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Reliability of contemporary trend estimates
Growth rates in GDP
The graph below provides a comparison of the quarterly growth rates for chain volume measures of GDP in both seasonally adjusted and trend terms over the last fourteen financial years. Growth in the June quarter was 0.3% in trend terms and 0.1% in seasonally adjusted terms.
Household saving ratio
In both trend and seasonally adjusted terms the household saving ratio was negative in the June quarter 2003 implying that household consumption was greater than household disposable income. In trend terms the ratio was -1.2% in the June quarter and in seasonally adjusted terms it was -1.3%. The deterioration in the saving ratio in recent quarters has been driven by both a slow down in the rate of growth of disposable income and the continued strength of household consumption expenditure. The movement in disposable income has been affected by the very weak income results for the farm sector arising from the drought. The impact occurs because the household sector defined in the national accounts includes unincorporated businesses and therefore includes most farm businesses. Consequently, most farm income (included as a significant component of 'gross mixed income' ) is also part of total household income. Although seasonally adjusted household saving has been negative in the past three quarters, net national saving has been positive over the same period. The net national saving ratio in the June quarter was 2.5% in seasonally adjusted terms.
Caution should be exercised in interpreting the household saving ratio in recent years, because major components of household income and expenditure may still be subject to significant revisions. The impact of these revisions on the saving ratio can cause changes in the apparent direction of the trend. The following graph presents the household saving ratio derived from trend and seasonally adjusted data (see Explanatory Notes).
Private non-farm inventories to total sales ratio
In trend current price terms, the book value of private non-farm inventories increased by $384 million (0.4%) in the June quarter, while total sales rose by $388 million (0.3%). Consequently, the inventories to total sales ratio rose marginally from 0.778 in March quarter 2003 to 0.779 in June quarter. The following graph presents the ratio of private non-farm inventories to total sales over the last fourteen years (see Explanatory Notes).
Imports to domestic sales
The imports to domestic sales ratio, trended and at current prices, fell from 0.385 in March quarter 2003 to 0.380. This reflects a rise of 0.2% in imports of goods accompanied by a 1.5% rise in domestic sales. The following graph presents the ratio of imports to domestic sales over the last fourteen years (see Explanatory Notes).
Terms of trade
In June quarter 2003 the terms of trade index derived from trend estimates (see Explanatory Notes, paragraph 31) rose from 102.6 in the March quarter 2003 to 103.2. The implicit price deflator for exports fell by 2.3% while the deflator for imports fell by 2.8%.
Real gross domestic income
A measure of the real purchasing power of income generated by domestic production is the chain volume measure of GDP adjusted for the terms of trade effect, which is referred to as real gross domestic income (see Explanatory Notes, paragraph 33). The graph below provides a comparison of quarterly movements in trend GDP (chain volume measure) and real gross domestic income. During the June quarter, trend real gross domestic income increased by 0.4%, compared to the increase in the trend chain volume measure of GDP of 0.3%. Trend and seasonally adjusted estimates of real gross domestic income are shown in table 41.
Real net national disposable income
A broader measure of changes in national economic well-being is real net national disposable income. This measure adjusts the chain volume measure of GDP for the terms of trade effect, real net incomes from overseas and consumption of fixed capital (see Explanatory Notes, paragraphs 35 and 36). The graph below provides a comparison of quarterly movements in trend GDP (chain volume measure) and real net national disposable income. During the June quarter, trend real net national disposable income increased by 0.2%, while the increase in the trend chain volume measure of GDP was 0.3%.
Net purchases of second-hand assets
The graph below shows the net purchases of second-hand assets by the private sector from the public sector for both machinery and equipment, and other buildings and structures. In recent periods, significant sales of assets by the public sector have included the sale by the Victorian Government of its remaining 49% share in the Loy Yang B power station in June quarter 1997, the sale of DASFLEET by the Commonwealth Government in September quarter 1997, the sale of the publicly-owned Dampier to Bunbury natural gas pipeline in March quarter 1998, the sale of the National Transmission Network in June quarter 1999, the sale of South Australian electrical generation and distribution assets in December quarter 1999 and September quarter 2000, and the sale of some assets of the Ports Corporation of Queensland in September quarter 2001.
Compensation of employees-Quarterly Movements
In the June quarter 2003, seasonally adjusted compensation of employees grew by 1.5%, while the number of employees recorded in the Labour Force survey fell by 0.3%. Thus, average compensation per employee increased by 1.8%. This follows growth of 0.1% and 0.5% in the previous two quarters. The growth rate between 2001-02 and 2002-03 was 3.7% which compares with 3.5% growth in the Wage Cost Index (cat.no. 6345.0) and 4.3% growth in average weekly all employees, total earnings (Average Weekly Earnings (cat.no.6302.0)). (It should be noted that the conceptual bases for the three wage measures are different.)
It is noted that following the introduction of the new method for calculating compensation of employees in March quarter 2002 the estimation of average earnings is not as direct as under the previous approach and hence the usual decomposition of national accounts estimates of compensation of employees into an employment component and an average earnings component may be of lower quality.
Quarterly movements in compensation of employees can also be affected by changes in two component series: severance, termination and redundancy payments, and employer social contributions (i.e. employers' contributions to superannuation and worker's compensation premiums). Estimates for severance, termination and redundancy payments and employer social contributions are shown below. Due to the cessation of the private sector component of the Survey of Employment and Earnings in December quarter 2001, separate estimates of severance, termination and redundancy payments are no longer available for the private sector.
IMPACT OF THE DROUGHT ON AUSTRALIAN
In the previous three issues of this publication (September 2002, December 2002 and March 2003) the ABS presented estimates of the impact of the drought on agricultural production based on forecasts made by the Australian Bureau of Agricultural and Resource Economics (ABARE).
The ABS has recalculated its estimates of the direct impact of the drought on agricultural production in the national accounts using the latest ABARE forecasts. The following table shows, in seasonally adjusted chain volume terms, the published quarterly data for 2002-03. The table shows a much more marked decline in agricultural outputs than in agricultural inputs. The difference between the outputs and the inputs is gross agricultural product at market prices. The fall in the estimates of gross agricultural product at market prices between 2001-02 and 2002-03 represents the direct impact on GDP of the current drought over this period. There was a decline in chain volume terms from $25,796 million in 2001-02 to $18,436 million in 2002-03, a fall of $7,360 million or 28.5%, representing a negative contribution of 1.0 percentage point to the growth in the volume of GDP between 2001-02 and 2002-03.
Gross value added at basic prices for the agriculture industry fell from $23,235 million in 2001-02 to $16,606 million in 2002-03, a fall of $6,629 million or 28.5%.
The graph below, in seasonally adjusted chain volume terms, shows movements in the five major categories of agricultural output.
For a complete picture of the impact of the drought on GDP the indirect effects of the drought must also be considered. These indirect effects are described in the feature article published in the September quarter 2002 issue of this publication.
Estimates of agricultural production for 2003-04 based on Australian Bureau of Agricultural and Resource Economics' September 2003 forecasts will be presented in a feature article in the October 2003 issue of Australian Economic Indicators (cat.no.1350.0) to be released on 30 September, 2003.
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