Balance of Payments and International Investment Position Statistics

Series

Title

Balance of Payments and International Investment Position Statistics

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Alternate Title

BOP and IIP

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Rights

Statistics New Zealand

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Abstract

The Balance of Payments (BoP) and International Investment Position (IIP) are some of New Zealand's key economic statistics. Put simply, the BoP measures economic transactions between New Zealand residents and the rest of the world. It also draws a series of balances between inward and outward transactions, provides an overall net flow of transactions between New Zealand residents and the rest of the world, and reports how that flow is funded.

Economic transactions include:

  • exports and imports of goods such as agricultural products, raw materials, machinery and transport equipment, computers, textiles, clothing , and footwear
  • exports and imports of services such as international transport, travel and business services
  • primary income flows such as dividends and interest earned by non -residents on investments in New Zealand and by New Zealanders investing abroad
  • secondary income flows are offsetting entries to any one-sided transactions listed above, such as foreign aid and funds brought by migrants to New Zealand
  • financial flows such as investment in shares, debt securities and loans

New Zealand's BoP statement comprises the current and capital accounts (which record the value of New Zealand's transactions in goods, services, income, and transfers with non-residents) and the financial account (which records financial transactions in international assets and liabilities.

In recent years, with growing interest in the level of foreign investment and debt, more emphasis has been placed on New Zealand's IIP statistics. These statistics measure the level (or stock) of foreign investment in New Zealand and New Zealand investment abroad at the end of a specified period. The difference between foreign investment in New Zealand and New Zealand investment abroad is referred to as New Zealand's net IIP. The IIP statistics may be split to show, separately, New Zealand's foreign debt and equity investment.

The balance of payments and international investment position statistics are used:

  • Domestically, by those engaged in financial market operation, policy development and the provision of advice and analysis, including government agencies, especially the New Zealand Treasury and the Reserve Bank of New Zealand.
  • Internationally, by major credit rating agencies in their assessments of New Zealand, and by the International Monetary Fund (IMF) in its economic monitoring and assessment role.
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Purpose

The main purpose of balance of payments statements is to produce and publish information on the value of New Zealand's transactions with the rest of the world in goods, services, income, transfers including seasonally adjusted trend measures of the current account. It provides detailed changes in New Zealand’s investment flows and level of investment on assets and liabilities with the rest of the world. The international investment position and balance of payments statistics are used:

  • domestically, by those engaged in financial market operation, policy development and the provision of advice and analysis, including New Zealand government agencies, especially the New Zealand Treasury and the Reserve Bank of New Zealand
  • internationally, by major credit rating agencies in their assessments of New Zealand, and by the International Monetary Fund (IMF) in it s economic monitoring and assessment role.
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Frequency

3 Quarterly

Main users of the data

Balance of Payments (BoP) and International Investment Position (IIP) statistics are used extensively by business, academics, media, the public, and international organisations. BoP data is also widely used by international organisations; International Monetary Fund, World Bank, Organisation of Economic Cooperation and Development (OECD) and United Nations for monitoring and comparing New Zealand’s performance with other countries. Other users include government organisations such as: Treasury, RBNZ, MFAT

More specifically our statistics also provide information for trade negotiations among World Trade Organisation’s (WTO) membership to make reforms of the international trading system, such as introducing lower trade barriers, trade rules etc.

Usage and limitations of the data

Usage:

The conceptual framework used in New Zealand’s BOP and IIP statistics is based on the sixth edition of the IMF Balance of Payments Manual (BPM6). Statistics New Zealand compiles statistics using quarterly and annual surveys of NZ resident enterprises, surveys conducted by other entities, administrative data and financial market information. The business frame survey is believed to capture enterprises having significant amount of international transactions.

Revisions are made every June quarter with latest available survey and administrative data. Estimates for non-surveyed and undercounted areas are determined every year.

Statistics New Zealand produces and publishes very comprehensive data series about exports and imports of commercial services with highly disaggregated level of service type, using the quarterly international trade in services and royalties survey (ITSS) and International Visitor survey.

In November 2012, Statistics New Zealand produced detailed information on trade in services by country for New Zealand's major trading partners and a comprehensive list of service types. These service types include the estimates on travel, transportation, insurance and government services by country (covering nearly 18 trading partner countries) back dated to the year ended June 2006.

Statistics New Zealand also publishes external and related party debt statistics, foreign direct investment and investment income by industry.

Limitations:

Balance of Payments statements are compiled using double-entry bookkeeping system to ensure that the accounts balance in the accounting sense. In practice, the BoP statement does not always balance. In compiling the Balance of Payments statement a variety of data sources are used; therefore, some transactions may not be captured and there is a possibility of reporting or compilation errors. To balance the accounts, we use a balancing item called the 'net errors and omissions' or 'residual'. The residual could be positive or negative. The residual is always entered on the credit side of the account. A positive residual means that the sum of debits is greater than the sum of credits. Persistent large residuals in one direction, negative or positive may indicate serious errors. However, a small figure does not necessarily mean that only small errors and omissions have occurred, since large positive and negative errors may be offsetting.

The following areas of known financial account undercoverage may contribute to the residual.

The primary data sources for the financial account and IIP are sample surveys. While we make a new estimate for the non-sampled IIP stock positions each year, we don’t make an estimate for financial account transactions.

  • We do not receive adequate data about transactions arising from settling and trading in financial derivative contracts from survey respondents.
  • Financial transactions of business units that are not surveyed quarterly or identified annually via the Inland Revenue reported income tax data included in BoP. The business units mostly include estate and trusts, partnerships, small sized companies, and individuals. All types of investment flows of these businesses are excluded, except shares held by these entities in Australian listed companies. We include an estimate of the investment flows of these entities in Australian listed companies in the BoP financial account.
Significant events impacting this study series

Significant events impacting this data study series. The main events were:

• The BoP statistics for New Zealand was first compiled from the 1950-1951 year based on merchandise trade reports from customs record and overseas exchange transactions (OET) record published at monthly intervals by the Reserve Bank of New Zealand.

• The method used in the construction of BoP accounts was based on the principles adopted by the International Monetary Fund (IMF) and were in conformity with the methods used in most overseas countries.

• Before 1993, BoP statistics were based on the principles set and formulated by the fourth edition of the Balance of Payments Manual (BPM4) of the IMF.

• At this stage, BoP statement was divided into current and capital account. The capital account showed how the surplus or deficit on current account was financed.

• Quarterly balance of payments publications have been produced since the June quarter of 1966.

•In June 1999, Statistics New Zealand introduced the bulk of the changes required to meet BPM 5 guidelines for the current and capital account. Current account was redefined to exclude the items of a capital nature, for ex: migrant transfers. Also there was an expansion of classification of services.

• The remaining BPM 5 changes were introduced in June 2000 quarter. • After these changes, BoP statement comprised of three accounts; current account, capital and financial account.

• Quarterly International Insurance Survey (QIIS) was introduced in June 1988. Quarterly Total Overseas Debt Survey and Quarterly International Trade in Services Survey (ITSS) were introduced in September and December 1989. In March 1992, Quarterly Investment Income sample survey was introduced.

• A complete statement of IIP has been prepared since 1990-1991 year as an annual basis. • New Zealand participated in IMFs Coordinated Portfolio Investment Survey in December 1997.

• Complete balance of payments (BoP) and International Investment Position (IIP) Statistics published as ongoing quarterly series beginning with the June 2000 quarter.

• The current quarterly publication was released in the form of media release and “Hot Off the Press” at a news conference. Seasonally adjusted and trend series were published for quarterly balance of payments statistics. These series were first introduced for the September 1989 quarter.

Major events

Major events recently occurred can be explained under three major sections.

  • Data improvements to international investment position statistics
  • Incorporating new information
  • Presenting additional details

Methodological changes and data changes:

There were some significant events that had an impact on balance of payments data series recently, resulting from incorporating new information from standard practice and improving methods.

• Statistics NZ revised its treatment of Canterbury earthquake’s insurance claims in New Zealand’s international accounts.

Removed the impact of the Canterbury earthquakes from overseas income. The claims from overseas-owned insurance company profits were included initially in the investment income category. These have been removed from investment income attributed to the rest of the world, to maintain the consistency of transactions throughout our macroeconomic statistics. This change is linked with the decision to treat these claims as capital transfers (rather than current transfers) due to the exceptional nature of the damage. This change meant that insurance and reinsurance claims associated with the Canterbury earthquakes would no longer affect items such as the current account balance, national disposable income, and national saving in New Zealand’s balance of payments and national accounts statistics.

• The transactions affected were spread across the September 2010 to June 2011 quarters, with the largest effect in the March 2011 quarter. The change in treatment increased the current account deficit by approximately $700 million in the March 2011 year, and decrease national disposable income and national saving by the same amount. Quarterly gross domestic product is unaffected by this change.

• All insurance claims not related to the Canterbury earthquakes are being treated as current transfers in balance of payments and national accounts statistics.

FISIM adjustments applied to current account

• Financial intermediation services indirectly measured (FISIM) is a type of financial service fee that is charged by banks and similar financial institutions. This fee is indirect as the value is not explicit within an interest transaction. We have introduced FISIM values into balance of payments statistics from the June 2000 quarter onwards. December 2012 quarter was the first to include FISIM adjustments- by amending the non- explicit service fee from within the other investment income series and transferring the service fee to the financial service export and import series.

International Trade in Services and Royalties Survey (ITSS)

• Statistics NZ publishes data about exports and imports of commercial services, with the quarterly international trade in services and royalties survey (ITSS). This is a sample survey designed to capture 90 to 95 per cent of services transactions within the economy.

• To ensure the sample remains accurate, Statistics NZ conducts the Census of International Trade in Services and Royalties (ITSS). The census provides a benchmark of the total imports and export of commercial services of all enterprises operating in New Zealand.

• The census results are used to estimate the quarterly activity of smaller enterprises that are not included in the quarterly sample. BoP has revised this ‘non-sampled estimate’ in the quarterly series to include the latest census results in Census of International Trade in Services and Royalties in the year ended June 2011.

• The net effect of revisions on the current account balance was a small increase, as the increase in services exports was largely offset by an increase in imports. Exports and imports of commercial services both revised up by approximately $900 million in the June 2011 year.

Data improvements to international investment position statistics:

• We have improved the estimates of IIP statistics by bringing new data into the series. These improvements are to New Zealand’s investment abroad (assets) estimate.

• The data that feed into measuring New Zealand’s international investment position are sourced from regular quarterly and annual surveys. The surveys are generally targeted at large and medium-sized companies, fund managers, the Reserve Bank of New Zealand, the Treasury, and other government entities including state owned enterprises. These surveys have been operating since June 2000. For units that are not in surveys, coverage gap remains in the IIP. Gaps mainly include small companies, trusts, partnerships and individuals.

Recent work done to cover the IIP gap includes:

• Derived estimate on assets held abroad by fund managers, which are surveyed annually in the Annual Managed Funds Survey (AMFS). From 2001-2008, the data captured in AMFS included the assets; equity, debt securities, and other instruments, and the country where the assets were hold (by four main countries). In 2009 the survey was expanded to include data on transactions, market price and exchange rates and the associated income flows.

• Derived the under-coverage estimate of portfolio equity investment in Australian listed companies. Under-coverage estimate was derived by reconciling Statistics New Zealand’s data on portfolio equity investment in Australia with the Australian Bureau of Statistics (ABS) data on Australian portfolio liabilities to New Zealand.

• Outstanding loans for New Zealand’s students living in overseas. In BoP context overseas based student debt holders (New Zealanders going overseas for a working more than one year treated as non-residents).

• On an average yearly basis from 2002 to 2011, approximately New Zealand dollar 10 billion has been added to New Zealand international assets abroad.

Presenting additional details:

In response to user demand, Balance of Payments unit introduced a range of more detailed information into New Zealand’s international accounts. Mainly:

• New Zealand's external debt and lending • Direct investment and investment income, by industry

New Zealand's external debt and lending;

• The sector of the New Zealand party to external debt and lending positions The investment relationship between the New Zealand party and the non-resident counter-party of external debt and lending positions (Table 15 and 16 of the quarterly release), also Tables 28 and 29 of the Annual release.

Direct investment and investment income, by country;

• We publish industry information in September on total international assets and liabilities in the Annual Balance of Payments and International Investment Position release for March years now. In response to the user demand, we have expanded coverage of industry information on international investment to include foreign direct investment and the income derived from international investment.

Other

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Balance of Payments landing page

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Balance of Payments and International Investment Position - information releases

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Studies

Studies

Coverage

Subjects
Balance of Payments, International Investment Position
Keywords
Foreign investment, Current account, Balance of trade
Date
-

BOP Data Collection

Label
BOP Data Collection en-NZ

Methodology

Methodology

Data sources

The source data and information for BoP and IIP statistics collected and processed each quarter are summarised below and include:

• Statistics NZ surveys of New Zealand-resident enterprises

• surveys conducted by other entities

• administrative data

• financial market information.

The main surveys that provide data for BoP and IIP are:

• Quarterly International Investment Survey – a sample survey that is the main source of data on primary income, financial account flows, and the stock of overseas assets and liabilities.

• International Trade in Services and Royalties Survey – a quarterly sample survey that is the primary source for commercial services data

• transportation surveys – full-coverage surveys that measure transactions relating to transportation services such as passenger airfares and port expenses.

Surveys conducted by other organisations – we use data from other organisations that operate surveys that are relevant to our data needs. For example: • International Visitors Survey – run by a marketing company for MBIE. The data is used to estimate exports of travel services in the current account.

• Quarterly Managed Funds Survey – a Reserve Bank of New Zealand (RBNZ) survey that provides data on overseas income, financial account transactions, and IIP, for the pension, money market, and non-money market sectors.

Administrative data – examples of these include non-resident withholding tax data from Inland Revenue, and New Zealand Customs Service records of imports and exports published in the overseas merchandise trade (OMT) statistics.

Financial market information – includes interest and, exchange rates and share prices for major investment partner countries. The information is used for survey validation purposes. We take much of this information from publicly available websites.

Conceptual adjustments to exports and imports of goods

In BoP, we record exports and imports of goods when the ownership changes between the resident and the non-resident party. Adjustments are made to the OMT statistics (source data for the BoP goods item), to account for ownership changes. The following conceptual adjustments are made.

• Goods that cross the customs frontier without a change in ownership are removed from merchandise trade imports and exports data – an example of this is large capital items imported or exported on an operational lease.

• Goods on consignment are removed from trade data, as ownership does not change for these goods when they leave a country.

• Freight and insurance charges are removed from the value of imports of goods and are reclassified to services.

• Changes in the level of oil stocks held abroad get added to or subtracted from imports of goods.

Goods on consignment are goods intended for sale but not actually sold at the time they cross the border of the exporting country. To meet the BoP recording convention, we remove the value of goods exported on consignment from the OMT exports in the quarter they leave the country, and add them back into exports in the quarter in which the goods are actually sold.

Seasonal adjustment and trend analysis

Quarterly current account statistics are subject to large, short-term movements, both irregular and seasonal, which makes interpreting trends in the original series difficult.

In the current account, we produce seasonally adjusted and trend series for both goods and services (including travel and transportation services separately). Primary and secondary income series only have a trend calculated for them as they do not have a seasonal pattern.

The seasonally adjusted current account is the sum of adjusted goods and services, and the actual primary and secondary income series. We calculate the seasonally adjusted balances as being the sum of adjusted exports minus adjusted imports.

Undercoverage estimate for the international investment position

BoP uses a purposive sampling method to capture international investment position (IIP) data for the other sectors of the economy. Under this method, all units identified as being significant are surveyed each quarter.

A non-sample estimate is added to the results of the quarterly survey to represent the IIP position for the entire population.

Net errors and omissions (residual)

We compile the BoP statement using the double-entry bookkeeping system to ensure the account balances. In practice, the BoP statement does not always balance. To balance the account, a balancing item called the 'net errors and omissions' or 'residual' is used. The residual is always entered on the credit side of the account.

We can calculate the residual by one of two means: 1.the sum of all current, capital, and financial account credits (inflows), less the sum of all the debits (outflows) 2.the current account balance, plus the net flow of the capital and financial accounts.

A positive entry means the sum of the debits is greater than the sum of the credits.

Persistent large residuals in one direction may indicate serious and systemic errors. However, a small figure does not necessarily mean that only small errors and omissions have occurred, since large positive and negative errors may be offsetting. Timing differences in data reported by the different sources we use to estimate the credit and debit sides of a transaction may result in positive and negative errors and omissions offsetting each other.

In any quarter there may be financial account transactions occurring but not recorded in the accounts. The reasons for them may include: transactions undertaken by entities not in the frame for BoP surveys, omissions of data by existing survey respondents, and errors in data reporting and compilation.

Confidentiality and accessing the data

Where data within a table in this release discloses information about an individual respondent, or would allow close estimation of such information, we publish data only after obtaining the consent of those respondents (ie published under section 37(4)(a) of the Statistics Act 1975). Where affected respondents have not provided their consent, data remains confidential.

More information

Statistics in this release have been produced in accordance with the Official Statistics System principles and protocols for producers of Tier 1 statistics for quality. They conform to the Statistics NZ Methodological Standard for Reporting of Data Quality.

Liability

While all care and diligence has been used in processing, analysing, and extracting data and information in this publication, we give no warranty it is error-free and will not be liable for any loss or damage suffered by the use directly, or indirectly, of the information in this publication.

Timing

Our information releases are delivered electronically by third parties. Delivery may be delayed by circumstances outside our control. Statistics NZ does not accept responsibility for any such delay.

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