Help on Financial Account! (1 Viewer)

[del pietro]

My eco text book, Leading Edge, 2006 Version, on Pg 96, goes through the different types of investment categorised in the Financial Account..

It states that Direct Investemnt is in surplus by $56.9 billion, however also states that Portfolio investment is the largest item on the Capital/Financial Account, showing a $4.4 billion surplus..

I just dont get how that makes any sense?

Also it states that the purchase of land is recorded as Portfolio investment.. i always thought it was Direct Investment, being a longer term type of investment...

Any help appreciated.. thanx heaps

 

[Sparcod]

Capital/Financial Account: (Australia's is in a surplus at the moment)

Capital Account
-Capital Transfers
-Money taken in/out of country by migrants
-foreign aid
-debt forgiveness
-acquisition of non-financial assets
(Note that this is part of the Current Account as 'current transfers')

Financial Account
-Direct Investment (eg.loans, getting full ownership of assets)
-Portfolio investment (eg.shares)
-Other investments (eg. loans, currency)
-RBA's assets (eg foreign holdings of gold, money, securities which are foreign)

Capital and Financial Account =Capital Account + Financial Account

Both are in a surplus (positive). Those two added together give a surplus.

 

[insert-username]

I believe it means that in size, Portfolio Investment is much larger than direct investment - several times larger. Remember that when we talk of surplus and deficits, it's [credit] - [debit]. The surplus thing means that portfolio investment from overseas into Australia is $4.4 billion larger than portfolio investment by Australians overseas. Direct Investment by foreigners in Australia is $56.9 billion more than Direct Investment by Australians overseas. So the surplus of Direct Investment is larger, but overall, Portfolio Investment represents a lot more money.


I_F

 

[Sparcod]

My eco text book, Leading Edge, 2006 Version, on Pg 96, goes through the different types of investment categorised in the Financial Account..

It states that Direct Investemnt is in surplus by $56.9 billion, however also states that Portfolio investment is the largest item on the Capital/Financial Account, showing a $4.4 billion surplus..

I just dont get how that makes any sense?

Also it states that the purchase of land is recorded as Portfolio investment.. i always thought it was Direct Investment, being a longer term type of investment...

Any help appreciated.. thanx heaps

I didn't believe those statistics at first. I don't have that book with me. I think you got the stuff muddled up.

Here are the stats I've got.
2003/04 ($m)

Net Capital Account: +1095

Net Direct Inv. -16125
Net Portfolio +72762
Other Investment -11907
RBA's Assets -5127
-----------
+47195
I don't know whose stats are wrong. It looks like mine.


About the purchase of land stuff, if you bought a very small percentage of the land -that's called portfolio investment.

 

[insert-username]

I didn't believe those statistics at first. I don't have that book with me. I think you got the stuff muddled up.

Here are the stats I've got.
2003/04 ($m)

Net Capital Account: +1095

Net Direct Inv. -16125
Net Portfolio +72762
Other Investment -11907
RBA's Assets -5127
-----------
+47195
I don't know whose stats are wrong. It looks like mine.


About the purchase of land stuff, if you bought a very small percentage of the land -that's called portfolio investment.

Balance of payments statistics change from year to year. The current acount deficit is current $56.9 billion, up from about $43 billion this time last year. These statistics do not stay static, and one of the reasons Leading Edge puts out a new textbook each year is to keep their statistics as up to date as possible.


I_F

 

[del pietro]

I believe it means that in size, Portfolio Investment is much larger than direct investment - several times larger. Remember that when we talk of surplus and deficits, it's [credit] - [debit]. The surplus thing means that portfolio investment from overseas into Australia is $4.4 billion larger than portfolio investment by Australians overseas. Direct Investment by foreigners in Australia is $56.9 billion more than Direct Investment by Australians overseas. So the surplus of Direct Investment is larger, but overall, Portfolio Investment represents a lot more money.


I_F

Ahh ok.. i think im begining to understand.. so ur saying that even though the actual surplus may be smaller for portfolio investment.. in other words growing at a slower rate than direct investment.. it still accumulates for a larger amount of money.. if i understand correctly.

If this is so, what are the actual figures for foreign porfolio and direct investment into and out of australia?

 

[Crazy Cat]

oh that is great info