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Note 5: Investment Income/(Expense)

2017 Forecast Actual
Budget
2016
$m
Budget
2017
$m
30 June
2017
$m
30 June
2016
$m
Interest Revenue  
608 590 Student loans (interest unwind) 602 603
1,363 1,271 Other financial assets classified as amortised cost or available for sale 1,190 1,267
6 3 Financial assets classified as held for trading 4 5
1,454 933 Financial assets classified as fair value through the operating balance 931 913
3,431 2,797 Total interest revenue 2,727 2,788
Interest Expense  
4,332 4,151 Financial liabilities classified as amortised cost 3,834 4,153
170 113 Financial liabilities classified as fair value through the operating balance 296 144
64 33 Interest unwind on provisions 32 39
4,566 4,297 Total interest expenses 4,162 4,336
(1,135) (1,500) Net interest income/(expense) (1,435) (1,548)
Gains and Losses on Financial Instruments  
3 5 Foreign exchange gains on financial assets and financial liabilities measured at amortised cost 7 348
(16) (744) Foreign exchange losses on financial assets and financial liabilities measured at amortised cost (448) (60)
1 (2) Change in fair value of financial assets and financial liabilities classified as held for trading 3 (2)
(6) (143) Gains/(losses) on disposal of financial assets and financial liabilities measured at amortised cost (214) (26)
1,134 1,163 Change in fair value of financial assets and financial liabilities classified as fair value through the operating balance 2,071 (2,501)
1,116 279 Net gains/(losses) on financial assets and financial liabilities 1,419 (2,241)
995 4,571 Net gain/(loss) on derivatives 4,911 3,358
2,111 4,850 Net gains/(losses) on financial instruments 6,330 1,117
Other investment income/(expense)  
836 841 Dividend income 871 815
836 841 Total other investment income/(expense) 871 815
1,812 4,191 Total investment income/(expenditure) 5,766 384

Student loans are advanced on an interest-free basis, therefore they are discounted to reflect their fair value. The interest unwind reflects the increase in value as the period to repayment reduces (refer note 15).

Interest revenue and expense is accrued using the effective interest method. The effective interest rate exactly discounts estimated future cash receipts through the expected life of the financial asset/liability to that asset/ liabilities net carrying amount.  The method applies this rate to the principal outstanding to determine interest revenue or expense each period.

Gains and losses may be reported in the Statement of Financial Performance when assets and liabilities are revalued in certain circumstances as described in the accounting policies for those assets and liabilities.  For the purposes of reporting the operating balance before gains and losses (OBEGAL) these gains and losses are excluded from total revenue and total expenses; and presented elsewhere in the Statement of Financial Performance.

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