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Balance of Payments and International Investment Position: March 2008 quarter
Embargoed until 10:45am  –  26 June 2008
Technical notes

Introduction

The conceptual framework used in New Zealand's Balance of Payments (BoP) and International Investment Position (IIP) statistics is based on the fifth edition of the International Monetary Fund's Balance of Payments Manual (BPM5). Descriptions of the underlying concepts, data sources and methods used in compiling the estimates are presented in the Balance of Payments Sources and Methods report. A printed copy can be obtained from Statistics New Zealand: phone (64) 04 931 4600; fax (64) 04 932 2026; email publications@stats.govt.nz ; or download the PDF online.

Balance of payments

New Zealand's BoP statement is a record of the value of New Zealand's transactions in goods, services, income and transfers with the rest of the world, and the changes in New Zealand's financial claims on (assets) and liabilities to the rest of the world. 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 involving New Zealand's transactions with non-residents).

Current account

The credit side of this account shows the export of goods and services, investment income earned and, under current transfers, the offsetting entries to resources received by residents without payment required.

The debit side shows the import of goods and services, investment income paid and, under current transfers, the offsetting entries to resources supplied to foreign residents without payment required.

To aid analysis, flows of goods, services, income and current transfers are categorised into major types of transactions. In addition, certain balances are calculated. A 'balance' is the credits less debits for a particular item or group of items. A negative number represents a deficit, while a positive number represents a surplus.

Balances are usually in surplus or deficit; zero balances are unusual. The balances are:

  • Balance on goods – goods exports (credits) less goods imports (debits).
  • Balance on services – services exports (credits) less services imports (debits).
  • Balance on income – income receipts (credits) less income payments (debits).
  • Balance on current transfers – current transfer inflows (credits) less current transfer outflows (debits).
  • Balance on goods and services – goods and services exports (credits) less goods and services imports (debits).
  • Balance on income and current transfers – income and current transfer inflows (credits) less income and current transfer outflows (debits).
  • Balance on current account – the sum of the balance on goods and services and the balance on income and current transfers.

Conceptual adjustments to exports and imports of goods

Conceptual adjustments are made to the overseas merchandise trade statistics (sourced from the New Zealand Customs Service) to comply with the BoP convention of recording goods in the current account. In BoP, exports and imports of goods are recorded when ownership of the goods passes from a resident to a non-resident, or vice versa. A change of ownership is said to have occurred when "the two parties (exporter and importer) record the transaction in their books or accounts". For merchandise trade statistics, goods are recorded as exports or imports when they cross a customs frontier.

The following adjustments are made to overseas merchandise trade data to meet BoP recording conventions:

  • goods that cross the customs frontier without a change in ownership are removed from imports and exports data – an example of this is large capital items imported or exported on an operational lease
  • goods that are sold on consignment are removed from trade data, as no change of ownership has occurred
  • freight and insurance charges are removed from the value of imports of goods, and reclassified as services
  • adding/subtracting changes in oil stocks abroad.

Exports or imports that do not change ownership are excluded from the overseas merchandise trade statistics to determine the goods component in BoP. This adjustment is reflected under the heading 'BoP conceptual adjustments' in table 4 of this release. An example of such an adjustment is when a large capital item is imported to New Zealand on an operational lease. In such a case, the ownership of the large capital item has not changed, so the value of it needs to be removed from merchandise trade imports data where it was recorded as an import when it crossed the customs frontier.

Goods on consignment are goods that are intended for sale but not actually sold at the time that they cross the border of the exporting country. To meet BoP recording convention, the value of goods exported on consignment is removed from the overseas merchandise trade exports in the quarter they leave the country, then added back into exports in the quarter in which the goods are actually sold (that is, when the change of ownership occurs).

Reporting on an accrual basis

Balance of Payments (BoP) asks survey respondents to provide data on an accrual basis (that is, when the service occurs), as opposed to a payments basis (that is, when the payment is actually received/made). However, when it is not possible to separate payments out on an accrual basis BoP can sometimes receive data relating to multiple periods in one lump sum. Where possible, BoP reallocates the payment to the period in which the service was performed, but irregular movements can still occur in some service categories.

Capital account

This account comprises two components: capital transfers and the acquisition or disposal of non-produced, non-financial assets. Capital transfers involve the transfer of ownership of fixed assets or the transfer of funds linked to them, without any counterpart transaction. Migrants' transfers are an example of a capital transfer.

Financial account

This account records financial transactions involving New Zealand claims on (assets) and liabilities to non-residents. The financial account is classified into assets and liabilities, which are broken down by type of investment (direct, portfolio, other investment and reserve assets) and instrument of investment.

Financial account inflows reflect either increases in New Zealand liabilities or decreases in international financial assets. Correspondingly, outflows reflect either increases in New Zealand's international financial assets, or decreases in its international financial liabilities.

Note that the income generated/paid from holding the asset/liability is recorded in the BoP current account component as international investment income.

Net errors and omissions (residual)

BoP statements are compiled using the double-entry bookkeeping system to ensure that the accounts balance in the accounting sense. For example, exports of goods are recorded as credits while payments in exchange for the goods are recorded as debits, denoting either increases in financial assets or decreases in financial liabilities. When goods are supplied as aid to foreign countries with no payment in return, then the goods are included as exports (credits) and an offsetting entry for the value of the goods is made under current transfers (debits).

In practice, the BoP statement does not always balance. In compiling the BoP 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, 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.

The residual can be calculated 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); or (2) the current account balance, plus the net flow of the capital and financial accounts. A positive entry means that the sum of the debits is greater than the sum of the credits.

Persistent large residuals in one direction (negative or positive) may be taken as an indication of 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. Offsetting errors may either be related or unrelated, resulting from a measurement problem affecting both sides or only one side of a transaction. Timing differences in data reported by the different sources used to estimate the credit and debit sides of a transaction may result in positive and negative errors and omissions offsetting each other in successive periods.

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 a new estimate is made for the non-sampled IIP stock positions each year, no estimate is made for financial account transactions, nor for the associated current account investment income flows.
  • Transactions related to managed funds that are not surveyed each quarter. Note that neither the financial account transactions nor current account income are estimated for this item.
  • Equity shareholding in overseas companies directly held by New Zealand individuals was estimated at $4.5 billion at 31 December 2005. Neither financial account transactions nor current account income are estimated for this item.

In any quarter, there may be financial account transactions that, for a number of reasons, are not included in the accounts. Reasons for such undercoverage may include: transactions undertaken by entities that are not in the BoP survey frame; transactions not reported by existing survey respondents; and errors in data reporting and compilation.

The data quality is safeguarded by undertaking regular assurance checks including:

  • comparing Reserve Bank of New Zealand (RBNZ) and IIP banking sector data
  • monitoring investment activity approved by the Overseas Investment Office
  • reconciling changes in stock position of inwards and outwards investment against financial account transactions, reporting changes due to exchange rate movements, changes in the valuation of assets and liabilities, and other changes such as reclassification between components
  • monitoring media reports of business activities relevant to the BoP and IIP
  • annually reviewing the survey populations, with additions made at any time during the year where warranted
  • editing and validating data received from survey respondents – this process often involves consulting survey respondents, particularly in respect of large and complex transactions.

Balance of Payments quality plan

Work is continuing on issues identified in the 2004 BoP Quality Plan document. The plan was developed in response to potential weaknesses in BoP data sources, methods and processes. A number of BoP data quality improvement projects were undertaken and late last year the outcomes from these projects were incorporated into the quarterly BoP and IIP statistics.

The current BoP data quality projects underway include:

  • coverage and collection of BoP data as a result of offshoring activities of New Zealand companies
  • update to the methodology for the individual holdings of assets abroad.

Offshoring activity

Statistics NZ has started a project to investigate the coverage and collection of BoP data on the offshoring activities of New Zealand companies. This project has three stages. The initial stage is almost complete. It involves producing an information paper on the knowledge gained on the offshoring activity to date. The second stage involves investigating data coverage and collection issues and making recommendations for improvements. The final stage will involve implementing the recommendations identified in stage two.

Individual holdings of assets abroad

The tasks completed to date include:

  • discussing the project outcomes with other government and non-government organisations that have an interest in it
  • identifying the various paths chosen by individuals in New Zealand to invest abroad and the mechanisms currently in place to collect data on these investments
  • identifying a number of options for collecting data where no current collection mechanisms exists.

This project is progressing more slowly than expected as staff have been concentrating on the production of quarterly statistics. Issues identified in this project link with work that Statistics NZ and the RBNZ are doing to improve the coverage and quality of foreign issues and holdings of securities data.

International Investment Position

The International Investment Position (IIP) measures the stock (or level) of New Zealand's financial assets and liabilities with the rest of the world at a particular point in time. It comprises New Zealand's net international debt (lending to non-residents less borrowing from non-residents) and net international equity investment (investment in shares abroad less foreign investment in New Zealand company shares). A net international debtor position means that international liabilities exceed international assets.

The BoP and IIP statistics are closely related, with the former measuring transaction flows and the latter measuring stock positions. The difference in the level of international financial assets and liabilities between two points in time is due to: (1) the BoP financial account transactions; and (2) the other (non-transactional) changes that occur during the period. Examples of the latter are revaluations, changes in market prices, changes in exchange rates, and other changes such as write-offs.

Presentation of International Investment Position statistics

There are two ways of presenting IIP statistics: the BoP presentation and the balance sheet presentation. While total assets and liabilities differ in each presentation, the net IIP result is identical, regardless of the presentation method used.

Balance of Payments presentation

The BoP presentation of New Zealand's IIP classifies investment by the relationship between the investor and the investment enterprise. This approach presents New Zealand's investment abroad (assets) by direct investment, portfolio investment, other investment, financial derivatives and reserve assets. Foreign investment in New Zealand (liabilities) is classified in the same way, except for reserve assets, which are not applicable. The BoP approach is the one recommended by the International Monetary Fund.

Balance sheet presentation

This approach uses a balance sheet format to present New Zealand's international assets and liabilities. The use of the balance sheet format enables presentation of assets and liabilities disaggregated into:

  • gross and net equity positions, overseas debt (borrowing), lending abroad, and net overseas debt (table 10)
  • borrowing and lending disaggregated by broad sector (table 10), by instrument type (table 11), by currency in which the obligations are repayable (table 12), and by residual maturity (table 13).

The relationship between the two presentations

Although there are differences in the classification of some transactions between the balance sheet and the BoP presentation, it is still possible to reconcile some items. The equity positions in the BoP presentation for New Zealand investment abroad sum to the equity figure under international assets in the balance sheet presentation. Similarly, the equity positions in the BoP presentation for foreign investment in New Zealand sum to the equity figure under international liabilities in the balance sheet presentation. Reserve assets are treated the same way in both presentations.

Lending and borrowing in the balance sheet and BoP presentations are treated differently and will not reconcile. All lending in the balance sheet presentation is treated as an asset and all borrowing treated as a liability. In the BoP presentation for New Zealand investment abroad, net lending by New Zealand enterprises is reported, and for foreign investment in New Zealand, net borrowing by New Zealand subsidiaries is reported.

In the BoP presentation, net lending refers to the total lending by New Zealand parent enterprises to their overseas subsidiaries, less any borrowing by New Zealand parent enterprises from their overseas subsidiaries. Net borrowing refers to the total borrowing by New Zealand subsidiaries from their overseas parent enterprise, less any lending by New Zealand subsidiaries to their overseas parent.

As the BoP presentation treats some borrowing as negative lending and some lending as negative borrowing, the values of lending and borrowing reported in the BoP presentation will not reconcile with those in the balance sheet presentation. For example, prepaid inter-company accounts with overseas parent enterprises are viewed as lending using the balance sheet presentation, but as negative borrowing using the BoP presentation.

International debt and external debt statistics

As described above, net international debt comprises lending to non-residents less borrowing from non-residents. Debt is an actual current contractual obligation that requires payment of principal and/or interest by the debtor at some point(s) in the future. Conversely, equity ownership represents a claim over the residual value of an enterprise.

Table 10 of the BoP and IIP release presents New Zealand's international balance sheet position, a contributing part of which is New Zealand's international debt. In table 10, gross international debt is termed 'borrowing'. Statistics NZ's measurement of international borrowing differs from the IMF's measure of external debt as set out in the External Debt Guide (2003). The difference lies in the treatment of financial derivative liability positions. The External Debt Guide excludes these positions; whereas in table 10, measures of international lending, borrowing and net international debt include these positions.

The IMF's External Debt Guide excludes financial derivative asset and liability positions because no principal is required to be repaid and interest is not accrued. An overdue obligation to settle a financial derivative contract is treated in both the IMF's guide and the table 10 series, like any arrears, as a debt liability because payment is required.

New Zealand’s external debt, lending, and net external debt can be derived from the data presented in table 11. This table presents New Zealand's international financial assets and liabilities disaggregated by instrument type, where financial assets and liabilities equate to international lending and borrowing, respectively, in table 10. Deriving external debt and external lending is done using table 11 data by deducting from each of total international assets (IIPQ.S5AA3) and liabilities (IIPQ.S5AL3) the value of financial derivative asset (IIPQ.S5AA6F) and liability (IIPQ.S5AL6F) positions, respectively; and using the adjusted totals of international financial assets (external lending) and liabilities (external debt) to calculate net external debt.

The table below derives the net external debt position from table 11 data and compares it with the net international debt position of table 10.

Calculating New Zealand's net external debt

Period 31 March 2007
NZ$(million)
31 December 2007
NZ$(million)
31 March 2008
NZ$(million)
Total international financial lending IIPQ.S5AA3 69,568 77,172 82,235
less financial derivatives IIPQ.S5AA6F 7,272 10,004 10,962
External lending 62,296 67,168 71,273
Total international liabilities IIPQ.S5AL3 192,800 210,614 219,463
less financial derivatives IIPQ.S5AL6F 7,612 9,763 10,466
External debt 185,188 200,851 208,997
Net external debt -122,892 -133,683 -137,724
Net international debt IIPQ.S5AA2B -123,232 -133,442 -137,228
Difference; net external debt less net international debt 340 -241 -496

 

Debt securities issued in New Zealand by overseas resident issuers (Kauri bonds)

Kauri bonds are debt securities issued in New Zealand, in New Zealand dollars, by non-resident issuers. According to BoP compilation principles, if a New Zealand resident investor holds such bonds, then the resident holder has a claim over the non-resident issuer. These holdings contribute to New Zealand investment abroad (international assets). When Kauri bonds are held by non-residents, then they are neither assets nor liabilities of New Zealand, they are a claim by the non-resident holder over the non-resident issuer. The Australian Bureau of Statistics (ABS) has adopted the same practice in respect of the Australian equivalent of Kauri bonds; Kangaroo bonds are debt securities issued in Australia by non-residents.

When reporting to surveys that collect data for the international accounts, some respondents have treated their investments in Kauri bonds as investment in New Zealand, leading to under-measurement of international assets and associated income in the statistics. This misreporting arises because these bonds are issued in New Zealand and denominated in New Zealand dollars and are therefore often interpreted by respondents as not relevant to the international accounts surveys.

Statistics NZ has engaged in a round of consultation with likely resident holders of Kauri bonds to clarify reporting. This consultation has resulted in a number of respondents now reporting their holding of Kauri bonds as investment abroad and the associated income to the surveys. This data has been incorporated into the March 2008 quarter statistics. Estimates of holdings have been incorporated in the statistics effective in the December 2007 quarter IIP asset position, with investment and income transactions incorporated into the financial account and current account, respectively, effective in the December 2007 quarter.

In respect of the IIP positions, this means there is an upwards level shift in the measurement of assets between the September 2007 and December 2007 asset positions. The size of this upwards level shift is less than $1.5 billion, that is, a shift up in the measured level of assets due to a measurement change, and not due to transaction or valuation changes. The level shift up at 31 December 2007 is equivalent to a maximum of 1.3 percent of New Zealand investment abroad at 30 September 2007. There is also an extension in the measurement of interest income attributed to Kauri bonds of under $30 million in a quarter.

In addition, an estimate of Kauri bonds acquired by the New Zealand household sector in the December 2007 quarter has been included in the BoP financial account transactions and the IIP as investment abroad. This is not a level shift as the investment occurred, and is recorded in, the December 2007 quarter. However, measurement in the statistics of investment abroad by households is a new development. The IIP estimate of investment abroad is held constant from quarter to quarter, and the sectoral classification is to 'other sectors'. The estimate is subject to change in the expectation that further work leads to improved data.

Estimates for earlier periods of investments in Kauri bonds are not uniformly available. As a result, revisions to periods before December 2007 are unlikely unless further information is obtained. In addition, Kauri bond holdings now included in the statistics still understate the estimated position. This undercoverage is estimated at approximately $2.8 billion. This conclusion is drawn from comparing data reported to the international investment surveys with information about Kauri bonds obtained primarily from RBNZ published data, and from other published sources. Further work aimed at improving data about the issuance and holding of Kauri bonds is underway. This includes work being done in conjunction with the RBNZ.

Components affected by the level shift in the December 2007 quarter:

  1. Income: Table 6 (current account income) – income from New Zealand investment abroad, portfolio investment income, income on debt, and bonds and notes.
  2. Investment transactions: Table 9 (balance of payments financial account) – New Zealand investment abroad, portfolio investment, and debt securities.
  3. Investment positions: Table 2 (international investment position) – New Zealand's investment abroad, portfolio investment, and debt securities.

RBNZ securities subject to repurchase agreements

The collateralised loan method is used to record the Reserve Bank of New Zealand's holdings of overseas issued debt securities that are subject to repurchase agreements. The collateralised loan method records these securities on a gross basis. This method was introduced to the statistics in the June 2007 quarter, and backdated to the December 2005 quarter. Previously, securities subject to repurchase agreements were recorded on a net basis. The change to gross recording does not affect the net IIP, nor the reserve assets series. However, further work to correctly classify the securities involved is required and is expected to be implemented with the release of June 2008 quarter statistics in September 2008.

In general terms, a repurchase agreement (repo) is a reverse security transaction where the holder of a security sells the security for cash with an agreement to repurchase the same or similar security for cash on a specified date. Using the collateralised loan approach, the security provider retains the security as an asset in their accounts, and records the cash received for the security as a loan liability.

The net basis of recording these positions in the published statistics involved deducting those securities subject to repo from the total securities held, and recording the net amount as reserve assets. The repoed security, which remained on the RBNZ's balance sheet, and the loan arising from the repo contract were not recorded in the published statistics. The gross recording (collateralised loan method) explicitly recognises the collateralised loan arising from the repo while retaining the repoed securities as assets on the RBNZ's balance sheet.

The effects of this change on the published statistics are that New Zealand's:

  • International lending (overseas assets) and international borrowing (overseas debt) rise by the same amount. The rise in lending is the amount of the securities that are subject to a repo contract, and the rise in borrowing is the amount of the collateralised loan liability resulting from the repo of securities.
  • Value of reserves is unchanged.
  • Net IIP is unchanged.

The statistics now show:

As reserves, those overseas-issued foreign currency securities that are held by the RBNZ are not subject to a repo agreement. This is unchanged from the previous treatment.

  1. Those securities held by the RBNZ, which are not reserves assets because they are subject to a repo contract. This data is new, and in table 11 is classified to the instrument type other instruments.
  2. The liability arising from the repo agreement, classified in table 11 to the instrument type loans. This data is new.

This treatment correctly states:

  • the gross lending and borrowing positions in table 10
  • the classification to the instrument type loans in table 11 of the collateralised loan arising from the repos; and
  • in table 2, the securities which are reserves.

The repoed securities are classified in table 11 assets to other instruments. This is not correct. The correct instrument classification is to money market instruments or bonds and notes, according to the instruments involved. The instruments involved are primarily money market instruments of original duration of less than one year.This misclassification has arisen because there has been insufficient opportunity to do the necessary work in the BoP data compilation and output system.

Data confidentiality

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

Data sources

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

  • Surveys of New Zealand resident enterprises conducted by Statistics NZ. These surveys operate with the approval of the Minister of Statistics and their completion is therefore a compulsory requirement as set out in the Statistics Act 1975. These surveys are directed at New Zealand resident enterprises that have been identified as being relevant to BoP and IIP statistics.
  • Surveys conducted by other entities. Some of the data used is purchased by Statistics NZ from other organisations that operate an appropriate survey. Statistics NZ has input into the design of these surveys. One example is the International Visitors Survey operated by a marketing company for the Ministry of Tourism (which supplies quarterly data used in the measure of exports of travel services in the current account). Another example is the Quarterly Managed Funds Survey (QMFS). This is a joint RBNZ and Statistics NZ operation, which supplies data for the current account component of income (credit), and the financial account and IIP components of portfolio investment, financial derivatives and other investment (assets).
  • Administrative data, for example non-resident withholding tax data from Inland Revenue and New Zealand Customs Service records of imports and exports, published by Statistics NZ each month as Overseas Merchandise Trade statistics.
  • Financial market information, including interest and exchange rates and share prices. Much of this information is taken from publicly available information sites.

Undercoverage estimate for the International Investment Position

The data sources for BoP financial account and IIP statistics comprise a set of surveys. The main survey is the Quarterly International Investment Survey (QIIS). Other sources include The Treasury and RBNZ (surveyed directly each quarter), a quarterly survey of New Zealand resident nominees, and the Quarterly Managed Funds Survey (QMFS), which is a joint RBNZ/Statistics NZ collection. For further information about the BoP financial account and IIP data sources refer to chapter 11 of the Balance of Payments Sources and Methods, available at: www.stats.govt.nz.

The QIIS, Quarterly Nominees and QMFS are all sample surveys. Estimates for non-surveyed enterprises (undercoverage estimates) are determined each year for the QIIS and incorporated into the published accounts. No estimate is made for survey undercoverage in respect of the Quarterly Nominees Survey (which supplies data on foreign portfolio equity investment in New Zealand via resident nominees). Information available from the equities market indicates that the level of survey undercoverage is negligible. The QMFS is a sample of principal New Zealand fund managers. No estimate for QMFS undercoverage is currently included in the published tables. However, smaller fund managers are surveyed annually, and estimates of their funds under management are presented in the footnotes to the tables covering international assets and liabilities.

The QIIS is a quarterly sample of approximately 500 enterprises. The sample is intended to capture approximately 95 percent of the stock levels of the main IIP components. The amount by which the quarterly sample survey is estimated to undercover the population is derived from the Annual International Investment Survey (AIIS). The AIIS survey collects data as at 31 March each year from a population of enterprises identified as being relevant to the BoP financial account and the IIP, but not surveyed in the QIIS. The AIIS is intended to be a census survey every three years and a sample survey in the interim years. The results of the AIIS are used to:

  1. Provide IIP (table 2) and international asset and liability (tables 10 to 13) positions to supplement the regular quarterly sample survey (QIIS). This estimate is known as the non-sampled estimate (NSE) and is added to the results of each quarter's QIIS results and included in the published accounts. The QIIS and NSE estimates of investment positions comprise New Zealand's measured international investment positions.
  2. Update the sample used in the regular quarterly sample survey (QIIS). To reduce the compliance load faced by the smaller businesses that typically comprise the AIIS population. The AIIS questionnaire is an abbreviated form of the QIIS questionnaire.

Note that in respect of NSE investment positions, the associated current account investment income flows and financial account transactions are neither collected nor estimated.

Currency and maturity breakdowns of the non-sampled estimate

To improve the usefulness of the assets and liabilities data, Statistics NZ has allocated the NSE across the different currency and residual maturity profiles. The allocation is reset each year in the release of June quarter statistics. The allocation uses QIIS data collected from non-bank enterprises applied to the results of the annual survey. The assumption is that the behaviour of the NSE data is similar to that of the non-bank enterprises surveyed in the QIIS. The resulting apportionment of NSE estimates is then added to the QIIS residual maturity and currency totals.

Review of sample of fund managers, and level shift in investment abroad

The sample of fund managers surveyed each quarter has been reviewed. The changes made to the sample of fund managers surveyed each quarter has resulted in a level shift up in the measured level of funds under management abroad. This level shift is approximately $1.4 billion, effective in the December 2007 quarter. The Annual Managed Funds Survey data estimate of funds invested abroad through smaller fund managers, previously updated at 31 December 2006, has now been updated for 31 December 2007. The 2007 results have been included in this release of March 2008 quarter BoP and IIP statistics, instead of in the release of June 2008 quarter statistics as previously indicated. This data is presented as footnotes to tables 2, 10, 11, 12 and 13 of this release.

Annual Managed Funds Survey

The Annual Managed Funds Survey (AMFS) is conducted jointly by the RBNZ and Statistics NZ and has collected data as at 31 December since 2001. The AMFS measures the stock of investment held (both in New Zealand and abroad) by fund managers who are not in the QMFS.

The results from the sample surveys showed assets held abroad of:

Results from the AMFS

Period Assets held abroad
NZ$(million)
December 2007 3,657
December 2006 4,315 (R)
December 2005 3,225
December 2004 1,036
December 2003 897
December 2002 2,187
December 2001 2,365

Symbol:
R revised

The AMFS does not capture any financial account transaction flow or current account investment income data. This data is not included in the IIP series of New Zealand investment abroad. The data from the AMFS for portfolio investment abroad is shown in the IIP tables to this release as an addendum item. The data is as at 31 December only.

The December 2003 and December 2002 data presented above is not comparable, as the large fund managers reporting in the 2002 AMFS were added to the QMFS from the beginning of the March 2003 quarter. In the December 2003 period, the largest of the annually surveyed fund managers were incorporated into the QMFS and from that point the data relating to those enterprises was included in the IIP series.

A review of the survey’s results and an investigation into the feasibility of adjusting the data (to take account of market price and exchange rate movements) are planned, before the data series is formally migrated into the New Zealand IIP statistics. For further information on the AMFS, contact Eric Chin on 04 931 4600 or email: bop.surveys@stats.govt.nz.

Equity shareholding in overseas companies directly held by New Zealand individuals

Many New Zealand individuals invest directly abroad and hold these overseas assets in their own custody or in the custody of an overseas entity. Only data relating to overseas financial assets of New Zealand enterprises, and those held by New Zealand individuals and organisations where the investments are undertaken by New Zealand fund managers, are reported in the BoP and IIP statistics. To cover the gap (that is, between assets invested and held directly), Statistics NZ has made estimates of the level of individuals' directly-held overseas equities. The estimates are presented as an addendum item in the IIP (table 2). This is because the estimation methodology relies on several key assumptions that cannot, at this stage, be fully tested by reference to available data. Changes to these assumptions can significantly alter the size of the estimate.

Equtity shareholding in overseas companies directly held by New Zealand individuals

Period Latest estimate
$(billion)
Previously published
$(billion)
Amount held in Australia
$(billion)
December 2005 4.5 .. 3.6
December 2004 5.2 4.9 4.0

Symbol: .. data unavailable

At present, a project is underway to improve estimates of the level of individuals' directly-held overseas equities. Progress on this will be advised as appropriate. For more information, refer to the Balance of Payments Quality Plan section in these Technical notes.

International trade in carbon emissions units

The classification and treatment of emission units is still under discussion in international accounting and statistical forums. In compiling BoP and IIP statistics, Statistics NZ regards emission units as intangible non-produced assets. Therefore, international trade in these units is recorded in the capital account of the BoP. For example, the sale of emission units by a resident to a non-resident is recorded as a capital account receipt.

Seasonal adjustment and trend analysis

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

Seasonally adjusted and trend series help to reveal the underlying behaviour of a series. While seasonally adjusted series have had the seasonal component removed, trend series have had both the seasonal and the irregular components removed. An example of an irregular event is the purchase of a frigate in the December 1999 quarter. Trend estimates reveal the underlying direction of movement in a series and are likely to indicate turning points more accurately than are seasonally adjusted estimates.

The adjusted balance on the current account is the sum of the adjusted goods, services, income and current transfers balances. The smoothed, seasonally adjusted current account balance (the trend) is formed in the same way.

The seasonally adjusted series are produced using the X-12-ARIMA seasonal adjustment package. The trend estimates are based on a five-term Henderson moving average of the seasonally adjusted series, with an adjustment for outlying values.

Towards the end of the series, trend estimates are subject to change, owing to the use of new data points in the estimation process as they become available. The main reason behind this is that the trend is calculated as a 'centred moving average' of the seasonally adjusted series. Seasonally adjusted values are also subject to some revision, as they are also calculated using centred moving average technology. Generally, these revisions are not as great as for the trend.

Revisions can be particularly large if an observation is treated as an outlier in one period, but is found to be part of the underlying movement as further observations are added to the series. All trend estimates are subject to revisions each quarter, but normally only the previous two or three estimates are likely to be substantially altered.

More information

For more information, follow the links from the Technical notes of this release on the Statistics NZ website.

Quarterly Balance of Payments 
International Trade in Services Survey
International Transportation
International Visitors Survey
International Insurance 
New Zealand Travellers Expenditure Model
Quarterly International Investment
Government Services
Government Transfers
Migrants Transfers 
Transfers 
Quarterly Nominees
Managed Funds

Copyright

Information obtained from Statistics NZ may be freely used, reproduced, or quoted unless otherwise specified. In all cases Statistics NZ must be acknowledged as the source.

Liability

While care has been used in processing, analysing and extracting information, Statistics NZ gives no warranty that the information supplied is free from error. Statistics NZ shall not be liable for any loss suffered through the use, directly or indirectly, of any information, product or service.

Timing

Timed statistical releases are delivered using postal and electronic services provided by third parties. Delivery of these releases may be delayed by circumstances outside the control of Statistics NZ. Statistics NZ accepts no responsibility for any such delays.

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