Monetary estimates can be volatile and, accordingly, must be viewed with some caution. The main reasons for this are:
- New Zealand has a small, relatively concentrated mining industry, which is subject to considerable economic variability. Short-run volatility in industry net operating surplus causes volatility in the monetary stock.
- Capital investment within the minerals industry can have a short-term downward bias on the measured value of New Zealand minerals, as the future returns on investment are not accounted for until they are realised.
- The net present value method is sensitive to assumptions – particularly the discount rate, future resource rents and asset life. There is significant uncertainty about these assumptions over the long term.
A consequence of the above is that year-to-year changes in the value of the minerals monetary stock do not indicate whether the resource is growing or being depleted, or how well the minerals asset is being managed. An accurate assessment of the management of the resource requires an analysis of physical and monetary stock (and flow) data over a long period.
Special care should be taken in interpreting commodity-level data, as the approach to disaggregating the total minerals monetary stock does not take into account differences in the physical properties of different minerals and the extraction methods used for them.
The accounts produced in this report are developmental, as monetary resource stock estimation practices are still evolving. Statistics New Zealand is continuing to develop and refine the methodologies and assumptions used to produce the minerals monetary stock account, including investigating measures to reduce the volatility of the series, to better account for the effects of capital investment on monetary stock estimates, and to better estimate monetary stocks at an individual commodity level.