IMPLEMENTATION OF SYSTEM OF NATIONAL ACCOUNTS 2008 AND

BALANCE OF PAYMENTS AND INTERNATIONAL INVESTMENT

POSITION MANUAL 6TH EDITION BY THE AUSTRALIAN BUREAU OF

STATISTICSMichael Davies,

First Assistant Statistician,

Macroeconomics and Integration Group,

Australian Bureau of Statistics

1

The ABS…• … is Australia’s official national statistical agency.• … has the authority to conduct statistical

collections.• … has obligations to publish and disseminate

compilations and analyses of statistical information, and to maintain the confidentiality of information.

• …ensures formulation, and compliance with, standards for the carrying out by official bodies of operations for statistical purposes.

2

Standards used in Australia• The ABS is a strong contributor to the development of

international standards.• 2008 System of National Accounts (2008SNA)• Balance of Payments and International Investment

Position 6th edition (BPM6)• Australian and New Zealand Standard Industrial

Classification 2006 (ANZSIC06…..consistent with ISIC REV 4)

• Standard Economic Sector Classifications of Australia 2008 (SESCA08)

3

Management of change process

• Industry classification fundamental – integral to ABS systems and databases

• Simultaneous implementation of 2008SNA/BPM6/SESCA08 to minimise disruption, a ‘big bang approach’.

• Therefore, long lead times for implementation of changes– Need to ensure funding/resourcing– Need to ensure business continuity

4

Standards change control• ANZSIC Implementation Board and

Macroeconomic Statistics Review Committee set up in 2005– Methods board to assess and document changes

• Transition plans to identify and prioritise tasks– Together with risks and risk mitigation strategies

• Communications plans to identify key clients and communication mechanisms

• Implementation workshops, information sessions and publications

5

Principles• Standards

• Timing of implementation

• Coordination and consultation

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Standards• Departures from standards:

– few in number & demonstrate a significant benefit or avoidance of an unwarranted cost

– carried through to all accounts/statistics– enable a straightforward reconciliation with the

standard where feasible– be implemented after extensive consultation and

publicity• Proposed departures were discussed with major

users

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Departures from standards• 2008 SNA

– Repurchases agreements and securities lending– Databases– Change from ‘consumption of fixed capital’ to ‘depreciation’– Goodwill and marketing assets– Valuation of water– Some components of illegal economy– The debtor approach to recording interest:1. Realistic e.g. Current market yields2. Avoids artificial measurement e.g. indexed debt, concessional

loans.

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Departures from standards• BPM6

– Repurchase agreements– Treatment of originals and copies– Treatment of patented entities– Goodwill and marketing assets– Reclassifications for exchanges in international

positions– Treatment of holding companies– Signage

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Timing of implementation• Changes resulting in changes to GDP should be

at same time– Needs 3 year lead time for Australian National

Accounts– Some consideration of other changes can take place

• Decided to release on the quarter that coincided with the annual publication (Sept quarter 2009, published in December 2009)

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Timing (Big bang approach)• ABS implemented all changes at once:

– Pros• minimised disruption for clients• reduced total cumulative effort:

– system, questionnaire changes– balancing

– Cons• made it a very large task• was difficult to disentangle individual impacts• not all standards / issues finalised in time• was difficult to be responsive to change

12

Coordination and consultation• Must be centrally coordinated

• Provide clients and stakeholders with sufficient information to manage their own changes.

• Consulted regularly with key clients– In Australia these include the Reserve Bank

of Australia and The Treasury.13

Extensive User Consultation• A series of information papers released between 2004 and

2009– 2004 information paper on ANZSIC development– 2006 information paper on ANZSIC implementation plans– 2007 information paper on introduction to revised SNA/BPM– 2008 update on ANZSIC implementation– 2009 information paper on implementation of revised SNA/BPM

• Consultation with key government agencies and other users– Including road shows in each State and Territory

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Managing a long time series under new standards• Implementation involved extensive changes to statistical

infrastructure– Business Register coded to ANZIC 2006 from March 2006– Creation of new survey frames– Back casting methodologies– Systems reengineering and database changes

• Parallel runs to generate ‘bridged data’ for measurement of impact

• Progressive migration of collections– Starting in 2006– Culminating with the National Accounts in SQ09

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Changes to data collections• ABS has a strong integrated suite of economic

collections from Survey and Administrative data• Easy changes

– Changes to in-house economic surveys– Changes to estimation models

• Complex changes– Changes to systems and processes– Changes to compilation of Supply-Use tables after

changes– Changes to external administrative collections (Tax data,

prudential information)

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General business of statistics process map

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Changes to data collections – financial account

• New financial sector classification– Separation of money-market funds and other

investment funds.

• Only those investment funds investing predominantly in financial assets are treated as financial corporations.– Small divergence from standards.

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Changes to data compilation – Input-Output• Made complex from changes to industry

classification• Divergence from 2008SNA use of

Producer Prices– Users prefer Basic Prices since Transport is

an important consideration– Continued use of 1968SNA methodology

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Impacts from implementing new standards• Level shift in GDP aggregate• Minimal change to growth rates• Minimal change to Current Account

Balance• Minimal change to International Investment

Position• Minimal change to Net Foreign Debt

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GDP SEASONALLY ADJUSTED SERIES, CVM—% change

Sep2004–05

Mar Sep2005–06

Mar Sep2006–07

Mar Sep2007–08

Mar Sep2008–09

Mar

%change

–1

0

1

22008SNA1993SNA

GDP SEASONALLY ADJUSTED SERIES, CVM—Levels

Sep2004–05

Mar Sep2005–06

Mar Sep2006–07

Mar Sep2007–08

Mar Sep2008–09

Mar

million

240000

260000

280000

300000

320000SNA08SNA93

CURRENT ACCOUNT SEASONALLY ADJUSTED SERIES, Levels

Sep2004–05

Mar Sep2005–06

Mar Sep2006–07

Mar Sep2007–08

Mar Sep2008–09

Mar Sep2009–10

$m

–21000

–18000

–15000

–12000

–9000

–6000BPM6BPM5

REVISIONS TO GDP GROWTH, Seasonally adjusted CVM

Jun2008–09

Sep2009–10

Dec Mar Jun Sep2010–11

Dec Mar

%

–0.4

–0.2

0

0.2

0.4

0.6mean revisionlatest revision

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NET FOREIGN DEBT, Original series—Levels

Sep2004–05

Mar Sep2005–06

Mar Sep2006–07

Mar Sep2007–08

Mar Sep2008–09

Mar Sep2009–10

$m

300000

400000

500000

600000

700000BPM6BPM5

NET IIP AT END OF PERIOD, Original Series—Levels

Sep2004–05

Mar Sep2005–06

Mar Sep2006–07

Mar Sep2007–08

Mar Sep2008–09

Mar Sep2009–10

$m

400000

500000

600000

700000

800000BPM6BPM5

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Challenges from implementing new standards

• R&D

• FISIM

• These will be described in more detail later

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User response to implementing new standards• Global Financial Crisis influenced user views on

new standards– Calls for a delay to the publication release– Problems with coherence in accounts were of concern

• Little user response to 2008SNA/BPM6 changes were the result of a good communication plan

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Areas of user concern• Unfunded pension liabilities was not a

problem as they were already done.• Little impact on productivity measures post

capitalisation of Research & Development.• Financial Intermediation Services Indirectly

Measured (FISIM) performed badly during crisis.

• Change to performance indicators which relied on GDP.

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Implementing Research & Development case study• Principles:

– Treat expenditure on R&D as capital formation.• Should be in terms of future economic benefit.• Practically, this is difficult to measure.

– Value R&D output at market prices.• Most R&D is own account and there is no recognised market price• ABS valued R&D at cost.• Difficulty in assigning an asset life for depreciation

– Assume international trade in R&D is covered by trade in services collection.

• Makes little difference to productivity story26

International reporting obligations

• Problems with early adoption – out of step with other countries.

• Evolution of new standards and reporting obligations outside of a formal framework– G20 finance ministers– Basel III developments – Globalisation indicators (for example: Ultimate

beneficiaries/owner, foreign affiliates) • Delay in some complementary manuals development

(eg. Government Finance, Trade in Services)

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The Financial Crisis

• Global Financial Crisis hits in December 2008 following the collapse of Lehman Bros

– Prior to this it was difficult to anticipate the full scale of the crisis and its impact on transmission mechanisms

• By this stage a number of critical implementation milestones had been passed

– Dual coding of the units frame ceased in June 2008– Migration of the annual industry collections in August 2008

• Government funding for SNA implementation ceased at the end of 2009.• FISIM estimates became unstable impacting on financial industry output

and consumer prices index.• Statistics on derivatives, the main transmission mechanism for the GFC,

are a significant data gap in Australia.

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Some economic phenomena during volatile timesTERMS OF TRADE, Seasonally adjusted

Mar1993–94

Mar1995–96

Mar1997–98

Mar1999–00

Mar2001–02

Mar2003–04

Mar2005–06

Mar2007–08

Mar2009–10

index

40

60

80

100

120

MINING GVA AND ALL EXPORTS TO CHINA, Seasonally Adjusted and Orginal

Mar2005–06

Sep2006–07

Mar Sep2007–08

Mar Sep2008–09

Mar Sep2009–10

Mar Sep2010–11

Mar

$m

0

10000

20000

30000

40000Mining GVAExports to China

FINANCE GVA, Seasonally Adjusted

Jun1995–96

Jun1997–98

Jun1999–00

Jun2001–02

Jun2003–04

Jun2005–06

Jun2007–08

Jun2009–10

$m

10000

15000

20000

25000

30000

35000Finance A93Finance A06

FINANCE SECTOR GROSS OPERATING SURPLUS, Seasonally adjusted

Jun1995–96

Jun1997–98

Jun1999–00

Jun2001–02

Jun2003–04

Jun2005–06

Jun2007–08

Jun2009–10

$m

0

3000

6000

9000

12000

15000

18000Finance Sector GOS S98Finance sector GOS S08

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Managing national accounts in a volatile environment and lessons learned• Long period of stable growth in Australia from 1992 to mid-2000’s.

o There is a tendency for complacency after an extended period of relative market stability

Exacerbated by staff turnover: many staff have not been through a full business cycle

• Generally most series performed well until 2007.

• Statistical discrepancy emerged as a problem after December quarter 2009. o Effective measurement in times of crisis requires statistical

infrastructure in place BEFORE the crisisFor example, measurement of the financial services industryFull set of accounts, including balance sheets and financial accounts are an advantage.

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Managing national accounts in a volatile environment and lessons learned - continued

• Government measures to stimulate the economy introduced in 2009.

• Onset of natural disasters from 2009 onwards• Sovereign debt issues emerged in 2010 and

continue to disrupt markets.o Implementation of the full set of accounts helps to

manage through crisis events.

These problems were faced by many NSOs.

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FISIM• FISIM performed unpredictably in a financial

crisis.– Was influencing CPI and headline inflation rates and

National Accounts aggregates.

• Responses– Forced a review of the FISIM model.– Removal of FISIM from headline CPI (inflation)– Implemented a revised Balance of Payments model– Improved data sources for National Accounts.

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Future developments• Revised Government Finance Statistics

Manual

• Emergence of new practices around 2008SNA and BPM6 from implementation in USA (2013), Canada (2013) and Eurostat (2014).

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