Australian Bureau of Statistics

Rate the ABS website
ABS Home > Statistics > By Release Date
1301.0 - Year Book Australia, 2005  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 21/01/2005   
   Page tools: Print Print Page RSS Feed RSS Bookmark and Share Search this Product  
Contents >> National accounts >> Defining and measuring GDP

The main output from the national accounts is a measure of the overall value of economic production in Australia in a given period, but without any double counting of the goods and services being produced. Many goods and services are bought by businesses for use in their own productive activities (e.g. steel is bought by car manufacturers). If the value of all goods and services produced were simply added together there would be serious duplication because some goods and services would be added in several times at various stages of production. The overall measure of production, excluding double counting, is called 'gross domestic product', which is commonly referred to as GDP. It is formally defined as:

    The total market value of goods and services produced in Australia after deducting the cost of goods and services used up (intermediate consumption) in the process of production, but before deducting allowances for the consumption of fixed capital (depreciation).

The performance of the economy is represented in the national accounts by such measures as growth in GDP. While movements in the chain volume measure of GDP (from which the direct effects of price changes have been removed) are an important indicator of economic growth, there is no single measure which can describe all aspects of the well-being of a country's citizens.

There are significant aspects of the quality of life which cannot be reflected in a system of economic accounts, just as there are significant aspects of an individual's well-being which are not measured in the conventional concept (or any other concept) of that individual's income.

Notwithstanding their limitations, especially in relation to uses for which they were never designed, the national accounts provide important information for a range of purposes. The system of national accounts also provides a framework or structure which can be, and has been, adapted and extended to facilitate the examination of many economic and social policy issues. An example of such extensions is in the article Impact of the farm season on Australian production in 2002-03 and 2003-04.

There are three ways of measuring GDP:

Income approach - which measures GDP by summing the incomes accruing from production: compensation of employees (wages and salaries, and employers' social contributions); gross operating surplus (profits); gross mixed income (income from unincorporated businesses, including a return to the owners of these businesses for their labour); and taxes less subsidies on production and imports.

Expenditure approach - which involves summing all final expenditures on goods and services (i.e. those goods and services which are not processed any further), adding on the contributions of changes in inventories and the value of exports, and deducting the value of imports. Final expenditures consist of final consumption expenditure and gross fixed capital formation. Exports are included in GDP because they are part of Australian production even though they are sold to overseas purchasers. Imports are deducted because, although they are included in final expenditures (e.g. when someone buys an imported video recorder its value is included as part of household final consumption expenditure), they are not part of Australian production.

Production approach - which calculates GDP by taking the value of goods and services produced by an industry (its output at basic prices, which implicitly includes taxes less subsidies on production) and deducting the cost of goods and services used up by the industry in the productive process (intermediate consumption), which leaves the value added by the industry. GDP is then obtained by summing value added across all industries, and adding taxes less subsidies on products.

While each approach should, conceptually, deliver the same estimate of GDP, if the three measures are compiled independently using different data sources then different estimates of GDP result. However, the Australian national income, expenditure and product estimates have been integrated within annual balanced supply and use tables which are available for 1994-95 to 2001-2002. Integration with balanced supply and use tables ensures that the same estimate of GDP is obtained from the three approaches, and thus annual estimates using the income, expenditure and production approaches are identical for the years for which supply and use tables are available.

Prior to 1994-95, and for the latest financial year, the estimates using each approach are based on independent sources, and there are differences between the income, expenditure and production estimates. Nevertheless, for these periods, a single estimate of GDP has been compiled. Table 29.1 shows time series of chain volume measures for GDP, and GDP per person, from 1976-77 to 2002-03. (For a discussion of chain volume measures, see Chain volume or 'real' GDP.)


29.1 GROSS DOMESTIC PRODUCT, Chain volume measures(a)
GDP
GDP per person
$m
$

1976-77
321,061
22,753
1977-78
323,989
22,688
1978-79
340,598
23,593
1979-80
349,315
23,923
1980-81
359,918
24,303
1981-82
372,739
24,759
1982-83
362,905
23,732
1983-84
382,266
24,686
1984-85
400,618
25,547
1985-86
417,144
26,234
1986-87
427,028
26,458
1987-88
449,946
27,437
1988-89
468,039
28,050
1989-90
485,503
28,663
1990-91
485,034
28,238
1991-92
486,336
27,959
1992-93
504,145
28,665
1993-94
523,762
29,481
1994-95
545,918
30,394
1995-96
569,125
31,279
1996-97
590,471
32,056
1997-98
616,805
33,118
1998-99
649,550
34,485
1999-00
673,944
35,385
2000-01
687,720
35,686
2001-02
714,370
36,621
2002-03
734,209
37,172

(a) Reference year is 2001-02.

Source: Australian System of National Accounts, 2002-03 (5204.0).


Compared with many developed economies, Australia has experienced relatively strong growth over the past ten years. With an average annual growth rate of 3.8% for 'real' GDP from 1994 to 2003, it is higher than any of the 'G7' countries (table 29.2).


29.2 GDP AT CONSTANT PRICES, International comparison - 1994 to 2003(a)
Average annual growth rate
%

Australia
3.8
'G7' countries
Canada
3.4
France
2.1
Germany
1.3
Italy
1.7
Japan
1.3
United Kingdom
2.8
United States of America
3.2
Total 'G7'
2.5
New Zealand
3.3

(a) Average annual growth.

Source: OECD, Quarterly National Accounts, Vol. 2004/2.


The chain volume measure of GDP increased by 2.8% in 2002-03, following an increase of 3.9% in 2001-02. For some analytical purposes, it is important to allow for the impact of population growth on movements in GDP. Annual growth in GDP per person has been about one to two percentage points lower than that for GDP since the mid-1970s and was negative in 1977-78, 1982-83, 1990-91 and 1991-92 (graph 29.3). In 2002-03, GDP per person increased by 1.5%.

Graph 29.3: GDP AND GDP PER PERSON



Previous PageNext Page

Bookmark and Share. Opens in a new window


Commonwealth of Australia 2014

Unless otherwise noted, content on this website is licensed under a Creative Commons Attribution 2.5 Australia Licence together with any terms, conditions and exclusions as set out in the website Copyright notice. For permission to do anything beyond the scope of this licence and copyright terms contact us.