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Balance of Payments and International Investment Position: September 2011 quarter
Embargoed until 10:45am  –  21 December 2011
Data quality

Period specific information
This section contains information about data that has changed since the last release.

General information
This section contains information about data that does not change between releases

Period-specific information

Earthquake-related figures revised

New Zealand issuers have provided updated estimates of their Canterbury reinsurance claims on non-resident reinsurers to Statistics New Zealand. The updated data comprises claims on non-resident reinsurers, which affects capital account inflows, investment abroad transactions, and IIP assets. The updated data was used to revise the statistics back to the September 2010 quarter. The updated figures are included in the table below.

Unusual data-item summary

This table summarises key one-off events impacting on BoP and IIP statistics in recent quarters.

Quarter

Unusual data-item description

Value NZ$(million)

Impact on current account balance (CAB) and the capital account

Impact on net IIP position

June 2011 Canterbury earthquake reinsurance claims 862 R Capital transfers inflow Assets – accounts receivable increases; net IIP position reduces
Mar 2011 Canterbury earthquake reinsurance claims 9,321 R Capital transfers inflow Assets – accounts receivable increases; net IIP position reduces
Sep 2010 Canterbury earthquake reinsurance claims 3,866 R Capital transfers inflow Assets – accounts receivable increases; net IIP position reduces
Dec 2009 Partial reversal of the tax settlement by major banks -379 Investment income – increases after tax profits; increases the CAB No direct impact
Sep 2009 Tax settlement – tax to pay by major banks 1,366 Investment income – decreases after tax profits; decreases the CAB No direct impact
Jun 2009 Tax settlement – tax to pay by major banks 661 Investment income – decreases after tax profits; decreases the CAB No direct impact

For further information about the treatment of these events see Impacts of the Canterbury earthquakes on New Zealand's international accounts about the Christchurch earthquakes, or the Hot Off the Press overviews of June 2009September 2009, and December 2009 quarter releases about the tax settlements.

Note that the numbers in this table have been revised and updated since the paper and the 2009 Hot Off the Presses were published.

General information

Data sources

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

  • Statistics NZ surveys of New Zealand-resident enterprises
  • surveys conducted by other entities
  • administrative data
  • financial market information.

Statistics NZ surveys of New Zealand-resident enterprises that operate with the approval of the Minister of Statistics. Their completion is therefore compulsory, as set out in the Statistics Act 1975. These surveys are directed at New Zealand-resident enterprises identified as being relevant to BoP and IIP statistics. The main surveys that provide data for BoP and IIP are:

  • Quarterly International Investment Survey (QIIS) – a sample survey that is the primary source of financial account and IIP data
  • International Trade in Services and Royalties Survey (ITSS) – 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
  • insurance surveys – full-coverage surveys that measure premiums and claims from direct overseas insurance, reinsurance, and insurance brokers for both life and non-life insurance.

Surveys conducted by other entities – Statistics NZ purchases some data from other organisations that operate a relevant survey. Statistics NZ has input into the design of these surveys. For example:

  • 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)
  • the Quarterly Managed Funds Survey (QMFS) – a joint Reserve Bank of New Zealand (RBNZ) and Statistics NZ operation that 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 that are 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 public information sites.

Surveys and guides

For more information about the data sources, follow these links 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

Sources and methods

The conceptual framework used in New Zealand's BoP and IIP statistics is based on the fifth edition of the International Monetary Fund's (IMF) Balance of Payments Manual (BPM5). For descriptions of the underlying concepts, data sources, and methods used in compiling the estimates, see the Balance of Payments Sources and Methods: 2004 report, available from the Statistics NZ website (www.stats.govt.nz). For a printed copy, phone (64) 04 931 4600 or email: subscriptions@stats.govt.nz.

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. 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.

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 (ie when the change of ownership occurs).

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.

In the current account, we produce seasonally adjusted and trend series for both goods and services series (including travel and transportation services separately). Income and transfers 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 income and transfers series. Seasonally adjusted balances are calculated as being the sum of adjusted exports minus adjusted imports. 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 may 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 revised, as they are also calculated using centred moving average technology. These revisions are generally smaller than those made to the trend series.

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 revised each quarter, but normally only the previous two or three estimates are likely to be substantially altered. 

Reporting on an accrual basis

BoP asks survey respondents to provide data on an accrual basis (when the service occurs), as opposed to a payments basis (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.

Undercoverage estimate for the international investment position

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.

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 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. AIIS is intended to be a census every three years and a sample survey in the interim years. The results of the AIIS are used to do two things.

  • Provide IIP (table 2) 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 make up New Zealand's measured international investment positions.
  • Update the sample used in the regular quarterly sample survey (QIIS). To reduce the compliance load faced by the smaller businesses that typically make up the AIIS population, the AIIS questionnaire is an abbreviated form of the QIIS questionnaire.

Note that the AIIS does not collect information on financial account transactions, nor are these transactions estimated.

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, 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:

  • the sum of all current, capital, and financial account credits (inflows), less the sum of all the debits (outflows)
  • 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 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. Offsetting errors may either be related or unrelated, resulting from a measurement problem affecting one or both sides 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.
  • Transactions relating to managed funds that are not surveyed each quarter. Note that financial account transactions are not estimated for this item.
  • Data about transactions arising from settling and trading in financial derivative contracts are not requested 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 estates 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. An estimate of the investment flows of these entities in Australian-listed companies is now included in the BoP financial account.

In any quarter there may also be financial account transactions that 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 RBNZ and IIP banking-sector data
  • monitoring investment activity approved by the Overseas Investment Office
  • reconciling changes in the stock position of inwards and outwards investment against financial account transactions, reported 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 BoP and IIP
  • annually reviewing the survey populations, with additions being 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 for large and complex transactions.

International debt and external debt statistics

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 11 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 11, 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 11, 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 11 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 12. 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 11. Deriving external debt and external lending is done using table 12 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 12 data and compares it with the net international debt position of table 11.

Calculating New Zealand's net external debt
30 September 2010 30 June 2011 30 September 2011
 NZ$(million)
Total international financial lending IIPQ.S5AA3 102,974 R 114,467 R 123,871
less financial derivatives IIPQ.S5AA6F 18,238 18,541 27,026
External lending 84,736 R 95,926 R 96,845
Total international liabilities IIPQ.S5AL3 254,058 253,923 R 271,883
less financial derivatives IIPQ.S5AL6F 20,589 19,371 R 25,764
External debt 233,469 234,552 R 246,119
Net external debt -148,733 R -138,626 R -149,274
Net international debt IIPQ.S5AA2B -151,084 R -139,455 R -148,012
Difference: net external debt less net international debt 2,351 829 R -1,262

RBNZ securities subject to repurchase agreements

Non-resident-issued debt securities, denominated in foreign currencies and held by the RBNZ, contribute to New Zealand's official sector reserve assets. When such a security is subject to a repurchase (repo) agreement, it remains in the IIP as an asset, but not as a reserve asset. The appropriate IIP classification is: New Zealand investment abroad: portfolio investment; debt securities (as opposed to investment abroad; reserve assets). The cash received for the 'repoed' security is recorded as a liability in the IIP as: foreign investment in New Zealand: other investment; loans. This is the collateralised loan approach to recording repoed securities. However, in the IIP, the repoed security is misclassified to New Zealand investment abroad: other investment; other instruments (instead of to portfolio investment; debt securities). Statistics NZ plans to improve the classification of the repoed securities within the financial account at a future time.

Other investment income breakdown

The table below shows a breakdown of the other investment income as reported in table 6 of this release. The breakdown includes income from survey data and from Inland Revenue's reported income data.

Other investment income breakdown, by quarter
Jun 2010 Sep 2010 Dec 2010 Mar 2011 Jun 2011 Sep 2011
NZ$(million)
Income from New Zealand other investment abroad 677 683 689 688 701 R 687
Interest data from surveys 62 68 74 73 86 R 72
Inland revenue income data 615 615 615 615 615 615
Income from foreign investment in New Zealand 984 1,034 1,055 1,033 1,004 R 1,015
Interest data from surveys 597 646 667 644 615 R 626
Inland revenue income data 387 388 388 389 389 389

Symbol: R revised

International trade in carbon emission 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 BoP. For example, the sale of emission units by a resident to a non-resident is recorded as a capital account receipt.

Presenting the balance of payments and international investment statistics

Presentation of international investment position statistics

There are two ways to present 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 method used.

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.

The balance sheet presentation approach uses a balance sheet format to present New Zealand's international assets and liabilities. Using the balance sheet format enables presentation of assets and liabilities by broad sector (table 11).

For example: a New Zealand company lends $100 to an overseas subsidiary, and borrows $60 from a different overseas subsidiary.

  • Under the BOP presentation this would be recorded as $40 of New Zealand direct investment abroad
  • Using the balance sheet presentation this would be recorded as $100 in New Zealand's international assets and $60 in New Zealand's international liabilities.
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 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.

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.

Liability

While all care and diligence has been used in processing, analysing, and extracting data and information in this publication, Statistics NZ gives 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

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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