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5.1 The analytical power of the national accounts depends not only on the recording of economic activity and wealth for the economy as a whole, but also requires segmentation of the economy into analytically useful categories. At an elemental level, economic activity and wealth can be attributed to institutional units, which are the basic transactor units in the system. To enhance the analytical usefulness of the accounts, SNA93 groups institutional units with similar functions in the economy into institutional sectors (and associated subsectors). The total economy consists of the entire set of institutional units that are resident in it. This chapter defines the concepts of residence, institutional units and institutional sectors, and describes the implementation of the concepts of units and sectors in the ASNA (the SNA93 concept of residence is adopted without modification in the ASNA). For the purpose of compiling production statistics classified by industry, the focus is on what SNA93 refers to as producing units. These are units, owned by institutional units, which are engaged in the production of goods and services. These units are discussed in Chapter 6.
5.2 The ASNA records the economic activity and wealth of resident institutional units. Resident institutional units are those institutional units that maintain a centre of economic interest in the domestic economic territory. The domestic economic territory of a country is defined, in paragraph 14.9 of SNA93, to comprise:
5.3 An institutional unit is said to have a centre of economic interest in a country when there exists some location within the country's economic territory on, or from which, the unit engages on a continuing basis in economic activities on a significant scale, either indefinitely or for a finite but long period of time (generally defined as one year or more - but see paragraph 5.4). From this definition it follows that short term production of goods or services undertaken by an Australian enterprise abroad, for example installation of equipment, can be treated as part of the GDP of Australia (and classified as exports of goods or services from Australia). In addition, ownership of land or buildings within the economic territory of a country is deemed to give the owner a centre of economic interest there (1).
(1) If the centre of economic interest of the non-resident owner of land or buildings remains outside the country where the property is located, the land or buildings are considered to be foreign direct investment enterprises owned and controlled by the non-residents. Any rents paid by the tenants of such land or buildings are deemed to be paid to the foreign direct investment enterprise, which in turn makes a transfer of property income to the actual non-resident owner. (See Chapter 4 for an explanation of a foreign direct investment enterprise.)
5.4 Individual members of households who leave the economic territory of a country and return after a limited period (less than one year) continue to be regarded as residents of that country. For example, a member of a resident Australian household who travels abroad for recreation, business, health or other purposes and returns within one year is treated while abroad as a resident of the Australian economy for national accounts (and balance of payments) purposes. Therefore, in the ASNA, any consumption expenditure undertaken abroad is considered to constitute an import of goods or services. An exception to the one year rule is made in the case of students and medical patients. Students are treated as residents of their country of origin, however long they study abroad. Medical patients abroad are also treated as residents of their country of origin, even if their stay is one year or more.
5.5 Individuals travelling to other countries for seasonal work, and those who cross country borders frequently for work purposes only, also remain residents of their original economic territory, as do locally recruited staff of foreign embassies, consulates, military bases etc., and the crews of ships, aircraft or other mobile equipment (such as drilling rigs) operating wholly or partly outside the economic territory. The staff of international organisations who work within the enclaves of those organisations are treated as residents of their country of origin if they work for less than one year. If they work with the international organisation for more than one year they are treated as residents of the host country of the international organisation's enclave.
5.6 International organisations established by international agreement (such as the United Nations) are accorded sovereign status, with their own economic territory consisting of the land or structures used by the organisation in the countries where they are physically located. International organisations are therefore not resident units of any country and all transactions with them are treated as transactions with non-residents.
The SNA93 concept of institutional units
5.7 In any economy, economic activity is undertaken by a variety of transactors. For example, corporations (both financial and non-financial), government units, households and non-profit institutions all engage in economic activity, but their economic objectives, functions and behaviour differ. Corporations are created for the purpose of producing goods or services for the market, usually as a source of profits for the units that own them. Non-profit institutions (NPIs) are created for the purpose of producing or distributing goods or services but not for the purpose of generating income or profits for the units that control or finance them. Government units organise and finance the provision of non-market goods and services to individual households and the community at large, mainly out of taxation. They are also concerned with the distribution and redistribution of income and wealth in accordance with government policies. Households are primarily consumer units, although they may also engage in any kind of economic activity, including the operation of unincorporated enterprises.
5.9 An institutional unit is defined in paragraph 4.2 of SNA93 as:
5.10 One major defining characteristic of an institutional unit is that either a complete set of accounts, including a balance sheet of assets and liabilities, exists for the unit, or it would be possible and meaningful, from both an economic and legal viewpoint, to compile a complete set of accounts if they were required.
5.11 SNA93 identifies two main types of units that may qualify as institutional units: (i) households and (ii) 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.
5.12 Households consist of persons or groups of persons. Many assets are owned, or liabilities incurred, jointly by members of the same household, and income received by individual members may be pooled for the benefit of all members. In addition, many expenditure decisions may be made collectively for the household as a whole. As a result of these circumstances, it is not usually possible to draw up meaningful accounts for individual household members. The individual members of multi-person households are therefore not treated as separate institutional units; rather, the household is treated as the institutional unit.
Legal or social entities
5.14 The second type of institutional unit is a legal or social entity that engages in economic activities and transactions in its own right. SNA93 identifies three main types of legal and social entities: corporations, non-profit institutions and government units. In addition, some unincorporated enterprises belonging to households or government units behave in much the same way as corporations and are treated as quasi corporations when they have complete sets of accounts. In the system, quasi corporations are treated in the same way as corporations.
5.18 SNA93 distinguishes two broad types of NPIs: market producers and non-market producers. NPIs are defined to be market producers if they charge prices or fees which have a significant influence on both the amounts producers are willing to supply and the amounts purchasers are willing to buy (i.e. the prices are 'economically significant'). Market NPIs are also defined to include all NPIs serving businesses, except where the NPIs are controlled and mainly financed by government units, in which case they are defined as non-market NPIs. Non-market NPIs provide goods or services either free or at prices or fees that are not economically significant.
The ASNA equivalent of institutional units
5.19 The units concepts used in the ASNA are based on the units model used in the ABS business register. These units concepts are based on SNA93 concepts, but are a little more complex in order to better reflect business and organisational structures in Australia. The units model underlying the ASNA comprises the following units:
5.20 A legal entity is an entity which possesses some or all of the rights and obligations of individual persons or corporations. Examples of legal entities for statistical purposes include companies, partnerships, trusts, sole proprietorships, government departments and statutory authorities. The legal entity unit closely approximates the SNA93 concept of legal and social entities described above, but includes unincorporated enterprises operated by households. In SNA93, such unincorporated enterprises are included with households.
5.21 The enterprise group consists of a unit covering all operations in Australia of one or more legal entities under common ownership and/or control. It covers all operations in Australia of legal entities that are related in terms of the current Corporations Law (as amended by the Corporations Legislation Amendment Act 1991). Therefore, an enterprise group may contain a mixture of enterprises (see below) classified to the non-financial corporations sector and the financial corporations sector depending on the functions performed by individual legal entities within the group.
5.22 The enterprise is a unit comprising all legal entities within an enterprise group that are classified to the same institutional subsector (for example, the life insurance corporations subsector within the financial corporations sector). Thus an enterprise group which contains legal entities that belong to more than one institutional subsector is split up into two or more mutually exclusive enterprises.
5.23 The remaining units in the model (management units, establishments, and locations) refer to producing units and are discussed in Chapter 6.
5.24 Most surveys providing information for the ASNA, other than detailed production information, use the ABS enterprise unit. However, most enterprises comprise only one legal entity and, as described in paragraph 5.22, those that comprise more than one legal entity are circumscribed by an institutional subsector boundary. For that reason, use of the enterprise unit for compiling statistics classified by institutional sector or subsector (as in the ASNA) is effectively the same as using a legal entity unit. As noted, the ABS legal entity unit is the same as the SNA93 institutional unit, with the exception that it includes household unincorporated enterprises. In the compilation of the Australian national accounts, household unincorporated enterprises are identified separately and included with households. Each of the different types of institutional units identified in SNA93 (i.e. corporations and quasi corporations, government units, NPIs and households) can be identified in the ASNA.
The SNA93 concept of institutional sectors
5.25 SNA93 groups institutional units with similar functions into the following institutional sectors:
Table 5.1 shows the SNA93 allocation of types of institutional units to institutional sectors. The same allocation rules are followed in the ASNA. However, as explained in paragraph 5.45 below, in the ASNA the NPISH sector is combined with the households sector.
Non-financial corporations sector
5.26 The non-financial corporations sector consists of corporations and quasi corporations that are principally engaged in the production of market goods and non-financial services. It includes resident non-financial corporations irrespective of the residence of their shareholders, and quasi corporations (including branches of foreign owned non-financial enterprises that are engaged in significant production in the economic territory on a long-term basis), and non-profit institutions that are market producers of goods or non-financial services.
Financial corporations sector
5.28 The financial corporations sector consists of resident corporations, quasi corporations and market NPIs that are principally engaged in financial intermediation or in auxiliary financial activities. Financial corporations are distinguished from non-financial corporations because of their different roles in the economy, and the inherent differences in their respective functions and activity. Financial corporations are mainly engaged in financial market transactions, which involve incurring liabilities and acquiring financial assets, i.e. borrowing and lending money, providing superannuation, life, health or other insurance, financial leasing or investing in financial assets. In this process, the corporations are not acting as agents, but rather place themselves at risk by trading in financial markets on their own account. Financial auxiliaries are also classified to the financial corporations sector. They include stockbrokers, insurance brokers, investment advisers, trustees, custodians and nominees, mortgage originators and other entities that are engaged in providing services closely related to financial intermediation even though they do not intermediate themselves.
General government sector
5.31 The general government sector consists of government units and non-market NPIs that are mainly financed and controlled by government. The general government sector includes all government departments, offices and other bodies mainly engaged in the production of goods and services outside the normal market mechanism for consumption by government itself and the general public. The units' costs of production are mainly financed from public revenues and they provide goods and services to the general public, or sections of the general public, free of charge or at nominal charges well below costs of production. The sector includes government enterprises mainly engaged in the production of goods and services for other general government units. Also included are NPIs that are serving businesses or households, and are composed largely of private sector members but are mainly financed and controlled by governments.
5.33 The households sector consists of all resident households, defined as small groups of persons who share accommodation, pool some or all of their income and wealth and collectively consume goods and services, principally housing and food. Although households are primarily consumers of goods and services, they also engage in other forms of economic activity through their operation of unincorporated enterprises. Such unincorporated enterprises are included in the households sector because the owners of ordinary partnerships and sole proprietorships will frequently combine their business and personal transactions, and complete sets of accounts in respect of the business activity will often not be available.
Non-profit institutions serving households sector (NPISH)
5.35 Table 5.1 shows that, with the exception of NPIs, all institutional units of a particular type are grouped together within the same sector. Market NPIs are allocated to either the non-financial corporations sector or the financial corporations sector, depending on which sector they serve. In the case of non-market NPIs, those that are controlled and mainly financed by government units are allocated to the general government sector. Other non-market NPIs (i.e. non-market NPIs not controlled or mainly financed by government), are allocated to the Non-profit institutions serving households sector (NPISH). (As already noted, the NPISH sector has not been implemented in the ASNA.)
Rest of the world
5.37 In addition to accounts for the resident sectors, SNA93 includes external (rest of the world) accounts, which provide a summary of all transactions of residents with non-residents (e.g. overseas governments, persons and businesses). 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. It is not a sector for which complete sets of accounts have to be compiled, although it is often convenient to describe the rest of the world as though it were a separate sector.
5.39 Institutional sector and associated classifications used in ABS statistics are described in Standard Economic Sector Classifications of Australia (SESCA) (Cat. no. 1218.0). The classifications included in SESCA are based on international standards, adapted to suit Australian situations where appropriate. The institutional sector classification, the Standard Institutional Sector Classification of Australia (SISCA), is the main classification used for sectoring in the ASNA. For simplicity of presentation, the SISCA excludes the private/public, level of government and foreign controlled distinctions that are part of the SNA93 classification of institutional sectors. These distinctions are contained in other classifications within SESCA. Table 5.2 shows the domestic institutional sectors and subsectors included in the ASNA. In the ASNA, accounts for the rest of the world are grouped as 'external accounts'. These accounts conform with the SNA93 definition of the rest of the world sector.
5.41 The SNA93 institutional sector classification does not explicitly include a public sector/private sector dichotomy; however the ASNA provides such a dissection of the income and capital accounts for the non-financial corporations sector. Public non-financial corporations are government owned or controlled corporations and quasi corporations that are mainly engaged in production of goods and services for sale in the market with the intention of substantially covering their costs.
5.42 Central Borrowing Authorities (CBAs) are public sector financial corporations that are established in all the States and Territories except the Australian Capital Territory, primarily to provide finance for government authorities and to arrange investment of their surplus funds. Their main activities comprise the creation of financial assets and liabilities by issuing securities, and on-lending funds to public authorities in the same jurisdiction. However, they also engage in other financial intermediation activity (for investment purposes), and may participate in the financial management activities of governments.
5.43 The National subsector is so named because it includes units that are subject to a degree of control from both Commonwealth and State governments and that cannot be allocated to either a State or Commonwealth subsector. The National subsector therefore includes multi-jurisdictional units in addition to units that are solely under the jurisdiction of the Commonwealth. At present, public universities are the only multi-jurisdictional institutions that are included in the National subsector.
Concordance between ASNA and SNA93 sector and subsector definitions
5.44 The composition of the ASNA institutional sectors and subsectors accords with SNA93 definitions in most cases. Instances where the ASNA's sectoral composition differs from the SNA93 guidelines are described in the following paragraphs.
Quasi corporations in the non-financial and financial corporations sectors
5.45 One feature of both the non-financial corporations sector and the financial corporations sector is that they are designed to cover businesses which are legally, or clearly act as, entities independent of their owners with regard to their income, consumption and capital financing transactions, and accordingly are required to maintain separate profit and loss and balance sheet accounts. Private enterprises classified to these sectors are mainly companies registered under the Companies Act or other Acts of Parliament but, as noted in paragraph 5.14 above, SNA93 also recommends that all quasi corporations (that is, unincorporated enterprises which function like a corporation by maintaining a complete set of accounts, including balance sheets) be treated as corporations and allocated either to the non-financial corporations or the financial corporations sector. However, SNA93 also acknowledges that it is often difficult to distinguish quasi corporations owned by households. Such is the case in Australia, where the bulk of quasi corporations are not presently identifiable from ABS data sources. In the ASNA, unincorporated enterprises identified as quasi corporations are currently limited to large and easily identified enterprises such as partnerships of companies, unit trusts of companies, credit unions, building societies, branches of overseas corporations, and mutual societies. All other quasi corporations are included, by default, in the households sector in the ASNA.
Non-profit institutions serving households (NPISH)
5.46 In the ASNA, the recommendations of SNA93 are followed with regard to the sector allocation of NPIs that are market producers and those that are controlled and mainly financed by government units. However, it will be some time before sufficient data relating to the transactions of NPISHs are available to enable the construction of a full range of sector accounts for NPISHs.