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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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Final consumption and saving

4.72 Consumption can involve either the use of goods and services in the process of production (intermediate consumption), as discussed in the section on production, or final consumption. Final consumption can be measured as expenditure on final consumption or as actual final consumption (explained below). Disposable income (see previous section) is either expended on final consumption or saved. Saving is available, along with net capital transfers, to finance elements of capital accumulation, which is discussed in the next section.

4.73 As noted in paragraph 4.11, GDP can be derived as the sum of all final expenditures, changes in inventories of finished goods, work-in-progress and raw materials, and the value of exports of goods and services less the value of imports of goods and services. In this context, final expenditures comprise final consumption expenditure and gross fixed capital formation. These expenditures are equivalent to final demand. Gross fixed capital formation is discussed in the next section, relating to accumulation and wealth.

Final consumption expenditure

4.74 Final consumption expenditure is expenditure on goods and services that are used for the direct satisfaction of individual or collective needs or wants. It excludes expenditure on fixed assets (including dwellings), valuables and other non-financial assets. Final consumption expenditure is undertaken only by the households sector, the non-profit institutions serving households sector (NPISH) (which, in the ASNA, is combined with the households sector - see Chapter 5) and the general government sector. However, any expenditure undertaken for business purposes by unincorporated enterprises (which are part of the households sector) is treated as intermediate consumption expenditure of the unincorporated enterprise, and not part of household final consumption expenditure.

Household final consumption expenditure

4.75 In the ASNA, household final consumption expenditure includes expenditure by resident households on goods and services, whether the expenditure is made within the domestic territory or by Australian residents abroad (see Chapter 5 for the definition of residents), and expenditure by non-profit institutions serving households. Specific transactions in household final consumption expenditure include:

      • the value of income received in kind by employees (as discussed in paragraph 4.50) which is treated as simultaneously spent by the employees on final consumption expenditure;
      • the value of goods produced by households for their own consumption, such as agricultural goods produced and consumed on the same farm, and 'backyard' production;
      • FISIM, the service charge component of households' interest payments and receipts - see paragraphs 4.22 and 4.23 (however, FISIM attributed to unincorporated enterprises owned by households is classified as intermediate consumption of the unincorporated business);
      • the service charge component of premiums paid for insurance and pension fund services - see paragraphs 4.24 and 4.25; and
      • the imputed value of the services of owner-occupied dwellings. The imputation of rent to owner-occupied dwellings enables the services provided by dwellings to their owner-occupiers to be treated consistently with the marketed services provided by rented dwellings to their tenants. This treatment is considered necessary because, if a large number of rented houses were sold to their occupiers and if estimates of imputed rent were not calculated for owner-occupied dwellings, there would be an apparent decrease in gross domestic product without any decrease in the provision of housing services. In effect, owner-occupiers (like other owners of dwellings) are regarded as operating businesses; they receive rents (from themselves as consumers), pay expenses, and make a net contribution to the value of production which accrues to them as owners.

4.76 Expenditures on the purchase of dwellings are explicitly excluded from household final consumption expenditure because dwellings are goods used by owners to produce housing services. Purchases of dwellings therefore constitute gross fixed capital formation. Expenditures on licences to use or own vehicles, boats and aircraft, and fees for shooting, fishing and hunting permits are also excluded. These are treated as taxes rather than as payments for services. All other kinds of licences, permits, certificates, passports etc., are treated as purchases of services and included in household final consumption expenditure.

Government final consumption expenditure

4.77 Most government final consumption expenditure is current expenditure on goods and services provided to the community. Such goods and services are either provided free or at prices that cover only a small proportion of the costs of producing the goods and services. As discussed in paragraphs 4.8 and 4.19, because most of the goods and services provided have no directly observable value, a direct measure of government non-market output is not available. The value of government non-market output is therefore considered to be identical to the cost of producing the output, which is equivalent to measuring government non-market output as the cost of all current expenditures made by government in the course of providing non-market goods and services to the community. The relevant expenditures are compensation of employees, the cost of other goods and services used (intermediate consumption), and the consumption of fixed capital. Government final consumption expenditure is then valued as the value of non-market output less the value of any sales of non-market goods and services.

Actual final consumption

4.78 The concept of actual final consumption is aimed at recording consumption in the sector where it actually occurs rather than in the sector where consumption expenditure is made. Therefore, government final consumption expenditure on services that benefit individual households (called individual services) is included with household actual final consumption, leaving government actual final consumption equal to government final consumption expenditure on services that benefit the community as a whole (called collective services).

4.79 Household actual consumption therefore includes government final consumption expenditures on education, health, social security and welfare, sport and recreation and culture, which are considered to be individual services. Excluded are expenditures on the provision of security and defence, the maintenance of law and order, the maintenance of public health and protection of the environment, which are considered to be collective services. Government actual final consumption is therefore equal to government final consumption expenditures on collective services. In SNA93, all services provided by non-profit institutions serving households are treated as individual services and are included in household actual final consumption. Because such non-profit institutions are included in the households sector in the ASNA, their final consumption expenditures are automatically included in household actual final consumption.

Saving

4.80 Saving represents that part of disposable income that is not spent on final consumption of goods and services. For individual units and sectors, and for the economy as a whole, gross saving is equal to gross disposable income less final consumption expenditure. Saving can also be derived as adjusted disposable income less actual final consumption. Net saving is equal to gross saving less consumption of fixed capital.

4.81 Saving can be either positive or negative. If it is negative, the excess of outlays over income must be financed either by disposing of existing assets or by incurring liabilities. When saving is positive it must be used to acquire financial or non-financial assets of one kind or another. Such transactions are part of accumulation and are discussed in the next section.


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