Australian Financial Accounts: Overview of Data Sources and Methods

1. Australian Financial Accounts: Overview of Data Sources and Methods Within a Whom to Whom Framework Amanda Seneviratne

2. Why? • Recently the ABS has had number of requests about how ABS compiles financial accounts quarterly in a “to-whom-from-whom” (counterparty) framework • This area of national accounting has received more attention since the global financial crisis and the G20 finance ministers “data gaps” initiative • The note is only an introduction to the subject • Detailed compilation methods are dependent on national institutional settings and data availability

3. Intersectoral Net Financial Transactions: June Quarter 2011

4. Inter Sector Financial Relationships • The inter sector financial relationship maps can be used as a guide to priorities and methods for data collection and compilation • The number of institutional units in each sector is a guide to the difficulty in measuring the sector quarterly, the timeliness and possibly the reliability of the measurement • It is clear we can’t afford thorough quarterly surveys of households or non-financial corporations • The following is a simplification in terms of sectoring and instruments. It covers both stocks and flows.

5. Approximate Number of Institutional Units Households ~ 9 million Non-Financial Corporations ~ 2 million Financial Corporations 3000 + 400K Pension Funds General Government 3000 of which 20 financing Rest of the World Very Many

6. Financial Corporations • Relatively small number of large institutions • Setting aside the large number of small self-managed pension funds • Maintain good accounting records • Prudential supervision for some types • We aim for complete enumeration of most types of financial corporation • Interagency (APRA/RBA/ABS) cooperation in data collection, quality assurance and usage.

7. Data for Financial Corporations is central building block for measurement Households ~ 9 million Non-Financial Corporations ~ 2 million Financial Corporations 3000 + 400K Pension Funds General Government 3000 of which 20 financing Rest of the World Very Many

8. Data for Financial Corporations is central building block for measurement Households ~ 9 million Non-Financial Corporations ~ 2 million Financial Corporations 3000 + 400K Pension Funds General Government 3000 of which 20 financing • Almost complete coverage of Financial Corporations • Data broken down by counterparty (subsectors) • Regulatory and ABS surveys • Intermediaries data from regulator used for regulatory, monetary aggregates and financial accounts Rest of the World Very Many

9. Rest of World • Financial assets, liabilities, transactions, and other flows with rest of world are required for quarterly International Investment Flows and Position statistics. • Difficult to do financial accounts without this significant dataset • Some recompilation from BPM6 to 2008 SNA is required • Data by domestic counterparty should exist in this dataset

10. Foreign Investment (IIP) Data is already collected for balance of payments purposes Households ~ 9 million Non-Financial Corporations ~ 2 million Financial Corporations 3000 + 400K Pension Funds General Government 3000 of which 20 financing X Data confrontation Rest of the World Very Many Domestic counterparties required

11. Rest of World (cont.) • Note financial corporations / rest of world relationship now has two sets of observations • Data confrontation for quality assurance of both datasets • Must decide what to publish in financial accounts • Australia financial accounts usually consistent with IIP • Means re-balancing financial corporations • The luxury of choosing with whom to be inconsistent.

12. General Government • Australia is a federation: Commonwealth, State, Territory and Local governments • However, financial management practices mean that only a handful of agencies have significant borrowing and investment roles • Commonwealth and State Treasuries / Department of Finance • State central borrowing authorities, Australian Office of Financial Management • A small ABS collection of about 20 agencies gives almost complete coverage • Securities issues in a security by security database

13. Government Financing AgenciesGFS data not adequate for this purpose in Australia Small ASB collection Households ~ 9 million X Non-Financial Corporations ~ 2 million Financial Corporations 3000 + 400K Pension Funds General Government 3000 of which 20 financing X Rest of the World Very Many X X Data Confrontation

14. General Government (cont.) • General government data overlaps with financial corporations and IIP datasets • More data confrontation opportunities • More decisions about best data, including Reserve Bank versus Dept. of Finance • Data structured in accordance with IMF GFS not sufficient • Counterparty, instrument detail • Valuation principles, accrual standards • more explanation of differences (especially to IMF)

15. Non-financial Corporations and Households • Securities issuance by non-financial corporations from equity and debt market sources (stock exchange, clearance houses) • Small survey of large corporates to track security holdings and accounts payable / receivable • All other financing covered by other sources • Households residual in securities markets and accounts payable / receivable

16. Small corporate survey for accounts payable/receivable Households ~ 9 million Residual in securities markets X Non-Financial Corporations ~ 2 million Financial Corporations 3000 + 400K Pension Funds General Government 3000 of which 20 financing X Rest of the World Very Many X

17. Non-financial corporations and Households (cont.) • Periodic confrontation with household wealth surveys • Micro / macro comparisons • No non-financial corporation financial asset and liability data available in tax system or in summary from corporate regulators • Financial Instrument Supply / Use compilation framework mitigates lack of direct data

18. Small corporate survey for accounts payable/receivable Households ~ 9 million Residual in securities markets X Non-Financial Corporations ~ 2 million Financial Corporations 3000 + 400K Pension Funds General Government 3000 of which 20 financing X Rest of the World Very Many X Compilation in Financial instrument Supply / Use framework provides a cross check and plausible residual allocation

19. Compilation Framework: Financial Instrument Supply / Use Tables • Ideally, independent measures of supply and use • Unconsolidated to a large extent • Intra-household sector relations consolidated • Other intra sector asset/liabilities add value to supply / use tables • Note: ABS thinks unconsolidated sector income and financial accounts are not meaningful.

20. Supply / Use Framework Example 1: Transferable Deposits

21. Transferable Deposits Example • Supplydata are from banking regulator (APRA) • Use data are from various data sources, including counterparty data collected by regulator • To the extent that use data do not sum to supply, balancing requires adjustment of weakest data source(s), in this case usually “other private non-financial corporations”

22. Supply / Use FrameworkExample 2: Listed Equity of Private Non-financial Corporations

23. Listed equity example • Unconsolidated • Supply from stock exchange (adjusted for SNA concepts) • Use from various sources • Balanced with weakest data source in this case the residual is allocated to households for which there is no data source • Note: plausibility of residual is assessed

24. More Information • Australian National Accounts: Financial Accounts (cat. no. 5232.0) (and related products) • amanda.seneviratne@abs.gov.au • D.Cullen@abs.gov.au • http://www.apra.gov.au/statistics/ for regulatory datasets and reporting forms