Balance of Payments and International Investment Position: December 2013 quarter Embargoed until 10:45am – 19 March 2014 Key facts     New Zealand's seasonally adjusted current account balance was a $0.8 billion deficit in the December 2013 quarter (the smallest since the March 2010 quarter). The smaller deficit was mainly due to an increase in exports of goods in the December 2013 quarter. For the year ended December 2013, the current account deficit was $7.5 billion (3.4 percent of GDP); it was 4.1 percent of GDP for the year ended September 2013. New Zealand's net international liability position was $147.6 billion (66.6 percent of GDP) at 31 December 2013 ($2.0 billion less than at 30 September 2013). Liz MacPherson Government Statistician 19 March 2014 ISSN 1178-0215 Commentary         Overview of December 2013 quarter Overseas reinsurance claims from Canterbury earthquakes continue to be settled Dairy volumes dominate rise in goods exports Services surplus falls Income deficit increases as foreign investments in New Zealand earn more Increased inflows of current transfers lead to smaller deficit Financial account shows net investment inflow Rise in overseas share prices drives net international liabilities down Overview of December 2013 quarter New Zealand's seasonally adjusted current account balance was a deficit of $837 million in the December 2013 quarter, $1,740 million smaller than the September 2013 quarter deficit. This is the smallest seasonally adjusted current account deficit since the March 2010 quarter. The fall in the deficit in the latest quarter was largely due to increased exports of goods. Record goods and services surplus The balance on goods and services was a surplus of $1,818 million in the December 2013 quarter, the largest surplus since the series began in 1987. This represents a $1,940 million turnaround from the September 2013 quarter's deficit. Exports of goods increased $1,410 million, on the back of strong dairy product exports this quarter. At the same time, a fall in the value of goods imports also contributed to the improved goods and services balance. 2 Foreign-owned companies earn higher profits The income deficit grew $330 million from the September 2013 quarter to the December 2013 quarter, as income earned from foreign investment in New Zealand increased. Foreign-owned companies in New Zealand earned higher profits this quarter, with most profits reinvested into these companies by their overseas parents rather than being paid out as dividends. Smaller annual current account deficit results from more exports of goods The annual current account deficit was $7.5 billion (3.4 percent of GDP) for the year ended December 2013. This compares with a deficit of $8.9 billion (4.1 percent of GDP) for the year ended September 2013. As for the quarterly story, the fall in the deficit over this time was mainly due to an increase in exports of goods, particularly dairy products. Net inflow of investment into New Zealand The current account deficit was financed by an $863 million net inflow of foreign investment into New Zealand in the December 2013 quarter. Both New Zealanders investing abroad, and foreigners investing in New Zealand, increased their holdings of portfolio investments during the period. Net international liabilities fall New Zealand's net international liability position was $147.6 billion (66.6 percent of GDP) at 31 December 2013, compared with $149.5 billion (69.2 percent of GDP) at 30 September 2013. The value of New Zealand's overseas assets increased by more than the value of overseas liabilities during the latest quarter. 3 Overseas reinsurance claims from Canterbury earthquakes continue to be settled Total international reinsurance claims from all Canterbury earthquakes are now estimated at $19.0 billion, up from an estimate of $18.7 billion in the September 2013 quarter. At 31 December 2013, a total of $13.0 billion of these claims had been settled with overseas reinsurers, leaving $5.9 billion of claims outstanding. See the table below for details. Updated reinsurance claim estimates Reinsurance Settlements Total outstanding claims at end of period Quarter claims NZ$(million) Sep 2010 5,194 0 5,194 Dec 2010 0 0 5,194 Mar 2011 12,884 59 18,019 Jun 2011 875 483 18,411 Sep 2011 0 849 17,562 Dec 2011 19 1,149 16,432 Mar 2012 0 1,327 15,105 Jun 2012 0 1,357 13,747 Sep 2012 0 1,362 12,385 Dec 2012 0 1,563 10,822 Mar 2013 0 1,010 9,812 Jun 2013 0 1,373 8,439 Sep 2013 0 1,440 6,998 Dec 2013 0 1,073 5,925 Total 18,972 13,047 5,925 These claim estimates will continue to be revised as the insurance industry provides us with updated information. Dairy volumes dominate rise in goods exports All quarterly references are to seasonally adjusted numbers unless otherwise stated. The balance on goods was a surplus of $1,678 million in the December 2013 quarter, a $2,086 million turnaround from the September 2013 quarter deficit. This is the largest balance on goods surplus ever recorded. Exports of goods rose $1,410 million in the December 2013 quarter, mostly due to increased volumes of dairy product exports. Favourable growing conditions led to strong domestic dairy production in the September quarter, which helped drive exports of dairy products to their highest-ever level in the latest quarter. Dairy prices fell slightly in the December 2013 quarter, but remain almost 50 percent higher than a year ago. Imports of goods fell $676 million in the December 2013 quarter, due to a fall in imports of capital goods. The fall in the latest quarter follows a $1,109 million rise in imports in the September quarter, which was driven by mechanical machinery and purchases of military helicopters. See Overseas Merchandise Trade: December 2013 for further detail. 4 Services surplus falls All quarterly references are to seasonally adjusted numbers unless otherwise stated. The balance on services was a surplus of $140 million in the December 2013 quarter, $146 million smaller than the September 2013 quarter surplus. Exports of services fell during the quarter, while imports of services remained relatively flat. The services surplus is now at a 15year low, although the surplus in the latest quarter was only $19 million smaller than a year ago. Exports of services fell $156 million compared with the September 2013 quarter. Overseas visitors to New Zealand stayed for longer periods, but spent less while they were here. However, total overseas visitor expenditure was still higher than a year ago. New Zealand companies also earned less revenue from providing film production services during the December 2013 quarter. Imports of services fell $11 million as New Zealand travellers spent less overseas in the December 2013 quarter. 5 Income deficit increases as foreign investments in New Zealand earn more The income deficit was $2,632 million in the December 2013 quarter. This is $330 million larger than the September 2013 quarter deficit, and was driven by both a $259 million increase in income earned on foreign investment in New Zealand and a $35 million decrease in income earned on New Zealand investment abroad. Profits of foreign-owned companies reaches four-year high Foreign investors earned $2,347 million on their New Zealand direct investments in the December 2013 quarter, the highest amount since the December 2009 quarter (when $2,654 million was earned). Of the profits earned, $1,274 million was reinvested into New Zealand and $778 million was paid overseas as dividends. The level of reinvested earnings in the latest quarter, driven by the bank sector, was the highest since the series began in the June 2000 quarter. 6 New Zealand portfolio investment income decreases The income earned on New Zealand’s portfolio equity investment abroad was $243 million in the December 2013 quarter, $95 million lower than in the September quarter. The decline in income was from lower dividends paid out on overseas portfolio investments. Portfolio equity investments capture investments by fund managers, including those owned by the New Zealand Government. Increased inflows of current transfers lead to smaller deficit The balance on current transfers was a deficit of $23 million in the December 2013 quarter, $130 million smaller than the September quarter's deficit. Inflows of current transfers increased as the New Zealand Government received more non-resident withholding tax. Financial account shows net investment inflow An $863 million net investment inflow was measured in the financial account for the December 2013 quarter. This is the result of a $4.7 billion inflow of foreign investment into New Zealand, partly offset by a $3.8 billion outflow of New Zealand investment abroad. Bank sector drives large increase of foreign portfolio investment in New Zealand Of the net $4,660 million total foreign investment in New Zealand in the December 2013 quarter, portfolio investments were $5,084 million, driven by debt securities. Money-market instruments issued by the banking sector represented three-quarters of the $4,326 million inflow of portfolio investment debt securities. An additional $1,337 million inflow came from government-issued debt securities to nonresidents in the form of bonds. 7 Fund managers drive New Zealand portfolio investment abroad to record high At $3,474 million, the outflow of New Zealand’s portfolio investment abroad in the December 2013 quarter was the largest quarterly outflow since the series began. There was a $1,895 million outflow of equity securities, mostly from fund managers investing in overseas company shares. A $1,580 million outflow of debt securities abroad was driven by investment in bonds and notes, also largely from fund managers. Rise in overseas share prices drives net international liabilities down This commentary refers to tables 11 to 19 in the ‘Downloads’ box. New Zealand’s net international liabilities at 31 December 2013 were $147.6 billion (66.6 percent of GDP), down $2.0 billion from 30 September 2013. Net market price changes of $2.9 billion had the largest effect on the net international liability position, more than offsetting the $863 million net inflow of financial account transactions. 8 Market price changes increased portfolio investment assets by $2.2 billion as the value of overseas company shares increased. These shares were primarily held by New Zealand fund managers. Market price changes also pulled down the value of portfolio investment liabilities by $1.2 billion. This captured a fall in the price of New Zealand stocks and New Zealand Government bonds in the December 2013 quarter. Banks’ withdrawals of financial derivatives leave net international debt flat New Zealand’s net international debt was $145.1 billion at 31 December 2013, up $473 million from $144.6 billion at 30 September 2013. The increase was driven by a $779 million decrease in international lending. In the December 2013 quarter there were large countering withdrawals of financial derivatives, mainly by the bank sector. International borrowing through financial derivatives decreased $3.3 billion, while international lending through financial derivatives decreased $2.4 billion. The banking sector’s net international debt was $102.5 billion (46.3 percent of GDP) at 31 December 2013, up from $101.3 billion at 30 September 2013. Increase in assets raises net international equity position The net international equity position at 31 December 2013 was -$2.5 billion, an improvement from -$4.9 billion at 30 September 2013. The $3.9 billion increase in New Zealand’s equity assets was larger than the $1.4 billion increase in equity liabilities. At $73.4 billion, international equity assets in the December 2013 quarter reached the highestever level for the time series, driven by an increase of portfolio investment transactions and favourable market price changes. 9 Outstanding reinsurance claims continue to fall Outstanding claims on overseas reinsurers for the Canterbury earthquakes were estimated to be $5.9 billion at 31 December 2013. Excluding these claims, New Zealand’s net international liability position would be $153.5 billion (69.3 percent of GDP). External debt New Zealand’s net external debt, which excludes the value of financial derivatives, was $144.7 billion (65.4 percent of GDP) at 31 December 2013, $1.3 billion more than the $143.4 billion debt at 30 September 2013. For more detailed data see the Excel tables in the 'Downloads' box. 10 Definitions About the balance of payments and international investment position Balance of payments (BoP): New Zealand's BoP statements are records of the value of New Zealand’s transactions with the rest of the world in goods, services, income, and transfers. They also record changes in New Zealand’s financial claims on (assets), and liabilities to, the rest of the world. International investment position (IIP): New Zealand’s IIP statement provides a snapshot of the country’s international financial assets and liabilities. It 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. The IIP includes 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:   BoP financial account transactions other (non-transactional) changes that occurred during the period (eg revaluations, changes in market prices, and other changes such as write-offs). More definitions Capital account: has two components – capital transfers and the acquisition or disposal of nonproduced, 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 (eg migrants transfers). Current account: records the value of New Zealand’s transactions with the rest of the world in goods, services, income, and transfers. The credit side of this account shows the export of goods and services, income earned, and, under current transfers, the offsetting entries to resources received by residents without payment being required. The debit side shows the import of goods and services, income paid, and, under current transfers, the offsetting entries to resources supplied to foreign residents without payment being required. The current account balance is the sum of all current account credits less all current account debits. When the sum of debits is greater than the sum of credits we have a current account deficit. Financial account: records financial transactions involving New Zealand claims on assets, and liabilities to, non-residents. 11 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 an asset/liability is recorded in the investment income component of the BoP current account. Net errors and omissions (residual): an item to ensure the BoP statement balances. It is equal and opposite to the sum of all current account, capital account, and financial account credit flows, less the sum of all debit flows. Balances: are usually in surplus or deficit and are calculated as credits (exports) minus debits (imports) – zero balances are unusual. For example, the balance on goods is goods exports (credits) less goods imports (debits). Goods: physical, produced items over which ownership rights can be established and whose ownership can be passed from one person to another through transactions. Services: products other than tangible goods. Services result from production activity that changes the conditions of the consuming units, or makes the exchange of products or financial assets possible. Examples of services are:      a lawyer providing advice to an overseas client a client paying a company to perform some market research a passenger flying on an overseas airline a company paying to have a ship repaired abroad a New Zealand branch receiving management services from its head office overseas. Exports of travel services: covers all expenditure on both goods and services by overseas visitors to New Zealand. This includes holidaymakers, business travellers, and international students. Excludes international airfares. Imports of travel services: covers all expenditure on both goods and services by New Zealandresident travellers while overseas. Excludes international airfares. Income: earnings from providing capital (eg profits received from directly owning a company, dividends received from owning shares, interest received from lending money) or wages/salaries earned from providing labour (‘compensation of employees’). Current transfers: offsetting entries to transactions where goods and services are supplied or received without there being an exchange of equal value in return (eg taxes or donations). Capital transfers: involve the transfer of ownership of fixed assets or the transfer of funds linked to them, without any counterpart transaction (eg funds brought into the country by migrants). Non-produced, non-financial assets: consist of natural resources; contracts, leases, and licences; marketing assets; and goodwill (eg the sale of a brand name). 12 Assets: a financial claim held by an entity on another entity (eg a New Zealand bank lending money to an overseas company would hold an asset equal to the value of the loan). Liabilities: a financial claim owing to an entity by another entity (eg a New Zealand company borrowing from overseas would have a liability to overseas equal to the value of the loan). Stocks: the value, at a set point in time, of a country’s financial assets or liabilities. Flows: transactions that result in an increase or decrease in financial assets or liabilities (eg a New Zealand company purchases 50 percent of an overseas company – the transaction is recorded as a flow in the financial account, and the value of New Zealand’s stock of financial assets increases accordingly). Direct investment: a situation where a single investor owns 10 percent or more of voting shares in a company (eg New Zealand-based subsidiaries of overseas companies represent direct investment from overseas). Portfolio investment: investment of less than 10 percent of voting shares in a company by a single investor (eg a New Zealand fund manager buying 1 percent of shares in an overseas company). Other investment: mainly loans between unrelated parties (eg a New Zealand subsidiary borrowing from an overseas bank). Securities: financing or investment instruments bought and sold in financial markets, such as bonds, notes, options, and shares. Financial derivatives: securities in which the price is dependent on or derived from one or more underlying assets. The derivative itself is merely a contract between two or more parties. Its value is determined by fluctuations in the underlying asset. The most common underlying assets include stocks, bonds, commodities, currencies, interest rates, and market indexes. Net international debt: New Zealand's overseas lending less its overseas borrowing. Lending and borrowing include debt instruments only, and exclude equity (shares). Financial derivative asset and liability positions are included in lending and borrowing. See also 'net external debt'. Net external debt: New Zealand's net international debt excluding financial derivative asset and liability positions. The difference between international debt and external debt is explained in the data quality section. See also 'net international debt'. Related: a relationship classification introduced for the external lending and debt series and applied solely to the bank sector, due to their role as financial intermediaries. Captures funding and claims between a bank and its direct investment partners (the bank’s parent and its own subsidiaries) where the purpose of funding and claims is financial intermediation – borrowing to lend. Unrelated: a relationship classification introduced for the external lending and debt series. Captures all positions in all debt instrument types that are not the subject of a direct or related (bank sector only) investment relationship. Official sector: the sector comprising general government and the monetary authorities. 13 Related links Upcoming releases The Balance of Payments and International Investment Position: March 2014 quarter will be released on 18 June 2014. The release calendar lists all our upcoming information releases by date of release. Subscribe to information releases, including this one, by completing the online subscription form. Past releases See Balance of Payments and International Investment Position for links to past releases. Related information papers Revisions to New Zealand’s macroeconomic accounts to December 2013 (published 2013) – informs users of New Zealand's macroeconomic statistics about data changes we have included in the international and national accounts for 2013. New Zealand's direct investment with Australia: How the global financial crisis affected profits and reinvestment – looks at what happens to profits of Australian-owned companies in New Zealand, and New Zealand-owned companies in Australia. Includes analysis of how the global financial crisis of 2008–09 may have affected company decisions around reinvestment. See Balance of payments page for more information. Related information Global New Zealand – annual international trade, investment, and travel profiles produced in conjunction with the Ministry of Foreign Affairs and Trade. Investment by country – data on investment flows between New Zealand and all other countries, the stock of New Zealand's investment abroad, and stocks of investment in New Zealand held by all other countries, at 31 March 2012. International trade in services – further information about New Zealand's trade in services with the rest of the world. Overseas merchandise trade – statistical information on the importing and exporting of merchandise goods between New Zealand and other countries. National accounts – statistics about economic aggregates such as gross domestic product, capital formation, and government and private consumption. 14 Data quality Period-specific information This section contains information about data updates since the last release.   Reference period Revisions General information This section contains information about data that does not change between releases.              Data sources Sources and methods Conceptual adjustments to exports and imports of goods Non-life insurance premiums in the balance of payments FISIM adjustments applied to current account Seasonal adjustment and trend analysis Reporting on an accrual basis Expanded external lending and debt statistics Undercoverage estimate for the international investment position Net errors and omissions (residual) RBNZ securities subject to repurchase agreements International trade in carbon emissions units Confidentiality and accessing the data Period-specific information Reference period Information for this release was collected for September to December 2013. Revisions See revisions for details of the revisions introduced in the December 2013 quarter. General information 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. Statistics NZ surveys the New Zealand-resident enterprises that operate with the approval of the Minister of Statistics. Enterprises must complete these surveys, as set out in the Statistics 15 Act 1975. We direct these surveys 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 – we purchase some data from other organisations that operate a relevant survey; we have input into the design of these surveys. For example:   the International Visitors Survey – operated by a marketing company for the Ministry of Business, Innovation and Employment (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 we publish each month as overseas merchandise trade statistics. Financial market information – including interest and exchange rates and share prices. We take much of this information from public information sites. 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. The IMF published the sixth edition of the Balance of Payments and International Investment Position Manual (BPM6) in 2009. In July 2012, we began a programme of work to implement new international standards, including BPM6, into New Zealand's macroeconomic accounts. The first Balance of Payments and International Investment Position information release aligning with BPM6 is planned for 2014. The work programme for implementing new international standards includes changes to our questionnaires and other data collection vehicles. Ongoing work to address known areas of undercoverage, such as transactions in financial derivatives, will be incorporated into this project. Please see net errors and omissions (residual) for a discussion of known areas of undercoverage. 16 Conceptual adjustments to exports and imports of goods We make conceptual adjustments 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, we record exports and imports of goods 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. We make the following adjustments 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. Changes in oil stocks abroad are added/subtracted. 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, we remove the value of goods exported on consignment from the overseas merchandise trade exports in the quarter they leave the country, then add them back into exports in the quarter in which the goods are actually sold (ie when the change of ownership occurs). Non-life insurance premiums in the balance of payments Non-life insurance premiums paid are made up of service and risk elements. This represents the fact that when a premium is paid it doesn't necessarily result in a future claim, although the insurance company still provides a service. A payment made without receiving any goods or services in return is called a transfer (eg tax payments or benefits). Therefore, the service part of a premium is recorded as insurance services, while the risk part is recorded as current transfers. We use the average domestic service charge ratio (ADSCR) to determine the proportions of nonlife reinsurance premiums allocated to services and transfers. The ADSCR is the five-year average of non-life insurance claims paid divided by total premiums. 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; the service fee is indirect because the value is not explicit within an interest transaction. We have introduced FISIM values into the BoP statistics, from the June 2000 quarter onwards. The September 2012 quarter release was the first to include FISIM adjustments – by amending the non-explicit service fee from within the other investment income series (table 6: BOPQ.S5AC1B203 and BOPQ.S5AD1B203) and transferring the service fee to the financial services imports and exports series (table 5: BOPQ.S5AC1A206 and BOPQ.S5AD1A206). There is no net effect on the current account balance because the changes to export and import services are offset by changes in interest flows. Only banks can export FISIM. However, all sectors can import FISIM if they hold loan and deposits with an overseas bank. 17 For example, when a New Zealand resident deposits money in an overseas bank, the amount of actual interest received is less than that earned because the overseas bank deducts their service fee charge (FISIM import). For BoP to calculate the desired 'pure interest' earned, we add the service fee (FISIM) to other investment income received (credits). In contrast, when a New Zealand bank lends to a non-resident, the interest charged on the loan by the New Zealand bank includes a service fee charge (FISIM exports). For BoP to calculate the desired 'pure interest' charge, we deduct the service fee (FISIM) from other investment income received (credits). We now record these FISIM transactions with non-residents in the current account as either an export or import of financial services. See Financial intermediation services indirectly measured in the national accounts, for a comprehensive description of FISIM. 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. Seasonally adjusted and trend series help to reveal the underlying behaviour of a series. While seasonally adjusted series have the seasonal component removed, trend series have 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. We calculate the seasonally adjusted balances 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 fiveterm Henderson moving average of the seasonally adjusted series, with an adjustment for outlying values. Towards the end of the series, trend estimates may change when new data points are available to the estimation process. The main reason is that we calculate the trend 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 becomes part of the underlying movement as further observations are added to the series. We revise all trend estimates each quarter, but normally only the previous two or three estimates are likely to be substantially altered. 18 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 out payments on an accrual basis, we sometimes receive data relating to multiple periods in one lump sum. Where possible,we reallocate the payment to the period in which the service was performed, but irregular movements can still occur in some service categories. Expanded external lending and debt statistics The September 2012 quarter release was the first to include two new tables on New Zealand’s external lending and debt (ELD). (See table 15: External lending and debt all sectors, and table 16: External lending and debt by sector and relationship.) The new series complements the existing international investment position (IIP) and international financial assets and liabilities measures of New Zealand’s international balance sheet position. The primary difference from the other measures is that we exclude financial derivatives. The new tables also include additional relationship classifications and sector breakdowns to facilitate additional analysis. Net international/external debt comprises lending to non-residents less borrowing from nonresidents. Debt is an actual current contractual obligation that requires the debtor to pay principal and/or interest at some point(s) in the future. The new ELD series complies with the IMF’s External Debt Guide (2003), which excludes financial derivatives because no principal is required to be repaid and interest is not accrued. Introducing expanded external lending and debt statistics provides more information on the ELD series and its connection with the IIP and the international financial assets and liabilities series. Undercoverage estimate for the international investment position The QIIS, Quarterly Nominees, and QMFS are all sample surveys. We determine estimates for non-surveyed enterprises (undercoverage estimates) each year for the QIIS and incorporate them into the published accounts. No estimate is made for survey undercoverage for 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 Annual International Investment Survey (AIIS). The AIIS survey collects data at 31 March each year from a population of enterprises we identify as relevant to the BoP financial account and the IIP, but which are not surveyed in the QIIS. AIIS is intended to be a census every three years and a sample survey in between. 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 IIP. 19  Update the sample used in 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 do we estimate these transactions. Net errors and omissions (residual) BoP statements are compiled using the double-entry bookkeeping system to ensure the accounts balance in the accounting sense. For example, we record exports of goods 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 we use a variety of data sources; 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 is always entered on the credit side of the account. We can calculate the residual 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 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 we make a new estimate for the non-sampled IIP stock positions each year, we don't make an estimate for financial account transactions. Transactions relating to managed funds that are not surveyed each quarter. Note that we don't estimate financial account transactions for this item. We don't request 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 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. We include an estimate of 20 the investment flows of these entities in Australian-listed companies in the BoP financial account. In any quarter there may also be financial account transactions that we don't include in the accounts. Reasons for such undercoverage 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. We safeguard the data quality 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. 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 (not investment abroad; reserve assets). We record cash received for the 'repoed' security 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. We plan to improve the classification of the repoed securities within the financial account at a future time. International trade in carbon emission units The classification of carbon emission units is outlined in chapter 13.14 of the Balance of Payments Manual (6th edition), which classifies tradable emission permits as economic assets. BPM6 states the resale of carbon emission units by a resident to a non-resident enterprise should be recorded in the capital account of BoP. We follow this treatment and include international trade in carbon emission units in the 'Acquisition and disposal of non-produced, non-financial assets' series in the capital account. For example, we record the sale of emission units by a New Zealand resident to a non-resident as a capital account inflow (credit). Our quarterly international trade in services and royalties survey measures the international sale and purchase of carbon emission units included in our statistics. 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 21 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, 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. Crown copyright© This work is licensed under the Creative Commons Attribution 3.0 New Zealand licence. You are free to copy, distribute, and adapt the work, as long as you attribute the work to Statistics NZ and abide by the other licence terms. Please note you may not use any departmental or governmental emblem, logo, or coat of arms in any way that infringes any provision of the Flags, Emblems, and Names Protection Act 1981. Use the wording 'Statistics New Zealand' in your attribution, not the Statistics NZ logo. 22 Revisions   Earthquake-related figures revised Revisions for Balance of Payments and International Investment Position: September 2013 quarter Earthquake-related figures revised New Zealand insurers have provided updated estimates of their Canterbury reinsurance claims on non-resident reinsurers. The updated data affects capital account inflows, investment abroad transactions, and IIP assets. We used the updated data to revise statistics back to the September 2010 quarter. These are shown in the table below. Updated Canterbury reinsurance claims on non-resident reinsurers Reinsurance claims published (18 Revised reinsurance claims (19 Size of December 2013) March 2014) revision Quarter NZ$(million) Sep 4,907 5,194 287 2010 Dec 0 0 0 2010 Mar 12,808 12,884 76 2011 Jun 982 875 -107 2011 Sep 0 0 0 2011 Dec 21 19 -2 2011 23 Revisions for Balance of Payments and International Investment Position: September 2013 quarter The tables below present a summary of revisions to the September 2013 quarter. Revisions reflect new or improved information becoming available. Current and capital accounts Current and capital accounts September 2013 quarter revisions Previously published Sep Revised Sep 2013 Component 2013 quarter quarter NZ$(million) Current account -4,775 -4,880 balance Current account credits 16,618 16,559 Current account debits 21,394 21,440 Magnitude of revision -105 -59 46 Balance on goods Exports (fob) Imports (fob) -1,843 11,106 12,949 -1,848 11,101 12,949 -5 -5 0 Balance on services Exports of services Imports of services -581 3,524 4,105 -577 3,524 4,101 4 0 -4 Balance on income Income inflow Income outflow -2,202 1,722 3,924 -2,302 1,668 3,970 -100 -54 46 -149 -153 -4 266 266 0 415 419 4 23 23 0 404 404 0 381 381 0 Balance on current transfers Inflow of current transfers Outflow of current transfers Balance on capital account Capital account inflow Capital account outflow 24 Financial account Financial account September 2013 quarter revisions Previously published Sep Revised Sep 2013 Magnitude of Component 2013 quarter quarter revision NZ$(million) New Zealand investment -1,322 -905 417 abroad Direct investment 787 725 -62 Portfolio investment 1,165 1,379 214 Other investment -632 -366 266 Reserve assets -2,642 -2,642 0 Foreign investment in -1,829 -2,395 -566 New Zealand Direct investment 107 94 -13 Portfolio investment 1,760 1,221 -539 Other investment -3,696 -3,711 -15 Net errors and omissions Net errors and omissions September 2013 revisions Previously published Sep 2013 Revised Sep 2013 Component quarter quarter NZ$(million) Net errors and 5,259 6,347 omissions Magnitude of revision 1,088 International investment position International investment position September 2013 quarter revisions Previously published Sep Revised Sep 2013 Component 2013 quarter quarter NZ$(million) NZ investment 161,348 162,017 abroad Direct investment 22,871 22,905 Portfolio investment 75,425 75,637 Other investment 28,545 28,984 Financial derivatives 15,316 15,300 Reserve assets 19,192 19,192 Foreign investment 311,465 311,539 in NZ Direct investment 100,906 101,083 Portfolio investment 114,495 114,590 Other investment 78,966 78,768 Financial derivatives 17,098 17,098 25 Magnitude of revision 669 34 212 439 -16 0 74 177 95 -198 0 Contacts For media enquiries contact: Mark Gordon Wellington 04 931 4600 Email: info@stats.govt.nz For technical information contact: Wido van Lijf Wellington 04 931 4600 Email: info@stats.govt.nz April Oberhaus Wellington 04 931 4600 Email: info@stats.govt.nz For general enquiries contact our information centre: Phone: 0508 525 525 (toll-free in New Zealand) +64 4 931 4600 (outside New Zealand) Email: info@stats.govt.nz Subscription service: Subscribe to information releases, including this one, by completing the online subscription form. Correction notifications: Subscribe to receive an email if a correction notice is published for Balance of Payments and International Investment Position (quarterly). Unsubscribe to correction notifications for Balance of Payments and International Investment Position (quarterly). Subscribe to all to receive an email if a correction notice is published for any of our information releases. Unsubscribe to all if you change your mind. 26 Tables The following tables are available in Excel format from the 'Downloads' box. If you have problems viewing the files, see opening files and PDFs. 1. Balance of payments major components, quarter ended 2. International investment position, at end of quarter 3. Balance of payments seasonally adjusted and trend series, quarter ended 4. Current account goods, quarter ended 5. Current account services, quarter ended 6. Current account income, quarter ended 7. Current transfers, quarter ended 8. Balance of payments major balances, actual, quarter ended 9. Balance of payments major balances, year ended in quarter 10. Balance of payments financial account, quarter ended 11. International financial assets and liabilities, at end of quarter 12. International lending and borrowing by instrument, at end of quarter 13. International lending and borrowing by currency, at end of quarter 14. International lending and borrowing by residual maturity, at end of quarter 15. External lending and debt all sectors, at end of quarter 16. External lending and debt by sector and relationship, at end of quarter 17. Balance of payments ratios, year ended in quarter 18. International investment position (IIP) net reconciliation statement, actual, quarterly 19. International investment position (IIP) gross reconciliation statement, actual, quarterly Revisions tables A supplementary set of tables outlining revisions made back to the June 2000 quarter is available from the 'Downloads' box. Access more data on Infoshare Use Infoshare to access time-series data specific to your needs. For this release, select the following categories from the Infoshare home page: Subject category: Economic indicators Group: Balance of Payments 27