1218.0 - Standard Economic Sector Classifications of Australia (SESCA), 2002  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 13/09/2002   
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Government units

2.24. Government units are described in SNA93 as 'unique kinds of legal entities established by political processes which have legislative, judicial or executive authority over other institutional units within a given area". (SNA93, paragraph. 4.104.)

2.25. The principal functions of government units are:

  • to provide goods and services to individuals or the community at large
  • to redistribute income and wealth by means of transfers
  • to engage in non-market production.

2.26. Non-market production consists of production that is made available free of charge or at prices that are not economically significant. Prices are defined as not economically significant if they do not have a significant influence on the amounts that producers are willing to supply and purchasers wish to buy.

2.27. In Australia, the majority of government units are readily identifiable in that their operations are mainly financed from taxation and they redistribute income by means of transfers (e.g. subsidies, grants, welfare payments) or engage in other forms of non-market production, which means they provide government services (e.g. defence, education, health services, economic advice) free of charge or at nominal prices.

2.28. Departments and authorities operating from the public accounts of the Commonwealth Government or a state or territory government collectively constitute a government unit of the parent government. Other authorities operating outside the public accounts, and local government authorities, qualify individually as government units. Included are the executive, judicial and legislative arms of government, including the Governor General and each of the state governors and their establishments, all courts of law, each parliament, all parliamentary departments, and all parliamentarians' offices that are funded from taxation.

2.29. Statutory authorities that are mainly funded from taxation are also government units. They are entities created by legislation or regulation for the purpose of implementing government policy by providing goods or services free or at economically insignificant prices.

2.30. Government units do not include government-owned companies or quasi-corporations mainly engaged in market production. Such companies are considered to be corporations.

2.31. SNA93 specifies that, to qualify as a separate institutional unit, a government unit must:
  • have funds of its own, raised by taxing other institutional units or received as transfers from other government units
  • have authority to disburse some, or all, of such funds in the pursuit of policy objectives
  • have authority to borrow funds on its own account.

2.32. Units that do not meet all of these criteria are treated as part of a larger government unit.

2.33. In the ABS Business Register, for practical reasons, individual government departments are treated as individual legal entities, even though they may not satisfy SNA93 criteria for recognition as institutional units. However, because the departments all fall within the same sector (the general government sector), this difference does not affect conformity of ABS sector statistics with the international standard. ABS GFS (the statistics most affected) include units that cover all departments and authorities included in the public accounts of the Commonwealth Government, and each state and territory Government. Each of these units meets SNA93 criteria for recognition as an institutional unit. Units not covered by the various public accounts are also included in ABS GFS. These units individually satisfy the SNA93 definition of an institutional unit.

2.34. Governments may operate units that qualify as quasi-corporations. Generally to qualify as quasi-corporations, such units would engage in market production, be managed and operated in a similar way to a corporation and have a complete set of accounts, including a statement of financial position. Such units are not classified as government units for SISCA purposes, but are classified as corporations.

2.35. However, difficulties can arise in interpreting SNA93 criteria for recognising government-owned quasi-corporations. In particular, the SNA93 definition of economically significant prices is open to interpretation. In deciding whether a government-owned unit should be treated as a quasi-corporation, the ABS is guided by characteristics of the unit additional to those set out in SNA93, including whether the unit:
  • generates sufficient revenue to cover its production costs (excluding interest)
  • is not limited to selling its output to units of the same government
  • is in open competition with other producers of its types of products
  • prepares accounts that comply with accounting standards or regulations and are subject to audit
  • relies more on independent sources of revenue than on government subsidies to remain in operation.

2.36. The existence of some or all of these characteristics is used as a guide and each case is judged on its merits. In cases where there are only minor differences between units of the same type, consistent treatment of the same type of unit in all government jurisdictions is sometimes considered more important than application of precise rules that give different results across jurisdictions.

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