Balance of Payments, International
Investment Position and Australian
National Accounts: How are they related?
What is Balance of Payments?
How are they related to Australian National Accounts?
The Balance of Payments is a statistical statement which
records all economic transactions between residents and
non-residents of Australia.
The Balance of Payment and International Investment
Position form part of the broader system of Australian
National Accounts. In the Australian National Accounts, the
Gross Domestic Product (GDP) is the key economic aggregate
that measures the total value added for the Australian
economy in any period. The GDP gives a complete picture
of the state of Australia’s economy and allows to identify the
factors driving economic growth in a particular time period.
Residents and non-residents can be people or organisations.
To be an Australian resident in this context means that the
particular person or organisation has a closer association with
Australia than anywhere else.
The transactions in the Balance of Payments are divided into
three broad categories:
Current Account - measures exports and imports of goods
and services, primary income of residents from non-residents,
and secondary income (goods, services or income which
are given to Australian residents from non-residents,
or vice-versa).
Capital Account - records acquisition or disposal of
non-produced, non-financial assets, (such as patents and
copyrights) and capital transfers (such as debt forgiveness).
Financial Accounts - records transactions relating to
financial assets and liabilities (such as shares, bonds and
loans) between residents and non-residents.
Australia’s payment to the rest of the world is generally
greater than what we receive and this is known as the
current account deficit. A balance is said to be in surplus if
credit entries exceed debit entries or in deficit if debit entries
exceed credit entries.
What is International Investment Position?
The International Investment Position is the balance sheet
showing the stock of foreign financial assets and liabilities
at a point in time and includes total Foreign Debt.
There are three measures of GDP:
1. Production = value of goods and services produced by
an industry, i.e cost of production.
2. Income = sum of incomes generated from production.
3. Expenditure = sum of spending on goods and services
produced plus exports minus imports.
Headline GDP is the average of the three figures. This figure
can be found on the front of the ABS publication Australian
National Accounts: National Income, Expenditure and
Product, Australia (cat no. 5206.0).
When reading a Balance of Payment or Australian National
Account table, note that:
Credits = exports
Debits = imports
Residents = Australians
Non-residents = non-Australians
Further reading:
Balance of Payments and International Investment Position,
Australia, Concepts, Sources and Methods, Australia, 1998
(cat. no. 5331.0)
Australian National Accounts: Concepts, Sources and
Methods, 2000 (cat.no.5216.0)
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