APPENDIX 1 FRAMEWORK AND CONCEPTS
FRAMEWORK FOR THE ICT SATELLITE ACCOUNT
The supply and use tables, which are the cornerstone of the annual and quarterly national accounts, provide the data framework for the development of an ICT satellite account. The supply table records the total supply of products within the economy and the use table records the total use of each product within the economy and for export. In an ICT satellite account the relevant products are those defined to be ICT products.
Supply of each product (valued at purchasers' prices) is composed of:
Use of each product (valued at purchasers' prices) is composed of:
- Domestic production by industry (valued at basic prices)
- Transport, retail and wholesale trade margins
- Taxes less subsidies on products.
A complete use table also includes for each industry the primary inputs to production, namely compensation of employees, gross operating surplus, gross mixed income (GMI) and other taxes less subsidies on production. For the economy as a whole, the supply and use tables provide the annual estimates of GDP and components.
- Intermediate use by industries (products that are consumed by industries in the process of producing other products).
- Final use by type of expenditure. Final use includes consumption by households and government, products that have been capitalised because they will be used in future production, changes in inventories and goods and services that are exported.
The supply and use methodology is based on the fundamental economic identity that supply of products equals use. A feature of the supply and use system is that the supply and demand of each product are, as far as possible, independently calculated. A formal and systematic process of data confrontation is used to resolve discrepancies between supply and use. This generally involves making choices about which components are based on the most suitable and reliable data.
The supply and use tables are used to assemble and integrate all data required to produce estimates of economic aggregates related to ICT, including ICT gross value added and ICT GDP.
The following tables illustrate the basic structure of supply and use tables. In an ICT satellite account the products highlighted are ICT products, but not exclusively so, as industries producing ICT products require non-ICT products for their production process. This is an essential element for deriving ICT GDP. Likewise, the industries highlighted are ICT specialist industries, but as virtually all industries produce some ICT products, a complete list of Australian and New Zealand Standard Industrial Classification (ANZSIC) industries is included, albeit at a more aggregated level (ANZSIC Division).
The use table above had to be abbreviated for reasons of space. The column marked 'Final consumption expenditure' is further decomposed into HFCE and government final consumption expenditure (GFCE). The column marked 'Gross capital formation' represents a combination of gross fixed capital formation (investment) and change in inventories. The use table does not record industry or sector details relating to gross fixed capital formation. These are compiled in subsidiary tables.
Broadly, the production of the 2002-03 ICT satellite account involved the following steps:
- establishing an ICT product classification. An ICT product classification is a classification that identifies products that are ICT in nature. (The current list of ICT commodity items used in surveys in Australia is shown in Appendix 3.)
- expanding the number of industries in the core supply and use tables to include more detail for the industries of particular interest from an ICT perspective
- compiling a table of gross fixed capital formation by industry using the same ICT product and industry classifications as in the supply and use tables.
CONCEPTS FOR THE ICT SATELLITE ACCOUNT
Output is defined as the value of total sales or other uses of goods and services (including capital work done on own account), plus the value of change in inventories of goods produced as outputs. The value of ICT output therefore is the market value of ICT goods and services produced within Australia. ICT output may be produced by units in any industry, though in practice the great majority of ICT output is produced by a small number of industries.
Capital goods produced on own account for own use are valued according to their estimated market value, or if this is not possible, on the basis of production costs, i.e. the value of labour and non-labour costs, and consumption of fixed capital used to produce the capital good. There are two significant ICT-related items of capital work produced on own account - own account computer software and own account production of telecommunication assets. The latter item relates wholly to telecommunication service providers and comprises the physical infrastructure required to put various telecommunication equipment in place (e.g. construction of mobile phone towers). All industries engage in producing computer software on own account.
ICT gross value added and ICT GDP
ICT gross value added and ICT GDP are two key economic aggregates derived in the satellite account.
Gross value added shows the 'value' which a producer adds to the goods and services it purchases in the process of producing its own output. ICT gross value added is measured as the value of output of ICT goods and services less the value of intermediate consumption inputs used in producing these ICT products. ICT gross value added is comparable with estimates of the gross value added of 'conventional' industries such as mining and manufacturing as presented in the ASNA.
Output and value added are measured at 'basic prices', that is before any taxes on products are added (or any subsidies on ICT products are deducted). In practice, taxes on ICT products are almost entirely comprised of GST.
SNA93 states that basic price measures are to be used for comparisons between industries and sectors and across countries because they are free of the effects of taxes and subsidies on products that can vary between industries (and countries) and over time. The tax and subsidy component of a product's sale price does not represent value added by the industry producing that product.
ICT GDP, on the other hand, measures the gross value added of the ICT industry at purchasers' prices. It therefore includes taxes (less subsidies) on ICT related products since these are reflected in prices actually paid by the purchaser. ICT GDP has a higher value than ICT gross value added. ICT GDP is a construct to allow comparison with the most widely recognised national accounting aggregate, GDP. While it is useful in this context, the ICT gross value added measure should be used in comparisons with other industries and between countries. There is no generally accepted way to allocate deductible taxes such as GST to industry, and substantially different results can be obtained for industry GDP depending on the method chosen. This is a further reason for gross value added to be the preferred measure for industry comparisons.
ICT investment is gross fixed capital formation plus changes in inventories relating to ICT products. Gross fixed capital formation is the value of acquisitions less disposals of new or existing fixed assets. Assets consist of tangible or intangible assets that have come into existence from processes of production, and that are themselves used repeatedly or continuously in other processes of production over periods of time exceeding one year.
ICT Government final consumption expenditure
Government final consumption expenditure is current expenditure by general government bodies on services to the community such as defence, public order and safety. Because these are provided free of charge or at prices which cover only a small proportion of costs, the government is considered to be the consumer of its own output. This output has no directly observable market value, and so is valued in the national accounts at its cost of production. In 2002-03, general government bodies in Australia did not produce any market output that could be considered ICT in nature and therefore government final consumption expenditure on ICT products was estimated as zero.
Current expenditure by general government bodies on such things as telecommunication services and computer services has been treated as intermediate consumption by these units.