5216.0 - Australian National Accounts: Concepts, Sources and Methods, 2000  
ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 15/11/2000   
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Contents >> Chapter 14: Final consumption expenditure >> Household final consumption expenditure

Household final consumption expenditure


14.3 Household final consumption expenditure (HFCE) measures current expenditure by households and non-profit institutions serving households. HFCE is a large aggregate covering a wide range of goods and services. It is therefore usually desirable to further dissect this item. The SNA93 proposes a 'functional' classification to identify the 'functions' - in the sense of 'purposes' or 'objectives' - for which households engage in these transactions. The Classification of Individual Consumption by Purpose (COICOP) is used for a breakdown of HFCE by purpose or function. The outlays covered include:

      • expenditure on consumer durables such as cars, furniture and high-value, long-lasting household appliances (but excluding dwellings, which are regarded as the fixed assets of an 'industry' - for more details see Chapter 15);
      • consumer semi-durables such as clothing and footwear, other appliances, and crockery and cutlery;
      • single-use goods such as food, cigarettes and tobacco, and alcoholic drinks; and
      • services of all kinds such as hairdressing, dry cleaning and public transport.

14.4 COICOP provides for HFCE to be classified into the following major categories:

01Food and non-alcoholic beverages
02Alcoholic beverages, tobacco and narcotics
03Clothing and footwear
04Housing, water, electricity, gas and other fuels
05Furnishings, household equipment and routine maintenance of the house
09Recreation and culture
11Hotels, cafes and restaurants
12Miscellaneous goods and services

Most of these major categories are further split into subcategories.

14.5. In the Australian national accounts the classification of HFCE is aligned, as far as possible, with COICOP. However, there are some instances where it is not yet possible for Australia to follow COICOP's recommendations, e.g. Australia will not include an estimate of HFCE on narcotics in COICOP item 02 Alcoholic beverages, tobacco and narcotics, as reliable data on narcotics expenditure are not available. Other items, such as expenditure on COICOP item 09.6 Package holidays, are not specifically identified in Australia's HFCE, but the components of package holidays (airfares, accommodation and food) are included in the corresponding major categories of HFCE. Also, Australia will not include an explicit estimate of HFCE on prostitution services in COICOP item 12.1 Personal care, as reliable data on such expenditure are not available. The functional categories of HFCE described in this chapter are based on COICOP as modified for Australian circumstances in the Australian national accounts.

14.6 As noted in paragraph 14.3, the final consumption expenditure of NPISHs is included with that of households in the ASNA. SNA93 recommends that the final consumption of NPISHs should be classified according to the Classification of the Purposes of Non-Profit Institutions Serving Households (COPNI). The major Divisions of COPNI are as follows:

03Recreation and culture
05Social protection
07Political parties, labour and professional organisations
08Environment protection
09Services n.e.c.

Consequently, in the ASNA, the final consumption expenditure of NPISHs is classified, as far as possible, to the corresponding category of HFCE. Specifically, expenditure by NPISHs on Health, Recreation and culture, and Education are classified to the corresponding categories of HFCE, while final consumption expenditure for the other Divisions is classified to Other goods and services in HFCE. As data sources for estimating the final consumption expenditure of NPISHs are very limited, indirect means are generally employed to compile these estimates. It is often necessary to assume that the final consumption expenditure for NPISHs can be estimated as the sum of income transferred by households, corporations and general government in a period, less an allowance for net property income payments and capital formation.

Components of HFCE estimated using the Retail Censuses and Retail Trade Surveys

14.7 The periodic Retail Censuses provide the primary benchmarks for many components of HFCE. The census results are adjusted for sales which are out of scope of the census and, where appropriate, an estimate of business purchases is deducted. The last three censuses were conducted for the years 1979-80, 1985-86 and 1991-92. Some service industries that were included in the 1979-80 census were excluded from subsequent censuses because of the introduction of the Selected Services Industries Surveys that commenced in respect of 1986-87. Other elements included in the benchmarks are: sales by manufacturing, mining, wholesale, electricity and gas establishments, and NPISHs; sales by organisations selling directly to the public; goods withdrawn from stock for own use; self-supplied food; and several other minor items.

14.8 The latest Retail Census benchmark is moved forward using data from the monthly Survey of Retail Trade. Until June 1987, quarterly commodity data from the Survey of Retail Trade were available as indicators for these components. These data are no longer available and component estimates for more recent quarters (and years) are derived by applying relationships between industry and commodity sales data from the 1991-92 Retail census to monthly industry data from the Survey of Retail Trade. The change in that survey from June 1988 to collect data on a retail turnover rather than a retail sales basis further complicated the estimation of these components. As a result, the estimates of the individual components for periods after June 1987 are less firmly based than those for earlier periods. The effect of the changes on the estimates of total HFCE is minimal.

Benchmarking to supply and use tables

14.9 By necessity, many independent data sources are used to compile estimates of HFCE. Retail Censuses and Surveys, Service Industries Surveys, Household Expenditure Surveys, and Public Finance statistics, are just a few of the data sources used. In many cases, these collections are undertaken infrequently, so that in some years extrapolations have to be made using less complete data. National accountants also have to transform many of these source data onto a national accounts basis. They also have to make estimates using whatever data are available where no census, survey or similar data are available. By necessity, the national accounts make extensive use of methods based on benchmarks extrapolated forward using other indicator data. In a period of comparatively rapid change, extrapolative methods based on assumptions of fixed relationships become less tenable. In these circumstances there is a need to validate or confront the estimates that make up the national accounts.

14.10 The approach now undertaken by the ABS, for years from 1994-95, is to confront estimates of final demand, including HFCE, with estimates of supply, within supply and use tables. Several improvements to the overall quality of HFCE estimates have resulted from this confrontation process.

Volume estimates of household final consumption expenditure

14.11 Volume estimates of household final consumption expenditure, expressed in the prices of the reference year, are derived for each of the commodity groups described below for each State. These elemental volume estimates are aggregated to form chain volume estimates for the published national and State statistics.

14.12 For most commodities, household final consumption expenditure comprises expenditures in Australia less expenditures by non-residents in Australia plus expenditures by Australian residents overseas. The net value of the first two items is revalued as a single entity. For almost all commodities the volume estimates of this entity are derived by revaluing their current price counterparts with a suitable deflator. In most cases this deflator is the corresponding commodity-specific and State-specific consumer price index (CPI) taken from Consumer Price Index (Cat. no. 6401.0).

14.13 For all commodities, expenditures by Australian residents overseas are revalued using a single deflator which comprises the aggregate CPIs (after adjustment by exchange rate conversion factors) of those countries frequently visited by Australian residents, weighted together according to the values of Australian expenditures in those countries.

14.14 The volume estimates of expenditures by non-residents in Australia are precisely offset by corresponding values in exports of services, and the volume estimates of expenditures by Australian residents overseas are precisely offset by corresponding values in imports of services.

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