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Printable version
Key Statistics - article, May 2000, p7
New international standards for balance of payments statistics1
This article looks at new international standards for reporting balance of payments statistics and outlines some of the developments underway at Statistics New Zealand for meeting those standards.
Introduction
New Zealand’s balance of payments (BOP) statements record the value of New Zealand’s transactions with the rest of the world in goods, services, income and transfers, and the changes in New Zealand’s international financial assets and liabilities.
BOP statistics record transactions:
- between the residents of one economy with the residents of the rest of the world
- at the time of ownership change and in the case of services when a service is performed
- at their market value.
A double-entry system is used to compile the BOP statement. A BOP statement is made up of the following three accounts:
- Current account
The current account records transactions relating to goods, services, income and current transfers. The current account balance is an important measure of the performance of the New Zealand economy. A current account deficit arises when a nation saves less than it invests and meets the difference with inflows of foreign capital. The latest BOP statistics (December 1999 quarter) show that New Zealand’s current account deficit was NZ$2.9 billion for that quarter. On a December 1999 year-end basis, the deficit was 8.0 percent of New Zealand’s Gross Domestic Product.
- Capital account
Transactions relating to capital transfers and purchases and sales of intangible assets are recorded in the capital account. Transfer occurs where one transactor provides economic value to another but does not receive an economic value in return. A capital transfer is a transaction that leads to a change in the stock of assets of one or both parties to the transactions.
- Financial account
Changes in New Zealand’s financial assets and liabilities with the rest of the world are recorded in the financial account. A deficit in the current account will mean a net inflow of capital in the financial account.
The level of international assets and liabilities are recorded in a related account called the International Investment Position (IIP) statement. It provides information on New Zealand’s net debt position with the rest of the world. As at 31 March 1999, New Zealand’s net international investment position with the rest of the world was NZ$ -85.9 billion.
Standards for compiling balance of payments statistics
The guidelines for producing BOP statistics are promulgated by the International Monetary Fund (IMF).
In 1993, the IMF issued the fifth edition of the BOP manual (BPM5) for the compilation of BOP and IIP statistics. These guidelines were developed in co-operation with various international organisations including the World Bank and the Organisation for Economic Cooperation and Development (OECD). The aim of the new standard is to bring BOP statistics more up to date with developments in international financial markets and to meet the requirements of regulatory authorities, credit rating agencies and policy analysts. It was also introduced to achieve consistency with other macro-economic statistics, such as the national accounts.
In 1995 the IMF released special data dissemination standards (SDDS) which contain several requirements for BOP statistics. The SDDS is an IMF initiative and its objective is to promote the availability of comprehensive, timely, accessible and reliable economic and financial statistics to the general public. The countries subscribing to SDDS are required to produce comprehensive current, capital and financial account data on a quarterly basis. This is in addition to meeting quality and timeliness standards for a range of other economic statistics, including production, investment, prices and overseas trade statistics.
In response to the recent Asian financial crisis and other financial crises in South America, the IMF is proposing to further strengthen the SDDS disclosure requirements on overseas debt statistics. The proposals include the requirement to disclose information on prospective amortisation of debt and interest payments and to provide greater currency and maturity breakdowns. A number of countries are already subscribing to the SDDS, having met the key standards. New Zealand still has some work to do before its set of economic data accords fully with the SDDS requirements.
New Zealand’s statistical obligation to the IMF
New Zealand has an obligation to produce BOP and IIP statements in a timely and regular manner and in accordance with the latest statistical standards. This obligation is a requirement of its membership of the IMF.
The BOP statistics are currently compiled by Statistics New Zealand from quarterly and annual surveys of businesses and official sector organisations. The current and some capital and financial account information is currently produced on a quarterly basis, while much of the detailed financial account information and IIP statement is produced annually. New Zealand’s overseas debt (on a gross basis) is also produced annually. Thus, there is no comprehensive quarterly measure of capital flows into and out of New Zealand, which is of concern to the IMF and credit rating agencies. The lack of quarterly data on the financing of New Zealand’s BOP current account deficit creates financial uncertainty about the external exposure of the New Zealand economy and a perception of risk.
In September 1999, Statistics New Zealand released the June 1999 quarter and the March 1999 year annual data as the first official release of BOP statistics on the new BPM5 basis. Most of the current and capital account information was sourced from data that had been collected on the basis of the new BPM5 standard. The financial account information (available extensively in the March 1999 annual publication) was sourced on a BPM4 basis but has been presented in the release on a BPM5 format. When all the developments (see next section) are completed, then we can truly say that New Zealand’s data is fully meeting the new international reporting standards.
Most OECD countries have moved their data collections and presentation to the new standard, so when New Zealand is fully on the BPM5 basis its data will be easier to compare internationally.
Changes to be introduced in the financial account
Statistics New Zealand is currently in the process of redeveloping its financial account data-collections to meet the new international statistical reporting standards.
Some of the major changes introduced in BPM5 affecting the financial account are:
- The reporting of interest income on an accrual basis rather than the due for payment basis.
- Direct investment is to be based on 10 percent or more of the equity ownership by a single investor in an enterprise and, consequently, portfolio investment is to be based on less than 10 percent ownership in an enterprise.
- The recognition of transactions in financial derivatives.
- The recognition of short-term securities as portfolio investment.
Most of the major changes affecting the current and capital account have already been implemented.
Data collection strategy for the financial account
Figure 1 provides an illustration of the data collection strategy for the financial account of the BOP and the IIP statements on a quarterly basis. A mixture of Statistics New Zealand’s own surveys and those of the Reserve Bank of New Zealand will be used to collect the relevant data.
There will be also be an annual sample survey which will provide information to benchmark the under-coverage estimate of the non-sampled quarterly population. A three-yearly census survey will also be developed and this will be used to update the quarterly and the annual sample surveys.
The key data collection strategy for Statistics New Zealand will be:
- the introduction of a new quarterly International Investment Survey (QIIS)
- the introduction of a new quarterly Nominee Survey
- changes to the Reserve Bank’s Managed Funds Survey
- changes to data that is requested from the Reserve Bank of New Zealand and the Treasury by way of direct inquiries to them.
The Quarterly International Investment Survey
There will be two versions of the survey questionnaire, one for the finance sector and the other for the non-finance sector of the sampled population. The survey will measure the amount and type of capital required to finance New Zealand’s current account deficit. Approximately 400 businesses will be surveyed each quarter on their financial dealings with non-residents. The QIIS survey will be introduced to selected respondents as a pilot collection for the March 2000 quarter. The survey proper will begin in the June 2000 quarter. The new survey is largely based on a similar survey undertaken by the Australian Bureau of Statistics. In introducing QIIS, Statistics New Zealand will be rationalising all past data collections on international financial assets and liabilities. Businesses included in the quarterly sample will be informed of the new data requirements and all attempts are being made to consult them and discuss any difficulties that may arise in completing the questionnaire.
Quarterly Nominee Survey
Statistics New Zealand will be introducing a new nominee survey to capture the non-resident holdings of New Zealand equity securities held via New Zealand nominee companies. The data from this survey together with the data on overseas ownership of New Zealand equity securities from QIIS will give a better picture of the total holdings of New Zealand equity securities by non-residents.
The quarterly nominee survey will complement data that is captured by the Reserve Bank’s own nominee survey. The latter survey collects data on New Zealand debt securities held by non-residents with a domestic nominee.
Managed Funds Survey
Statistics New Zealand has been utilising the Reserve Bank’s Managed Funds survey for data on New Zealand’s portfolio investments overseas. Changes have already been made to this collection to reflect the new data requirements.
Data requests from the Reserve Bank and Treasury
Changes have also been made to data requests to the Reserve Bank and New Zealand Treasury on their own overseas activities and the overseas dealings that they undertake on behalf of the New Zealand government.
The outcome of the changes
The results of these data collection changes will mean comprehensive BOP financial account statement and IIP statistics being produced on a quarterly basis. On an annual basis, there will be country breakdowns of foreign investment into New Zealand and New Zealand’s investment abroad, as well as the currency exposure of our international assets and liabilities, maturity profiles and other such breakdowns.
The results will help assess short-term changes in our economy’s level of exposure to external economic factors such as stock market volatility, exchange rate variability and other financial risks.
Further information on BOP and other official statistics can be accessed from Statistics New Zealand’s website www.stats.govt.nz.
Footnote
NewIntlStds.pdf (21Kb)
The downloadable file is in Adobe Acrobat format. If you do not have the Adobe Acrobat Reader you may download the reader to view or print the contents of this file.
Balance of Payments
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