|
The End of Monthly Balance of Payments Figures
Guy Woods
Statistics Group
June 1997
Introduction
The release of the monthly balance of payments (BOP) figures by the
Australian Bureau of Statistics (ABS) often caused a considerable amount
of interest. These figures were widely regarded as a key indicator of
the state of Australia's economic position in relation to the rest of
the world. An 'adverse' figure was often debated in Parliament and had
a very noticeable impact on the financial markets.
Despite this interest, the ABS has ceased releasing BOP figures on a
monthly basis with. the December 1996 issue of Balance of Payments,
Australia (Cat No. 5301.0).
Since December 1996 the release of BOP figures has been restricted to
the quarterly publication Balance of Payments, Australia (Cat No.
5302.0).
Background
Concerns about the quality of the monthly estimates and a desire to
bring Australia into line with recommendations of the International Monetary
Fund (IMF) and practices of other countries have prompted this change
of focus to quarterly figures.
The ABS felt that the financial markets were at times placing far too
much importance on figures which were really only rough estimates requiring
considerable revision as more reliable data became available. In an Information
Paper titled Do We Need Monthly Balance of Payments Statistics, the
ABS discussed concerns about how the statistics were being used and what
the possible solutions to their misuse might be. The paper quoted Dr Steven
Kates of the Australian Chamber of Commerce and Industry (ACCI) as noting
that volatility in the monthly numbers was having an adverse impact on
interest rates, business confidence and investment.(1) Mr Bernie Fraser,
former Governor of the Reserve Bank, is quoted by the Sydney Morning
Herald, as having expressed concerns about the impact of monthly BOP
figures in a speech to business economists last year. He felt that those
commentating on the figures needed to concentrate on the long-term analysis
of the data.(2)
The above figure illustrates just how different the Current Account
Deficit (CAD) can be after it has been revised at a later date. In the
last 10 years data for the CAD have been revised up on 55 occasions and
revised down on 66 occasions.(3) The average adjustment has been $212
million for a downward adjustment and $219 million for an upward adjustment.
The problem with the monthly BOP figures lies with the income
and unrequited transfers components of the Current Account.
Only 20% of their value is derived from current data available on a monthly
basis. The remainder is extrapolated from figures released in previous
months. In comparison, 80% of the value of the merchandise and
services trade data of the Current Account are derived from current
monthly sources.(4)
Taking all this into consideration, the ABS consulted with user groups
and in its Information Paper it detailed its concerns and offered several
solutions. The solutions ranged from doing nothing to devoting more resources
to the compilation of the BOP data. In the end the ABS decided on a compromise.
The ABS would continue to produce monthly figures for trade in goods and
services, but discontinue the production of monthly BOP figures. This
has enabled ABS to continue with the monthly release of valuable and fairly
reliable monthly trade data, which are of considerable interest to economic
analysts.
There are now two new monthly publications containing trade data. International
Merchandise Imports, Australia (Cat No. 5439.0) is a one-page publication
which contains total imports and data on imports of some broad commodity
categories. International Trade in Goods and Services, Australia (Cat
No. 5368.0) contains monthly trade figures in broad commodity categories
(compiled on balance of payments basis) and exchange rates with the major
world currencies.
Reaction
The ABS has said that it received no adverse reactions to its decision
to discontinue the monthly BOP.
A survey of newspaper articles certainly seems to confirm this. The
Australian Financial Review published comments by four private
sector economists who in general were supportive of the change. These
four economists did say that it is useful to have the monthly trade figures
as these give a valuable indicator of the general direction of the economy.
Referring to the CAD, Chris Caton (Chief Economist at Bankers Trust) said,
'a large component of that was simply a made up number anyway'.(5) In
a recent press release the Australian Chamber of Commerce and Industry
described the last release of monthly BOP data as demonstrating how misleading
the monthly figures could be. That month registered a fall which was in
line with the existing trend whereas, the previous month had registered
a rise.
Conclusion
The decision by the ABS to cease publication of the BOP on a monthly
basis has generally been supported by the media and economists. A large
component of the data was not derived from reliable monthly sources, thus
making the figures liable to substantial revisions later on. The cessation
of publication of the monthly figures brings Australia into line with
prevailing international practices and removes the destabilising impact
that these figures could have on the financial markets.
Other Sources of Information
Quality of Australian Balance of Payments Statistics: Information Paper,
1996, ABS (Cat No. 5342.0)
Do We Need Monthly Balance of Payments Statistics: Information Paper,
1997, ABS (Cat No. 5366.0)
The Future of Monthly Balance of Payments Statistics: Information Paper,
1997, ABS (Cat No. 5367.0)
- ABS (Cat No. 5366.0).
- Sydney Morning Herald, 4 January 1997.
- Tony Kryger, Easy Guide to Balance of Payments, (Parliamentary
Research Service Background Paper No. 5, 1996-97) DPL, 1996.
- ABS (Cat No. 5366.0).
- Australian Financial Review , 7 January 1997.
|
