Investment Position (IIP) has been revised back to the September quarter 2020. These revisions have increased Australia's net IIP liability $346m to a net liability position of $809,742m at 31 December 2021. The financial account deficit has been revised up $4,996m to $11,286m at 31 December 2021.

Seasonally adjusted 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 decreased the volume surplus on goods and services by $1,720m for the December quarter 2021. 

Data in this issue aligns with the data in the March quarter 2022 issue of Australian National Accounts: National Income, Expenditure and Product (cat. no. 5206.0) to be released on 1 June 2022.