Balance of Payments and International Investment Position, Australia

Quality assurance undertaken by the ABS confirmed that COVID-19 did not result in quality impacts to Balance of Payments and International Investment Position statistics for September quarter 2020. For information on the expected economic impacts of COVID-19, please see the ABS Chief Economist Series paper Measuring natural disasters in the Australian economy.

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 updated annual GDP and GNI benchmarks released in the Australian System of National Accounts (cat. no. 5204.0) on 30 October 2020 will be revised and incorporated into the quarterly national accounts with the September quarter 2020 issue of Australian National Accounts: National Income Expenditure and Product (cat. no. 5206.0) to be released on 2 December 2020. The revised benchmarks will change the level of the quarterly and annual GDP and GNI used in the ratios for table 23 of this publication. As the ratios using the currently available GDP and GNI would be inconsistent with the revised data, they have been suppressed in this issue. Table 23 in the time series spreadsheets released in conjunction with this publication will be updated with the release of the quarterly Australian National Accounts: National Income, Expenditure and Product (cat. no. 5206.0) on 2 December 2020.

Australia's seasonally adjusted terms of trade on net goods and services for the September quarter 2020 rose 0.7% to 101.3, with a decrease of 3.0% in the implicit price deflator (IPD) for goods and services credits and a decrease of 3.6% 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.

The RBA Commodity Price Index (average monthly index) for rural commodities fell 9.3% between the June quarter 2020 and the September quarter 2020 while the EPI for rural goods fell 6.8%.

The RBA Commodity Price Index for non-rural commodities fell 4.5% between the June quarter 2020 and the September quarter 2020 while the EPI for non-rural goods (excluding non-monetary gold) fell 5.4%.

Differences between the RBA Commodity Price Index and ABS price measures are largely a consequence of methodological differences used in the construction of the respective indexes, including coverage of included commodities and timing of source data.

Income to residents (credits) rose $2,146m (14%) to $17,385m. The main components contributing to this rise were: 
·    direct investment assets, income on equity and investment fund shares, up $1,631m (36%);
·    portfolio investment assets, investment income on equity and investment fund shares, up $923m (12%). 

Income to non-residents (debits) fell $114m (1%) to $20,716m. The main components contributing to this fall were:
·    direct investment liabilities, income on equity and investment fund shares, down $1,186m (12%);
·    portfolio investment liabilities, interest, down $969m (22%). 

Partly offset by portfolio investment liabilities, income on equity and investment fund shares, up $2,264m (81%).

In seasonally adjusted terms at current prices, the net secondary income deficit fell $133m to $270m in the September quarter 2020.

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 effected.

Iron ore (in original terms)

• adjustments have been applied to iron ore lump in the March quarter (-$5m) 2019, the June quarter (-$45m) 2020 and the September quarter (+$115m). Adjustments have been applied to iron ore fines in the March quarter (+$40m) 2019, the June quarter (+$160m) and the September quarter (+$505m) 2020, 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 September quarter (-$500m). 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 September 2020 issue of International Trade in Goods and Services, Australia.

• capital goods n.e.s. component of goods debits, revised in the September quarter 2020.

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 2016. In original current price terms, these revisions have:

• increased the current account deficit for September quarter 2016 by $61m
• increased the current account deficit for December quarter 2016 by $139m
• increased the current account deficit for March quarter 2017 by $116m
• increased the current account deficit for June quarter 2017 by $108m
• increased the current account deficit for September quarter 2017 by $126m
• increased the current account deficit for December quarter 2017 by $103m
• increased the current account deficit for March quarter 2018 by $363m
• increased the current account deficit for June quarter 2018 by $77m
• increased the current account deficit for September quarter 2018 by $21m
• increased the current account deficit for December quarter 2018 by $20m
• decreased the current account deficit for March quarter 2019 by $17m
• decreased the current account surplus for June quarter 2019 by $4m
• decreased the current account surplus for September quarter 2019 by $167m
• decreased the current account surplus for December quarter 2019 by $278m
• decreased the current account surplus for March quarter 2020 by $615m.
• decreased the current account surplus for June quarter 2020 by $685m

The International Investment Position (IIP) has been revised back to the September quarter 2019. These revisions have increased Australia's net IIP liability $28,541m to a net liability position of $939,131m at 30 June 2020. The financial account deficit has been revised down $1,589m to $16,828m at 30 June 2020. 

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 decreased the volume surplus on goods and services by $687m for the June quarter 2020.

Data in this issue aligns with the data in the September quarter 2020 issue of Australian National Accounts: National Income, Expenditure and Product (cat. no. 5206.0) to be released on 2 December 2020.

The seasonally adjusted and trend estimates of goods, services, primary income and secondary income are revised for the September quarter 2020 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.

As a result of the re-analysis, both Goods procured in port by carriers (debits) and Fuels and lubricants (debits) will be seasonally adjusted from September quarter 2019. Current price value and chain volume measure series for Fuels and lubricants will be independently seasonally adjusted.

A new base year 2018-19 will be introduced into chain volume estimates and implicit price deflators in the September quarter 2020 issue. As a result, the chain volume estimate series and implicit price deflators series will be re-referenced to 2018-19.

As part of an ongoing improvement program within the International Accounts, from the September 2020 release of this publication, independent seasonal adjustment will be applied when calculating the seasonal patterns for the following export commodities:
·    Metal, ores & minerals
·    Coal, coke & briquettes
·    Other mineral fuels. 

Independent seasonal adjustment derives separate seasonal adjustment factors for the current price and chain volume measure series. The change is applied from September quarter 2019 onwards. Previously for these series, seasonal factors derived from the corresponding chain volume measures were used to seasonally adjust the current price value series.

The updated annual GDP and GNI benchmarks released in the Australian System of National Accounts, 2019-20 on 30 October 2020 will be revised and incorporated into the quarterly national accounts with the September quarter 2020 issue of Australian National Accounts: National Income Expenditure and Product to be released on 2 December 2020. The revised benchmarks will change the level of the quarterly and annual GDP and GNI used in the ratios for table 23 of this publication. As the ratios using the currently available GDP and GNI would be inconsistent with the revised data, they have been suppressed in this issue. Table 23 in the time series spreadsheets released in conjunction with this publication will be updated with the release of the quarterly Australian National Accounts: National Income, Expenditure and Product on 2 December 2020.