METHODOLOGY

Estimates of Australian capital stock are published annually in Australian System of National Accounts (cat. no. 5204.0). Estimates of Gross fixed capital formation for each state and territory are also published annually in Australian National Accounts: State Accounts (cat. no. 5220.0). The experimental estimates of State capital stock have been developed in a manner that ensures consistency with both of these publications.


PERPETUAL INVENTORY METHOD

Estimates of Australian capital stock are compiled using the Perpetual Inventory Method (PIM). This involves the compilation of a 'rolling' inventory of capital stock. In any particular period, investment in capital assets is added to the existing stock, and retired assets are deducted. The PIM requires data on Gross fixed capital formation and Price deflators, as well as assumptions regarding Mean asset lives, Retirement distributions, Age-efficiency functions and Age-price functions to compile capital stock measures.

Estimates of State capital stock are compiled using the same Price deflators and assumptions (Mean asset lives, Retirement distributions, Age-efficiency functions and Age-price functions) as those used in the compilation of Australian capital stock. While these factors may differ between states, these assumptions are necessary to maintain additivity between State capital stock estimates and the Australian capital stock estimates.

Additionally, state PIM parameters are difficult to measure directly due to a lack of appropriate data available at a detailed level across each of the states and territories. More detail on the application of the PIM and the assumptions used in the calculation of the Australian capital stock estimates can be found in Chapter 14 of Australian System of National Accounts: Concepts, Sources and Methods (cat. no. 5216.0).


GROSS FIXED CAPITAL FORMATION

Estimates of Gross fixed capital formation (GFCF) for the states and territories by asset by sector by industry are used as inputs into the Perpetual Inventory Method (PIM) to compile estimates of State capital stock. A new addition to the suite of data available by state is the allocation of state and territory GFCF to specific industries, which allows for state GFCF by industry estimates to be compiled for the first time.

The methodology for compiling state by asset by sector by industry estimates of GFCF involves allocating the equivalent Australian estimates by state using a state indicator (expressed as a percentage). Table 1 summarises the state indicators below.

TABLE 1: STATE GROSS FIXED CAPITAL FORMATION INDICATORS, BY ASSET
Asset type		Indicator
Private sector Non-dwelling construction and Machinery and equipment (a)		Private New Capital Expenditure and Expected Expenditure (cat. no. 5625.0) new actual capital expenditure by asset, by selected industries, by state.
Public sector Non-dwelling construction and Machinery and equipment (b)		Government Finance Statistics (cat. no. 5512.0) net purchases of capital assets by level of government, by asset, by industry, by state.
Computers and peripherals, Research and development and Computer software		Labour Force, Australia, Detailed, Quarterly (cat. no. 6291.0.55.003) number of employees by industry, by state.
Dwellings, Ownership transfer costs, Weapons systems, Cultivated biological resources, Mineral and petroleum exploration and Artistic originals		Data sources underlying Australian National Accounts: State Accounts (cat. no. 5220.0).
(a) The Private sector consists of Private corporations (both Non-financial and Financial) as well as the Household sector. (b) The Public sector consists of the General government sector and Public corporations (both Non-financial and Financial).

Table 1 describes how estimates of actual new capital expenditure from Private New Capital Expenditure and Expected Expenditure (cat. no. 5625.0) are used to allocate Private GFCF by industry for Non-dwelling construction and Machinery and equipment by state. Private New Capital Expenditure and Expected Expenditure (cat. no. 5625.0) contains estimates of actual and expected new capital expenditure on Buildings and structures and Machinery and equipment by private businesses for selected industries in Australia. The proportions used to allocate Private GFCF across states include asset and industry dimensions. The state proportions based on Private New Capital Expenditure and Expected Expenditure (cat. no. 5625.0) were used for all six Machinery and equipment asset types, except for Computers and peripherals(footnote 1).

The Private New Capital Expenditure and Expected Expenditure (cat. no. 5625.0) survey coverage excludes Agriculture, forestry and fishing, Public administration and safety, Education and training, and Health care and social assistance. For industries in the private sector not covered in the survey, actual new capital expenditure estimates for all industries in the private sector by asset by state were used. Due to the lack of any other suitable data, it is assumed that the state allocation for these industries is the same as the state allocation of actual new capital expenditure for all industries in the private sector.

Public GFCF by industry for Non-dwelling construction and Machinery and equipment is allocated by state using expenditure on net purchases of capital assets data from Government Finance Statistics (cat. no. 5512.0) as described in Table 1. Government Finance Statistics (cat. no. 5512.0) measures the financial activities (including net purchases of capital assets) of the commonwealth, state, territory and local general governments as well as government owned and/or controlled public corporations. Public universities are also considered to be part of the general government sector. The proportions used to allocate Public GFCF across states include sector, asset and industry dimensions. The state proportions based on Government Finance Statistics (cat. no. 5512.0) are used for all six Machinery and equipment asset types except for Computers and peripherals.

For the General government sector, net purchases of capital assets data is converted from Government Purpose Classification (GPC)(footnote 2) Government Purpose Classification (GPC) classifies the sales of goods and services, expenses, and net acquisition of non-financial assets of the general government sector in terms of the purposes for which the transactions are made. to Australian and New Zealand Standard Industrial Classification (ANZSIC), 2006 (Revision 2.0) (cat. no. 1292.0).

Private and Public GFCF by industry for Computers and peripherals, Research and development and Computer software are allocated by state using data from Labour Force, Australia, Detailed, Quarterly (cat. no. 6291.0.55.003) on the proportion of the number of employees in each state. Labour Force, Australia, Detailed, Quarterly (cat. no. 6291.0.55.003) contains estimates of the civilian labour force derived from the Labour Force Survey, including employment by location, industry and occupation. The proportions used to allocate GFCF across states include an industry dimension.

Number of employee data is used due to a lack of other suitable data sources available for allocating these assets across each state and territory at the industry level. It is assumed that there is a correlation between the location of employees and GFCF of Computers and peripherals, Research and development and Computer software.

For all other asset types, data is already compiled by state and territory for inclusion in Australian National Accounts: State Accounts (cat. no. 5220.0). Dwellings and Ownership transfer costs do not have an industry dimension. Weapons systems, Cultivated biological resources, Mineral and petroleum exploration and Artistic originals are limited to certain industries. The data sources and methods underlying the compilation of GFCF for these assets is described in Chapter 10 of Australian System of National Accounts: Concepts, Sources and Methods (cat. no. 5216.0).

Where state proportions are not available for the entire time period covering the Australian GFCF by industry estimates, the state proportions are backdated by assuming that the initial state shares of GFCF are constant for all prior periods. For example, Private New Capital Expenditure and Expected Expenditure (cat. no. 5625.0) state estimates begin in 1988-89. The state and territory shares of new actual capital expenditure in 1988-89 are applied for all prior periods for the relevant Australian GFCF by asset by industry estimates.

To ensure coherence with both Australian System of National Accounts (cat. no. 5204.0) and Australian National Accounts: State Accounts (cat. no. 5220.0), any differences in the State capital stock and Gross fixed capital formation estimates are residually allocated between sectors, assets and industries using a residual allocation process.


FOOTNOTES

1. The six Machinery and equipment asset types are; Computers and peripherals, Electrical and electronic equipment, Industrial machinery and equipment, Motor vehicles, Other transport equipment and Other machinery and equipment. <back
2. Government Purpose Classification (GPC) classifies the sales of goods and services, expenses, and net acquisition of non-financial assets of the general government sector in terms of the purposes for which the transactions are made. <back