6549.0 - Household Income, Consumption, Saving and Wealth, A Provisional Framework, 1995  
Latest ISSUE Released at 11:30 AM (CANBERRA TIME) 06/06/1995   
   Page tools: Print Print Page Print all pages in this productPrint All RSS Feed RSS Bookmark and Share Search this Product  
Contents >> Chapter 9. Consumption

Overview

Definition

9.1. Consumption is defined as the 'using up' of services and non-durable consumer goods that have a single use or an otherwise limited life (i.e. less than one year).

9.2. These goods and services may be used up in a number of ways. From the household's point of view, they may be consumed within the household or they may be transferred (in cash or in-kind) to other households and private institutions who then undertake the actual consumption.

9.3. Consumption that takes place within the household is collectively termed actual final consumption. This consists of consumption of goods and services purchased in the market place, consumption of goods and services received as in-kind receipts and consumption of services provided from within the household.

9.4. Consumption that is 'consumed' outside the household is termed current transfers outlaid (excluding direct taxes). These may be outlaid either in cash or in-kind. (Note that direct taxes constitute a flow that is distinguished from the income and consumption flows.)

9.5. Consumption is measured according to the market value of the goods and services consumed. For final consumption expenditure, the value recorded is that paid out by the household in return for the goods and services. It therefore includes the value of indirect taxes paid on purchased goods (see Consumption in Chapter 4).

Classification

9.6. Consumption is classified according to whether the consumption items are purchased by the household in return for money or whether they have been received by the household as in-kind receipts.

9.7. Consumption is also classified according to whether the consumption takes place within the household or whether it is undertaken indirectly - i.e. by a third party as a result of a transfer from the household to that party.

9.8. Household consumption therefore covers the following categories:

      • final consumption expenditure,
      • consumption of in-kind receipts from outside the household,
      • consumption of goods and services provided from within the household,
      which together comprise actual final consumption; and
      • current transfers outlaid.


Final consumption expenditure

Definition

9.9. Final consumption expenditure is defined as the 'using up' of services and non-durable goods that are acquired in the market place in return for money and have been purchased during the reference period. It includes the value of indirect taxes paid on purchased goods.

Classification

9.10. This final consumption expenditure is classified according to the type of goods and services consumed. The classification used in ABS expenditure surveys is that set out in the ABS Household Expenditure Survey Commodity Code List (HESCCL). (Note that the definition here differs, however, from the HESCCL in that it excludes all expenditure on consumer durables that are, in the ICW framework, classified as part of acquisition of non-financial assets.)

9.11. Since the cost to the household is required, items are valued at the amount paid by the household minus any rebates that may have been paid (e.g. in the case of medical bills that are partly refunded via Medicare.)

9.12. Final consumption expenditure includes interest paid on consumer loans, including those loans taken out for the purchase of the owner-occupied dwelling. Interest payments are viewed as payment for the service provided by the lending institutions or lending households. Interest paid on loans taken out for the explicit use of households as unincorporated enterprises are excluded here as they have already been deducted as part of the calculation of net entrepreneurial income.

9.13. The broad classification of final expenditure consumption is as follows:

      • current housing costs
      • fuel and power
      • food and non-alcoholic beverages
      • alcoholic beverages
      • tobacco
      • clothing and footwear
      • household services and operations
      • medical care and health expenses
      • transport
      • recreation
      • personal care
      • miscellaneous commodities and services.

Comments

9.14. Given the necessity of a common reference period for all household flows, a decision has to be made as to the timing of the consumption. Should the consumption be deemed to have taken place when the items are:

      • actually consumed,
      • paid for, or
      • acquired

9.15. Taken over the longer period, these occurrences of acquiring, paying for, and consuming the goods will theoretically coincide. For shorter periods, however, these three occurrences may not all occur within the same reference period.

9.16. The first approach of using the time the goods and services are actually consumed causes practical problems. Even non-durable goods are frequently consumed over an extended period e.g. the flour or coffee is not all used up as soon as the packet is opened. Practical problems of collecting data on a consumption basis rule out this approach.

9.17. The second and third approaches of payment and acquisition will coincide for many purchases when cash is paid out for the goods and services. For example, if a newspaper is purchased and paid for over the counter, then the two approaches will give identical results.

9.18. The approaches will not coincide, however, where goods and services are purchased using credit. For example, if a household acquires newspapers daily but only pays the bill every three months, then the two events will not coincide in the short reference periods used in household surveys.

9.19. The ABS recommends the payment approach wherever possible. This approach will better serve the balancing of household accounts in a household income and expenditure survey where clients may wish to derive, say, a residual measure of household saving.

9.20. If, however, this approach is not practical, then the alternative acquisitions approach may be used. The balancing of household accounts will, however, require that some adjustments will need to be made to the household accounts for the above purpose.


Consumption of in-kind receipts from outside the household

Definition

9.21. Consumption of in-kind receipts from outside the household is defined as the 'using up' of goods and services that are acquired from outside the household without the intervention of money.

9.22. As explained earlier, in-kind income has an equivalent in in-kind consumption. Thus, if a person is paid for work done by being given food or the use of a car, the imputed value of that food and car are simultaneously counted as both income and consumption. In-kind goods and services for consumption may be derived from government, private organisations or other households.

9.23. Care should be taken to ensure that for every item of income in-kind, a similar entry of in-kind consumption is counted.

Classification

9.24. In-kind consumption is classified in the same manner as was income in-kind, i.e. goods and services acquired via:

      • employment benefits
      • social security in-kind concessions
      • other government in-kind transfers
      • regular gifts and services provided free by other households
      • regular gifts and services provided free by private organisations (e.g. charities).

9.25. For some analyses, classification according to categories set out for market goods and services in the HESCCL may also be required.


Consumption of goods and services provided from within the household

Definition

9.26. Consumption of services provided from within the household are defined as the services provided by household fixed assets and by unpaid household work. Household assets are defined as all durable goods owned or being purchased by the household, including the dwelling.

Classification

9.27. Consumption of household services are classified as follows:

      • services provided by unpaid household work
      • services provided by the owner-occupied dwelling
      • services provided by other consumer durables.



Current transfers outlaid (excluding taxes)

Definition

9.28. Current transfers outlaid relate to cash and goods disbursed to government, to other households and private institutions or to charitable organisations for consumption by those other entities.

9.29. In the case of goods disbursed, these goods must have been both purchased and disbursed during the reference period.

9.30. Transfers to other households may be either compulsory, as is the case with some child support payments, or voluntary. Voluntary transfers to other households include regular and recurring gifts, either in cash or in-kind.

Classification

9.31. Current transfers outlaid may be classified according to the nature of the recipient and according to whether the transfers are compulsory or otherwise:

      • cash and gifts purchased and donated to private organisations such as charitable institutions
      • voluntary transfers in cash and in-kind to other households in the form of gifts, etc.
      • compulsory transfers in cash and in-kind to other households (e.g. child support).

Comments

9.32. For some analyses it may be desirable to deduct compulsory private transfers (along with taxes) from the gross income of households to derive a measure of net disposable income after all compulsory transfers have been dispersed. This would also overcome the problem of double counting of these transfers at national aggregate level noted in Other current transfers, paragraph 8.84.





Previous PageNext Page