Business Expectations Survey

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    Australian Bureau of Statistics (ABS)

    The Business Expectations Survey (BES) is a quarterly survey which provides data on the expectations of businesses in both the short (next three months) and medium terms (the current quarter of the following year) for a range of indicators (operating income, selling prices, profit, capital expenditure, stocks, employment, wage and salary expenses, other 'labour' expenses and other expenses). The BES samples at the MU level for businesses in all industries except agriculture, forestry and fishing; general government; and private households. Expectations are provided by respondents as percentage changes between a constant period and two future periods. Expectations are published at an aggregate level as weighted net balances or expected aggregate changes, with the expected aggregate change being the preferred expectations measure. These data are classified by industry, business size and State or Territory.

    The purpose of the survey is to:

    1. provide more accurate and reliable statistical information to forecast future Australian business activity than the information currently available from other sources (private sector surveys provide qualitative indicators - net balances - while the BES provides a quantitative indicator - expected aggregate change) and
    2. ensure the objectivity, relevance and timeliness of these statistics.

    The scope of the BES survey is all business units in the Australian economy except for :
    • Management units belonging to the following ANZSIC divisions/subdivisions;
      • Division A Agriculture, Forestry and Fishing
      • Division M Government Administration and Defence
      • Subdivision 97 Private Households Employing Staff
    • Non-employing businesses in all other industries, i.e. businesses which have not registered as group employers with the ATO (Australian Taxation Office); and
    • Businesses classified to the General Government sector. Note: government-owned Public Trading Enterprises are included.


    Conceptual framework
    Economic forecasting relies on information from a range of sources about trends in the economy and its component sectors. The measure of business expectations is a leading economic indicator and an important source of such information. Business expectation surveys have increasingly been accepted in Australia as providing a guide to likely developments as perceived by business decision-makers, perceptions which can become self-fulfilling because of the powerful role of expectations in shaping economic behaviour. In 1992, the Government funded the ABS to develop a comprehensive and statistically sound survey which would be able to deliver a quantitative measure of expected economic activity for a range of business performance indicators.

    Main outputs
    The results from the BES are published every quarter in Australian Business Expectations (ABS Cat No 5250.0)
    The BES is the largest and most comprehensive survey of its type conducted in Australia and is the only survey which provides both a qualitative indicator of business confidence (a weighted net balance) and a quantitative measure of expected change (a weighted aggregate) for a range of business performance indicators.

    The BES publication gives detailed information by size of business, industry and state, for the short term (the next quarter) and the medium term (current quarter next year).

    The survey outputs expected aggregate changes (expressed as a percentage) in a range of economic indicator items for two periods of time in the future. The items collected include operating income, selling prices, total wage and salary expenses, other labour expenses, all other expenses, stocks, profit, employment and capital expenditure. Data is collected for the following quarter and the current quarter of the following year. Accuracy of the results is aimed at the lowest possible variance based on a sample size of approximately 3500 units. Results of each quarters survey are released prior to the commencement of the reference quarter.

    BES data is presented by three main classifications: ANZSIC, business size and State.

    The BES publication (see above) presents statistics classified according to the Australian and New Zealand Standard Industrial Classification (ANZSIC) (Cat No 1292.0). Each statistical unit selected in the survey is classified to a single industry. The industry allocated is based on an estimate of the primary income earning activity of the management unit irrespective of whether a range of activities or a single activity is undertaken by the unit. Data from BES can generally be provided for ANZSIC Division and subdivision.

    BES collects data from employing businesses in all industries and sectors of the Australian economy except

    • agriculture, forestry and fishing;
    • general government; and
    • private households

    Business Size
    Data is classified by three business sizes:
    • Small (less than 20 employees, except for manufacturers where it is less than 100);
    • Medium (20 to 99 employees, except for manufacturers where it is 100 to 599 employees);
    • Large (100 or more employees, except for manufacturers where it is 600 or more employees).

    • Statistics are published for each State of Australia, other than the Northern Territory and ACT, and for Australia as a whole. For large and many medium-sized businesses the State of selection reflects the head office of the Australian-wide unit, and therefore to obtain State expectations data a synthetic estimation process is used in which sales expectations for each State/Territory are estimated by applying the proportion of a business' economic activity contributed by each State to the benchmark and attributing the same, i.e. Australian-level sales expectation, to each State in which the business operates. To facilitate this process selected businesses are required to provide the percentage of total business activity in each State or Territory.
    • State data is subject to a greater degree of variance than the Australian data.

    Other concepts (summary)
    Glossary of terms used in Australian Business Expectations:

    Capital expenditure The expected change in the value of capital expenditure in new tangible assets.

    Inventories The expected change in the book value of inventories between the end of the collection quarter and the end of the reference periods.

    Non-wage labour expenses The expected change in the total amount of employment related expenses not paid directly to employees.
    Examples of these expenses include payroll tax, worker's compensation and superannuation.

    Operating income The expected change in operating income derived from the sale of goods or the provision of services by a business in terms of value.
    Financial institutions report on the expected change in gross interest income plus fees and commissions.
    Non-profit or charitable organisations report on the expected change in fees received for services, donations from the public and government grants and subsidies.

    Other operating expenses The expected change in the total amount of all expenses which are not classified as labour expenses.
    Examples of these expenses include overheads, advertising, raw materials and packaging and handling.

    Paid persons working The expected change in the number of paid persons working. Where part time or casual employees are involved employers are requested to convert to a full-time equivalent. It should be noted that most other ABS series which provide data on paid persons working do not use a full-time equivalent measure.

    Profit Profit is a derived item based on the present trading performance of a business and the expected changes to the level of sales of goods and services and the sum of all expense items.
    The difference between the new benchmarks for the sales of goods and services and the sum of all expenses items (the sum of total wage expense, non-wage labour expense and all other operating expenses) as determined by the responses received, the Economic Activity Survey benchmarks for those items and an indicator of present trading performance (cost/income ratio) are used to determine the expected change for profit for the reference periods.
    Because of reporting difficulties experienced with the cost/income ratios, caution should be exercised in interpreting profit expectations.

    Reference PeriodsThere are two reference periods surveyed each quarter:
    • Short term (eg if the current quarter is the March quarter 2000, then the quarter being surveyed is the June quarter 2000); and
    • Medium term (eg if the current quarter is the March quarter 2000, then the quarter being surveyed is the March quarter 2001).

    Selling prices The expected change in the unit price of goods sold or services provided by the business. Where a business sells a range of products or services a representative product or service is used.
    Financial institutions should report on interest rates, services and commissions charged.
    Businesses providing services should report on contract rates, hourly rates or ticket prices.
    Community organisations should report on rates or fees levied.
    The benchmark for weighting the selling prices response is derived from associating selling prices with total expenses.
    (Please note that on the actual form data is collected for the item Price of goods sold and/or services provided).

    State Information State information has been derived for businesses in the survey which operate in more than one State. This has been achieved by:
    • applying a weight (the proportion of a business' economic activity undertaken in each State) to the benchmarks for that business to arrive at potentially eight different benchmarks for each business performance indicator; and
    • applying the overall percentage change in the business performance indicators obtained from the survey to each of the State benchmarks for each business performance indicator.

    Total operating expenses This is a derived estimate from the weighted response for the total of wage, non-wage labour and all other expenses.

    Total wage expenses The expected change in the total amount of direct wage and salaries paid to employees.

    New South Wales
    South Australia
    Western Australia
    Northern Territory

    Comments and/or Other Regions
    Most data is published at the Australian total level. Some data is published at a State level.


    Frequency comments
    The collection provides both short and medium term business expectations. The short term expectation compares the current quarter with the following quarter, while the medium term expectation compares the current quarter with the corresponding quarter of the following year.
    For example, if the current quarter is the Quarter ending December 2002, then the short term expectation measures the expected change between the three months ending 31 December 2002 and the three months ending 31 March 2003. The medium term expectation measures the change between the three months ending 31 December 2002 and the three months ending 31 December 2003.

    11/1991 At an ASAC meeting, representatives of Treasury highlighted a demand for expectations data to Mr McLennan in discussions. A week later, Treasury wrote to the ABS proposing an investigation into the feasibility of the ABS conducting a business expectations survey that is more 'statistically sound' than the private expectations surveys available at the time.
    8/1992 The funding of a survey of the expectations of Australian businesses was announced in the 1992-93 Federal Budget.
    2/1993-3/1993 Pilot study of approx. 350 businesses was conducted.
    5/1993-7/1993 Second pilot study (full dress-rehearsal) was conducted.
    8/1993-9/1993 First official BES conducted in respect of the December quarter 1993 - September quarter 1994.
    25/11/1993 Results of the first BES released as experimental estimates.
    1995 BES nominated for evaluation under the Treasury Portfolio Evaluation Plan.
    9/1996 Evaluation Final Report completed.
    9/1996 Paper on BES presented by Alan Mackay at the Conference of Economists.
    10-11/1996 95 businesses visited to discuss BES incorporating a PES.
    1997 New form design incorporating current quarter data tested and accepted by providers.
    8/1998 A pilot test was conducted in which a question on Current Quarter Expectations was included on the usual BES form. This was a mail-based pilot test of around 500 businesses, with information on current quarter expectations being asked for the 3 months ending 30/9/98.
    2/1999 The proposal to collect current quarter expectations data was rejected.
    7/2000 PES conducted involving 175 businesses.
    9/2001 BES PES re Evaluation of changes resulting from 2000 PES.
    3/2002 BES PES on Profit question on BES form.
    12/2002 The Collection conducted during October and November 2002 and released in December 2002 (March quarter 2003 and December quarter 2003 expectations) will be the final quarter that BES will be conducted after a decision to discontinue the survey. This decision was made after a review of forward work program priorities for Economic Statistics.


    Data availability comments
    Data is currently published each quarter in Australian Business Expectations - ABS Catalogue No 5250.0. The amount of data collected from the Survey of Business Expectations is much greater than the data contained in the publication. Subject to the ABS provisions for maintaining the confidentiality of respondents and the information they provide, more detailed information by industry and size of business may be made available on request as a special data service.

    13/04/2003 12:18 PM