THE NATIONAL ACCOUNTS COMPILATION PROCESS
The ABS has in place a set of rules to manage the timing of revisions to the national accounts. It is based around the national accounts compilation process, which itself reflects the availability of new or revised source data as well as operational factors.
While the basic accounting and price index data from the quarterly surveys can normally be expected to become quite firm the quarter following the initial estimate, the national accounts process requires that the estimates derived from these sources be subject to annual benchmarking that proceeds on a regular basis. The results of the benchmarking process are first published in the September quarter issue of the quarterly national accounts, coinciding with the availability of balanced annual current price and volume data from the supply and use tables.
The supply and use system progressively incorporates business accounts and other data from ABS annual surveys and from the taxation system. A balancing process is undertaken to achieve consistency between the supply and use of products in the economy in current price and volume terms. Data inconsistencies are reviewed and have to be resolved by altering some of the basic data. Quarterly national accounts estimates are benchmarked to successive vintages of annual data to maintain consistency within the national accounts system. This process also introduces revisions to quarterly growth rates in years either side of the new or revised annual data.
The benchmarking procedure used by the ABS is a mathematical routine designed to equate the quarterly and annual benchmarked estimates while minimising the impacts on existing quarterly growth rates. Using this procedure, revisions to an annual estimate have the potential to impact on growth rates for all the quarters in that year and in the two previous years and two forward years. Impacts of benchmarking on individual quarter growth rates could be reduced by adopting a simple pro rata procedure, but this would force all of the revision to growth rates into the September quarter. The optimising procedure used is widely considered to produce superior estimates of quarterly growth rates, but at the expense of more widespread revisions. Revisions to annual estimates result from the progressive incorporation of more complete source data balanced in the supply and use system and revisions to quarterly estimates result from the process of benchmarking. In this way a revisions process is inherent within the national accounts process because more comprehensive and reliable data only become available with a considerable lag.
Typically, the national accounts process for a given quarter for original current price and volume data proceeds as follows:
- The initial quarterly estimate is based on preliminary quarterly survey data.
- The later vintage quarterly estimates up to the June quarter issue of the national accounts are based on more complete or 'final' quarterly survey data.
- At the end of the current financial year (June quarter) the annual estimates for that year are derived initially as the sum of the four quarters.
- In the September quarter the reference year values for the whole time series of chain volume estimates are advanced one year to the current price values applying in the previous financial year. Re-referencing impacts on the data levels, but not on the growth rates. The base year weights for the current and previous year chain volume estimates are also moved forward. This can result in a revision to growth rates in those years.
- In the September quarter the quarterly estimates are subject to a benchmarking process to align them with annual current price and volume data that has been balanced in the supply and use system.
Seasonally adjusted estimates are created by applying seasonal factors to the unadjusted/original current price and chain volume data. Trend estimates are obtained by removing the irregular component from the seasonally adjusted series. This transformation to seasonally adjusted and trend data is a modelling process where the addition of new quarters and data revisions to previous quarters results in a re-estimation of the seasonal factors and underlying trends in the data going back a number of years due to the end-point problem. Revisions to growth rates will result from this process. Seasonal reanalysis of the data series was traditionally undertaken each September quarter which meant that revisions to seasonal factors generally only occurred once a year, although on occasion a 'one-off' reanalysis was conducted if evidence of changing seasonality had emerged. However, the ABS introduced concurrent seasonal adjustment to GDP and its component series from the December 2006 quarter issue of the national accounts. This involves re-estimating seasonal factors for the whole time series with the addition of each new quarter and therefore, revisions potentially flow through with the addition of each new quarter. Overall, the use of concurrent seasonal adjustment is expected to improve the accuracy and the consistency of the seasonally adjusted series by reducing the reliance on outdated projected forward seasonal factors. Annual seasonal re-analysis will still be required but it is expected that it will not result in significant revisions to the seasonal factors that have been derived concurrently.