NATIONAL WEALTH GLOSSARY

Asset

Assets are entities functioning as stores of value and over which ownership rights are enforced by institutional units, individually or collectively, and from which economic benefits may be derived by their owners by holding them, or using them, over a period of time (the economic benefits consist of primary incomes derived from the use of the asset and the value, including possible holding gains/losses, that could be realised by disposing of the asset or terminating it). See 'Financial assets' and 'non-financial assets'.

Australian resident

See 'Estimated resident population (ERP)'.

Average annual growth rate

The average annual growth rate is calculated as a percentage using the formula [(P_n/P₀)^1/n - 1] x 100, where P₀ is the value at the start of the period, P_n is the value at the end of the period and n is the length of the period between P₀ and P_n in years.

Capital formation

See 'Gross fixed capital formation'.

Capital-labour ratio

Capital services used per unit of labour input.

Chain price indexes

Annually-reweighted chain Laspeyres price indexes referenced to the same year as the chain volume measures. They can be thought of as a series of indexes measuring price change from a base year to quarters in the following year using current price values in the base year as weights, linked together to form a continuous time series. In other words, chain price indexes are constructed in a similar fashion to the chain volume indexes. Quarterly chain price indexes are benchmarked to annual chain price indexes in the same way as their chain volume counterparts. Unlike implicit price deflators, chain price indexes measure only the impact of price change.

Chain volume measures

Annually-reweighted chain Laspeyres volume indexes referenced to the current price values in a chosen reference year (i.e. the year when the quarterly chain volume measures sum to the current price annual values). Chain Laspeyres volume measures are compiled by linking together (compounding) movements in volumes, calculated using the average prices of the previous financial year, and applying the compounded movements to the current price estimates of the reference year. Quarterly chain volume estimates are benchmarked to annual chain volume estimates, so that the quarterly estimates for a financial year sum to the corresponding annual estimate.

Generally, chain volume measures are not additive. In other words, component chain volume measures do not sum to a total in the way original current price components do. In order to minimize the impact of this property, the ABS uses the latest base year as the reference year. By adopting this approach, additivity exists for the quarters following the reference year and non-additivity is relatively small for the quarters in the reference year and the quarters immediately preceding it. The latest base year and the reference year will be advanced one year with the release of the September quarter issue of this publication. A change in reference year changes levels but not growth rates, although some revision to recent growth rates can be expected because of the introduction of a more recent base year (and revisions to the current price estimates underlying the chain volume measures).

Consumption of fixed capital

Also known as depreciation, it is the reduction in the value of fixed assets used in production during the accounting period resulting from physical deterioration, normal obsolescence or normal accidental damage. Unforeseen obsolescence, major catastrophes and the depletion of natural resources are not taken into account.

Current prices

Estimates are valued at the prices of the period to which the observation relates. For example, estimates for 2007-08 are valued using 2007-08 prices. This contrasts to chain volume measures where the prices used in valuation refer to the prices of a previous period.

Debt

Debt is considered to be any liability that is not equity.

Debt servicing ratio

The debt servicing ratio is a commonly used measure of a country's capacity to pay the costs associated with debt. It is calculated by dividing export earnings (goods and services credits) into the net interest payments (income accrued and payable on net foreign debt).

Deflation

See 'Inflation'.

Depreciation

The accounting process of systematically allocating the cost less estimated residual value of an asset over its expected useful life. Depreciation as recorded in government financial records may deviate considerably from consumption of fixed capital as depreciation is normally calculated using the original costs of fixed assets. See 'Consumption of fixed capital'.

Domestic final demand

Domestic final demand is the sum of private and government final consumption expenditure and private and public gross fixed capital expenditures.

Dwellings

Dwellings are buildings that are used entirely or primarily as residences, including any associated structures, such as garages, and all permanent fixtures customarily installed in residences. Houseboats, barges, mobile homes and caravans used as principal residences of households are also included, as are historic monuments identified primarily as dwellings. The costs of site clearance and preparation are also included in the value of dwellings.

Economically demonstrated resources (EDR)

Economically demonstrated resources reflects the volume of subsoil assets available for production. EDR are those resources that have a very high probability of existence and are economically feasible to extract, given current technology and relative prices.

Economically demonstrated resources (EDR) per capita

The ratio of EDR to an estimate of the resident Australian population. Population estimates use data published in the quarterly publication ABS Australian Demographic Statistics (cat. no. 3101.0) and ABS projections.

Equity

Equity is that part of the issued capital of an enterprise which acknowledges a claim on the residual value of the enterprise after the claims of all other creditors have been met. It includes ordinary and participating preference shares, any reinvested earnings, and equity in unincorporated enterprises.

Estimated resident population (ERP)

The official measure of the population of Australia is based on the concept of usual residence. It refers to all people, regardless of nationality or citizenship, who usually live in Australia, with the exception of foreign diplomatic personnel and their families. It includes usual residents who are overseas for less than 12 months. It excludes overseas visitors who are in Australia for less than 12 months.

Exports

Goods which subtract from the stock of material resources in Australia, as a result of their movement out of the country. These goods have been produced or manufactured in Australia.

Exports of goods and services

The value of goods exported and amounts receivable from non-residents for the provision of services by residents.

Final consumption expenditure

Net expenditure on goods and services by persons, expenditure of a current nature by private non-profit institutions serving households and net expenditure on goods and services (which does not result in the creation of fixed assets or inventories or in the acquisition of land and existing buildings or second-hand assets) by public authorities other than those classified as public corporations. See 'Final consumption expenditure - general government' and 'Final consumption expenditure - households'.

Final consumption expenditure - general government

Net expenditure on goods and services by public authorities, other than those classified as public corporations, which does not result in the creation of fixed assets or inventories or in the acquisition of land and existing buildings or second-hand assets. It comprises expenditure on compensation of employees (other than those charged to capital works, etc.), goods and services (other than fixed assets and inventories) and consumption of fixed capital. Expenditure on repair and maintenance of roads is included. Fees, etc., charged by general government bodies for goods sold and services rendered are offset against purchases. Net expenditure overseas by general government bodies and purchases from public corporations are included. Expenditure on defence assets that are used in a fashion similar to civilian assets is classified as gross fixed capital formation; expenditure on weapons of destruction and weapon delivery systems is classified as final consumption expenditure.

Final consumption expenditure - households

Net expenditure on goods and services by persons and expenditure of a current nature by private non-profit institutions serving households. This item excludes expenditures by unincorporated businesses and expenditures on assets by non-profit institutions (included in gross fixed capital formation). Also excluded are maintenance of dwellings (treated as intermediate expenses of private enterprises), but personal expenditure on motor vehicles and other durable goods and the imputed rent of owner-occupied dwellings are included. The value of 'backyard' production (including food produced and consumed on farms) is included in household final consumption expenditure and the payment of wages and salaries in kind (e.g. food and lodging supplied free to employees) is counted in both household income and household final consumption expenditure.

Financial assets

Financial assets are mostly financial claims. Financial claims entitle the owner to receive a payment, or a series of payments, from an institutional unit to which the owner has provided funds. The exceptions are monetary gold, Special Drawing Rights (SDRs), and shares, which are treated as financial assets even though there is no financial claim on another institutional unit.

Financial assets include insurance technical reserves, monetary gold, SDRs, other accounts receivable/payable, securities other than shares, and shares and other equity.

Financial assets with the rest of the world

Foreign financial assets held by Australians (such as foreign shares, deposits and loans). See 'Financial assets'.

Financial corporations

Financial corporations comprise all resident corporations and quasi-corporations mainly engaged in financial intermediation and provision of auxiliary financial services. For example, they borrow and lend; provide superannuation, life, health or other insurance services, or financial leasing services; or they invest in financial assets. Holding companies with mainly financial corporations as subsidiaries are also included, as are market NPIs that mainly engage in financial intermediation or production of auxiliary financial services. Mostly these enterprises are incorporated but large unincorporated enterprises such as unit trusts and superannuation funds are included in this sector if they qualify as quasi-corporations. This broad sector is broken down into eight sub-sectors: Central Bank; Banks; Other depository corporations; Life insurance; Pension funds; Other insurance corporations; Central borrowing authorities; and Financial intermediaries and auxiliaries n.e.c.

Fixed assets

Fixed assets are produced assets that are used repeatedly or continuously in production processes for more than one year.

Foreign debt assets

A nation's gross debt claims on the rest of the world. See net foreign debt.

Foreign debt liabilities

A nation's gross debt liabilities to the rest of the world. See net foreign debt.

General government sector

General government consists of all government units and non-market NPIs that are controlled and mainly financed by government. It mainly comprises Commonwealth, State and local government departments, offices and other bodies that are primarily engaged in production of goods and services outside the normal market mechanism. Statistics for this broad sector are broken down into two levels of government (LOG): National government; and State and local government.

All units that have a national role or function are classified to the National government sector. The fact that a unit is controlled by the Commonwealth Government is prima facie (but not necessarily conclusive) evidence that the unit has a national role or function. The only multi-jurisdictional units currently classified to the National LOG are the public universities which are mainly financed and partly controlled by the Commonwealth Government but are subject to a degree of control by the establishing State or Territory Government. All units that have a State or Territory, or a local, role or function are classified to the State and local government sector.

Gross disposable income - households (National Accounts basis)

Gross household income less income tax payable, other current taxes on income, wealth etc., interest on dwellings, consumer debt interest, interest payable by unincorporated enterprises, rent on natural assets, net non-life insurance premiums, social contribution for workers' compensation and other current transfers payable by households.

Gross domestic product (GDP)

The total market value of goods and services produced in Australia within a given period after deducting the cost of goods and services used up in the process of production but before deducting allowances for the consumption of fixed capital. Thus gross domestic product, as here defined, is 'at market prices'. It is equivalent to gross national expenditure plus exports of goods and services less imports of goods and services.

GDP per capita

The ratio of the chain volume estimate of GDP to an estimate of the resident Australian population. Population estimates use data published in the quarterly publication ABS Australian Demographic Statistics (cat. no. 3101.0) and ABS projections.

GDP per hour worked

The ratio of the chain volume estimate of GDP to an estimate of hours worked. Hours worked estimates are derived as the product of employment and average hours worked. Movements in chain volume estimates of GDP per hour worked are commonly interpreted as changes in labour productivity. However, it should be noted that these measures reflect not only the contribution of labour to changes in production per hour worked, but also the contribution of capital and other factors (such as managerial efficiency, economies of scale, etc.).

Gross fixed capital formation

The value of acquisitions of new and existing produced assets, other than inventories, less the value of disposals of new or existing produced assets, other than inventories.

Household sector (National Accounts basis)

Includes all non-financial unincorporated enterprises that are owned and controlled by households and are not included in the private non-financial corporations sector. Most business partnerships and sole proprietorships are included because their owners combine their business and personal affairs and do not keep separate accounts for their business operations and therefore do not qualify as quasi-corporations. Although private non-market non-profit institution serving households, such as clubs and charities, are included in a separate sector in the Standard Economic Sector Classification of Australia (SESCA) (ABS cat. no. 1218.0), in this publication such non-profit institutions are included with the household sector because separate information about their financial operations is not available.

A household is a small group of persons who share the same living accommodation, who pool some, or all, of their income and wealth and who consume certain types of goods and services collectively, mainly housing and food. Households include group households of unrelated persons, same-sex couple households, single-parent households as well as one-person households. A household usually resides in a private dwelling (including caravans etc. in caravan parks). Persons usually resident in non-private dwellings, such as hotels, motels, boarding houses, jails and hospitals, are not included in household estimates. This definition of a household is consistent with the definition used in the Census. The number of households can be either based on count or estimated resident population.

Household net worth per capita

Net worth per capita held by households and not by general government, financial corporations or non-financial corporations.

Implicit price deflator

Obtained by dividing a current price value by its real counterpart (the chain volume measure). When calculated from the major national accounting aggregates, such as gross domestic product, implicit price deflators relate to a broader range of goods and services in the economy than that represented by any of the individual price indexes that are published by the ABS. Whereas the chain price indexes are chain Laspeyres indexes, the annual implicit price deflators are chain Paasche price indexes, i.e. each year-to-year movement is calculated using the current price value shares of the second of the two years to weight together the elemental price indexes.

Movements in implicit price deflators can be greatly affected by changes in the physical composition of the aggregates and their components. For this reason, quarterly implicit price deflators derived from seasonally adjusted or trend data are preferred to those derived using original data.

Imports

Imports reflect goods that arrive in the country and include:

• goods brought into Australia directly for home consumption following the payment of any duty; plus
• goods which enter the country but are not cleared for home consumption; the goods instead go into Customs (bonded) warehouses and duty is not paid at that time.

Imports of goods and services

The value of goods imported and amounts payable to non-residents for the provision of services to residents.

Inflation (deflation)

A term commonly used to refer to changes in price levels. A rise in prices is called inflation, while a fall is called deflation.

Institutional sectors

The groupings of all resident institutional units according to their institutional characteristics and functions. Five institutional sectors are recognised: the non-financial corporations sector, the financial corporations sector, the general government sector, the households sector and the non-profit institutions serving households sector.

Institutional units

An institutional unit is an economic entity that is capable, in its own right, of owning assets, incurring liabilities, and engaging in economic activities and in transactions with other entities. There are two main types of institutional units, namely persons or groups of persons in the form of households, and legal or social entities whose existence is recognised by law or society independently of the persons, or other entities, that may own or control them. The individual members of multi-person households are not treated as separate institutional units. Legal or social entities that engage in economic activities in their own right, such as a corporation, NPI or government unit, are considered institutional units as they are responsible and accountable for the economic decisions or actions they take.

Labour productivity

See 'GDP per hour worked'.

Liability

A liability is an obligation which requires one unit (the debtor) to make a payment or a series of payments to the other unit (the creditor) in certain circumstances specified in a contract between them.

Liabilities to the rest of the world

Liabilities owed by Australian residents to overseas entities. Australia's liabilities to the rest of the world include borrowings from overseas and foreign holdings of Australian currency, shares and other securities.

Loans and placements

Loans are borrowings which are not evidenced by the issue of debt securities, and are not usually traded. Examples are an overdraft from a bank, money lent by a building society with a mortgage over a property as collateral, and a financial lease agreement with a finance company. Repurchase agreements are treated as purchases and sales of debt securities, not collateralised loans. Placements are customers’ account balances with entities not regarded as deposit-taking institutions. Examples are account balances of State and local public non-financial corporations with their central borrowing authorities, of public sector pension funds with their State Treasuries, and 11am money placed with corporate treasuries.

National accounts

Systematic quantitative summary of the Australian economy as a whole.

National assets

The sum of non-financial assets (produced and non-produced) and financial assets with the rest of the world owned by Australian residents. See 'Asset', 'Financial assets with the rest of the world', 'Non-financial assets', 'Produced assets', 'Non-produced assets' and 'Resident'.

National liabilities

See 'Liabilities to the rest of the world'.

National net saving

Calculated as the sum of the net saving of each of the resident sectors - households (includes unincorporated enterprises and private non-profit institutions serving households), non-financial corporations, financial corporations and general government. Also referred to as net saving.

National saving ratio

The ratio of national net saving to national net disposable income. National net saving is calculated as national net disposable income less final consumption expenditure. National net disposable income is calculated as national gross disposable income less consumption of fixed capital.

National net worth

National assets less national liabilities. See 'National assets' and 'National liabilities'.

Net capital stock

The accumulation of past investment flows less retirements, less accumulated capital consumption on the same items. Assets included in net capital stock are machinery, buildings and some other fixed produced assets used in the production of goods and services. See 'Perpetual inventory method (PIM)'.

Net foreign debt

The net sum of foreign debt liabilities and foreign debt assets.

Net present value

An estimate of value or net benefit (in present terms) over the lifetime of an investment or project. Net present value (NPV) takes into account factors such as current production rates, prices, costs, and discount rates when ascribing a value to an investment or project.

Net worth

Assets less liabilities and shares/contributed capital. For the general government sector, net worth is assets (both financial and non-financial) less liabilities since shares and contributed capital is zero. It is an economic measure of wealth and reflects the contribution of governments to the wealth of Australia.

Non-financial assets

Any asset that is not in the form of a financial claim on another economic unit, monetary gold or a statutory reserve deposit at the International Monetary Fund.

Non-financial corporations

All resident corporations and quasi-corporations mainly engaged in the production of market goods and/or non-financial services, and holding companies with mainly non-financial corporations as subsidiaries. Also included are non-profit institutions that mainly engage in market production of goods and non-financial services.

Non-produced assets

Non-produced assets are non-financial assets that come into existence other than through processes of production.

Non-resident

Any economic entity (individual, enterprise or other organisation) ordinarily domiciled in a country other than Australia.

See 'Estimated resident population (ERP)'.

Perpetual inventory method (PIM)

The PIM is a method of constructing estimates of capital stock and consumption of fixed capital from time series of gross fixed capital formation. It allows an estimate to be made of the stock of fixed assets in existence and in the hands of producers which is generally based on estimating how many of the fixed assets, installed as a result of gross fixed capital formation undertaken in previous years, have survived to the current period.

Australian estimates of capital stock are based on the PIM, which involves compiling a 'rolling inventory' of the capital stock based on historical data about investment flows. In a given year, investments in capital assets are added to the stock, and retirements of assets are deducted from the stock.

Produced assets

Produced assets are non-financial assets that have come into existence as outputs from production processes. Produced assets consist of fixed assets and inventories.

Public sector

The combination of the general government sector, the public non-financial corporations and the public financial corporations.

Real

It is possible to deflate measures of income and wealth by a price index in order to measure purchasing power. By comparing the deflated value of the income with the actual value of the income, it is possible to determine by how much the real purchasing power of the income or wealth has increased or decreased. Aggregates deflated in this way is generally described as "real". Real income or wealth is measured with reference to the price level in some selected reference year. Thus real values cannot exist in isolation, rather they vary depending upon the choice of reference year.

Reference period

Refers to the period that provides the weights for an index.

Resident

Residents are those entities that have a closer association with the territory of Australia than with any other territory. Examples are: general government bodies; financial and trading enterprises and non-profit bodies producing goods or services or both within the territory of Australia; and persons whose centre of interest is considered to lie in Australia. Any entity which is not determined to be a resident of Australia is classified as a resident of the rest of the world. See 'Estimated resident population'.

Resident unit

A unit with a centre of economic interest in the economic territory of the country.

Rest of the world

The rest of the world consists of all non-resident institutional units that enter into transactions with resident units, or have other economic links with resident units.