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5216.0 - Australian National Accounts: Concepts, Sources and Methods, 2000  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 15/11/2000   
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Contents >> Appendix 1 - Classifications

Introduction

A1.1 Standard classifications and definitions of statistical units and items are essential elements underlying the compilation and presentation of statistics produced by national statistical offices, such as the Australian Bureau of Statistics. The use of such standards ensures that statistics are comparable across industry and sector boundaries and can be aggregated from various collections, e.g. for national accounts purposes.

A1.2 Furthermore, the ABS has adopted the System of National Accounts 1993 (SNA93) as the standard for the compilation of its national accounts statistics, to help promote the integration of economic and related statistics, as an analytical tool, and in the international reporting of comparable national accounting data.


Sector classification

A1.3 Dividing the economy into sectors provides information about groups of economic units, such as financial corporations or households, that have similar economic functions and institutional characteristics. The main purpose of these classifications is to facilitate analysis of economic activity along sectoral or institutional lines. The Standard Economic Sector Classifications of Australia (SESCA) describes a number of standard classifications used by the ABS in the compilation of statistics that involve dividing the economy into broad economic sectors.

A1.4 A key classification within SESCA is the Standard Institutional Sector Classification of Australia (SISCA). SISCA is based on the SNA93 institutional sector classification. The ASNA bases its sector classification on the international standards set out in SNA93. In the ASNA there are five sectors:

      • non-financial corporations (including public non-financial corporations);
      • financial corporations;
      • households (including unincorporated enterprises);
      • general government; and
      • rest of the world
SNA93 delineates an extra sector for non-profit institutions serving households (NPISH), but these units are included with the household sector in the ASNA.

A1.5 The main feature for both the non-financial corporations and financial corporations sectors is that they cover businesses which are legally, or clearly act as, entities separate from their owners with regard to their economic activities. Businesses mainly classified to these sectors include companies registered under the Companies Act or other Acts of Parliament, or large unincorporated enterprises which maintain complete and independent financial records.

A1.6 The non-financial corporations sector comprises all resident corporations and quasi-corporations mainly engaged in the production of market goods and/or non-financial services. Also included are non-profit institutions (NPIs) that mainly engage in market production of goods and non-financial services. These NPIs include those set up by associations of non-financial corporations to mainly provide member corporations with services, for which the members pay directly or by way of regular membership fees.

A1.7 Public non-financial corporations include government owned or controlled enterprises which are mainly engaged in the production of goods and services for sale in the market with the intention of substantially covering their costs.

A1.8 Financial corporations are mainly engaged in both incurring liabilities and acquiring financial assets, i.e. in borrowing and lending money, in financial leasing or investing in financial assets. Corporations providing services closely related to and designed to facilitate these activities are also classified to this sector, e.g. the Reserve Bank of Australia is included in the financial corporations sector.

A1.9 Households and unincorporated enterprises are included in the one sector because the owners of ordinary partnerships and sole proprietorships frequently combine their business and personal transactions. Non-profit institutions serving households comprises all resident non-market NPIs that are not controlled and not mainly financed by government. Such NPIs provide goods and services to households free or at prices that are not economically significant.

A1.10 The general government sector includes all departments, offices and other bodies mainly engaged in the production of goods and services for consumption by governments and the general public, whose costs of production are mainly financed from public revenues. NPIs which are mainly financed and controlled by governments are included in this sector.

A1.11 The rest of the world sector encompasses non-resident governments, businesses and persons that engage in transactions with Australian residents. It includes only non-resident units that enter into or have other economic links with Australian resident units. Non-resident units are therefore excluded from all other sectors.

A1.12 Further information on the classification of institutional sectors generally in ABS statistics is contained in Standard Economic Sector Classifications of Australia, 1998 (Cat. no. 1218.0). This publication describes a number of standard classifications used by the ABS in the compilation of statistics that involve dividing the national economy into broad economic sectors.


Functional classification

A1.13 The SNA93 proposes 'functional' classifications to identify the 'functions' - in the sense of 'purposes' or 'objectives' - for which groups of transactors engage in certain transactions.

A1.14 Four functional classifications are included in SNA93. Of these, two are presently used in the ASNA:

      • Classification of Individual Consumption by Purpose (COICOP); and
      • Classification of the Functions of Government (COFOG).

The two that are not used are the Classification of the Purposes of Non-profit Institutions Serving Households (COPNI) and the Classification of Outlays of Producers by Purpose (COPP).

A1.15 COICOP is used to classify individual consumption expenditures in the Household final consumption expenditure aggregate (HFCE). Individual consumption expenditures are defined as those which are made for the benefit of individual persons or households. COICOP groups together goods and services that serve similar functions.

A1.16 In the ASNA the classification of HFCE is aligned, as far as possible, with COICOP. However, there are some instances where it is not yet possible for Australia to follow COICOP's recommendations, e.g. Australia does not include an estimate of HFCE on narcotics or prostitution services classified in COICOP item 02 Alcoholic beverages, tobacco and narcotics and item 12.1 Personal care, respectively. Reliable data on narcotics and prostitution expenditure are currently unavailable. The functional categories of HFCE are based on COICOP and modified for Australian circumstances in the ASNA. The categories include:
      • food;
      • alcoholic beverages and tobacco;
      • clothing and footwear;
      • housing, water, electricity, gas, and other fuels;
      • furnishings and household equipment;
      • health;
      • transport;
      • communications;
      • recreation and culture;
      • education services;
      • hotels, cafes and restaurants; and
      • miscellaneous goods and services.

A1.17 Transactions that are associated with non-profit institutions serving households, which are included in the household sector, are currently aligned to the COICOP functional classification.

A1.18 COFOG is the classification proposed by SNA93 for the functions of government. It is designed for classifying current transactions (such as consumption expenditure, subsidies and current transfers), capital outlays (capital formation and capital transfers) and acquisition of financial assets by general government and its subsectors.

A1.19 Government final consumption expenditure (GFCE) is current expenditure by general government bodies on services to the community such as defence, education, and public order and safety. In the Australian national accounts the classification of GFCE is aligned with COFOG. The categories used in the ASNA classification of total outlays are as follows:
      • general public services;
      • defence;
      • public order and safety;
      • education;
      • health;
      • social security and welfare;
      • economic services; and
      • all other.

A1.20 Economic services contains the COFOG classifications of fuel and energy; agriculture, forestry, fishing and hunting; mining and mineral resources; transportation and communication; and other economic affairs and services. The COFOG classifications of housing and community amenity; recreational, cultural and religious; and expenditures not classified by major group, are classified to the 'All other' group.

A1.21 Chapter XVIII Functional classifications in SNA93 describes in greater detail the principles and uses of these classifications. Even further detail is contained in Functional Classifications of the 1993 SNA, COICOP, COPNI, COFOG, OECD, Paris, 1998.


Industry classification

A1.22 The industry classification employed throughout the ASNA is based on the Australian and New Zealand Standard Industrial Classification, 1993 (ANZSIC) (Cat. no. 1292.0). ANZSIC identifies groupings of businesses which carry out similar economic activities. Each such grouping defines an industry, and the similar economic activities which characterise the businesses concerned are referred to as activities primary to that industry.

A1.23 The ANZSIC structure comprises categories at four levels, namely Divisions (the broadest level), Subdivisions, Groups and Classes (the finest level). At the divisional level ANZSIC provides a broad overall picture of the economy, and hence it is suitable for publication in summary tables in official statistics. The subdivision, group and class levels provide increasingly detailed dissections of the broad categories.

A1.24 In the national accounts ANZSIC, is employed with one modification:, ownership of dwellings is treated as a separate industry. Industry detail is generally provided at the Division level. In preparing the accounts it is sometimes necessary to shorten some of the more lengthy ANZSIC Division title descriptions. Where this occurs, no change in industry definition or content is implied.

A1.25 The industry classification used for input-output tables - Input-Output Industrial Classification (IOIC) - is also based on ANZSIC, but in some respects it departs from the usual application of that classification. For input-output tables it is desirable that an industry corresponds as closely as possible to the production of products primary to that industry. This applies especially where establishments classified to an industry produce significant amounts of products primary to another industry which has quite a different pattern of inputs. In these cases, where practical, secondary or subsidiary production is treated as output of the industry to which production is primary; this process is called redefinition of production. The major redefinitions made for the input-output framework can be found in Input-Output Tables, 1994-95 (ABS Cat. no. 5209.0).


Product classification

A1.26 The product classification employed in the ASNA is the Input-Output Product Classification (IOPC). The input-output system describes the production and subsequent use of all goods and services in the economy, hence the input-output product classification is defined in terms of the characteristic products of industry sectors.

A1.27 The structure of the IOPC arises from its industry-of-origin basis. In an industry-of-origin classification, each product item is shown according to the industry in which it is primarily produced. Thus the structure of the IOPC consists of industry of origin headings with detailed product items shown under each heading.

A1.28 The overall principles for the preparation of such an industry-of-origin product classification are:

      • homogeneity of inputs - each product or product group should consist of items that have similar input structures or technology of production. This principle is generally applied through the definition of each IOPC item in terms of the ANZSIC industry sector in which it is mainly produced; and
      • homogeneity of disposition - each product or product group, having satisfied the first criterion, should consist of items that have similar patterns of disposition or usage. This principle is applied by reference to the description of source data items and information about the transport, distribution and product taxation margins applying to particular products.

A1.29 This structure is implemented in the IOPC by the adoption of ANZSIC classes as the basis for defining IOPC items. In the 1994-95 Input-Output tables each IOPC item is identified by an eight digit code with the first four digits indicating the ANZSIC class to which the item is primary and the last four digits indicating the product number within the ANZSIC industry-of-origin class.

A1.30 At its most detailed level the IOPC comprises approximately 1,000 individual product items. For a full description of the nature, purpose and principles underlying this classification see Input-Output Tables Product Details, 1994-95 (ABS Cat. no. 5215.0).


Asset classification

A1.31 SNA93 describes three types of assets that should be included in the national accounts:

      • Non-financial produced assets;
      • Non-financial non-produced assets; and
      • Financial assets (and liabilities).

A1.32 Non-financial produced assets are defined as non-financial assets that have come into existence as outputs from processes that fall within the production boundary of SNA93. Produced assets need not be tangible, or in other words, 'goods'. SNA93 classifies mineral exploration expenditure, computer software and the value of produced entertainment, literary or artistic originals also under the heading of produced assets. Such assets are defined as intangible assets.

A1.33 There are two main types of produced assets: fixed assets and inventories. Both fixed assets and inventories are assets that are held only by producers for purposes of production:
      • Fixed assets are defined as produced assets that are themselves used repeatedly, or continuously, in processes of production for greater than one year. The distinguishing feature of a fixed asset is not that it is durable in some physical sense, but that it may be used repeatedly or continuously in production over a long period of time, taken to be more than one year. Some goods, such as coal, may be highly durable physically but cannot be fixed assets because they can be used once only. Fixed assets include not only structures, machinery and equipment, but also cultivated assets such as trees or animals that are used repeatedly or continuously to produce other products such as fruit or dairy products. They also include intangible assets such as software or artistic originals used in production.
      • Inventories consist of:
        • stocks of outputs that are still held by the units that produced them prior to their being further processed, sold, delivered to other units or used in other ways; and
        • stocks of products acquired from other units that are intended to be used for intermediate consumption or for resale without further processing.
        Inventories are held either as finished goods, work-in-progress or raw materials.

A1.34 Non-financial non-produced assets are defined as non-financial assets that have come into existence in ways other than through processes of production. This group includes among other things, land, water, subsoil assets and native forests. Also included are 'intangibles' such as transferable contracts and purchased goodwill. At present, there are insufficient data to include estimates of water, purchased goodwill and transferable contracts in intangible non-produced assets in the ASNA.

A1.35 Financial assets (and liabilities) differ from other assets in the national accounts in that, when a financial asset is owned by an institutional unit, there is (with a couple of exceptions) a counterpart liability on the part of another institutional unit. Financial assets include monetary gold; special drawing rights on the International Monetary Fund; cash and deposits; securities other than shares; loans and placements; shares and other equity; and other accounts receivable/payable.

A1.36 Chapter X The capital account in SNA93 describes in greater detail the classification of assets and liabilities in the national accounts.

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