6503.0 - Household Expenditure Survey and Survey of Income and Housing, User Guide, Australia, 2015-16  
Latest ISSUE Released at 11:30 AM (CANBERRA TIME) 10/10/2017   
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EXPENDITURE

The HES produces estimates of average household expenditure on goods and services and selected other payments.

Acquisitions, payments and consumption approaches

Expenditure can be measured according to the following approaches:

  • In the acquisitions approach, the full cost payable by the household of acquiring a good or service within a given period is collected. The full cost is collected regardless of whether the household actually paid for or consumed the good or service within the period.
  • In the payments approach, the payments made by the household within a given period are collected. Payments include those made on outright purchases, deposits and loans for goods and services regardless of whether the goods and services were acquired or consumed during the period.
  • In the consumption approach, an indicator of consumption is collected and a dollar value is derived. Consumption values are collected according to the use of a good or service during the given period regardless of whether the good or service was acquired or paid for during the period.

The HES has primarily adopted an acquisitions approach.

For many items, such as perishable foods (which are usually acquired, paid for and completely used within a relatively short period of time) the three approaches will provide nearly identical results. For other items such as durable items and items purchased on credit that are not fully consumed or paid for during the recall or reporting period, the situation is different. Estimates for individual households will vary according to the approach adopted. For groups of households, however, the estimates will 'average out' to a large extent, so that the estimates for groups of households can be said to be indicative of payments and consumption as well as acquisitions.

The following example relating to washing machines illustrates the different approaches discussed above. The HES collects expenditure on the acquisitions of washing machines over the three months period prior to the HES interview. For example, in a group of 1,000 households, on average, 96% of them had washing machines and on average, these washing machines were replaced after 10 years with a new one that was purchased for $700 and paid for with five equal instalments of $140.

Using the acquisitions approach, the number of households expected to report expenditure on washing machines, over a three month period is equal to 96% of 1,000 (i.e. 960) households divided by the number of three month periods in 10 years (i.e. 40) which equals 24 households. Each of these households would have spent $700 and so aggregate expenditure would be equal to 24 multiplied by $700 which equals $16,800 every three months. This is divided by the number of weeks in three months (13) and by the number of households in the sample (1,000), to give an average household expenditure of $1.29 per week.

Using the payments approach, the number of households expected to report expenditure over a three month period is equal to five times 96% of 1,000 households (because payments are made five times by each household) divided by the number of three month periods in 10 years which equals 120 households. The payment of each of these households is equal to the total cost of the machine ($700) divided by the number of payments (five) which equals $140. Aggregate expenditure is equal to 120 households multiplied by $140 which equals $16,800 every three months. This is divided by the number of weeks in three months (13) and by the number of households in the sample (1,000), to again give average household expenditure of $1.29 per week.

Using the consumption approach, 96% of 1,000 households would report their ownership in the three month period. The value of consumption is assumed to be equal to the cost of using the washing machine over three months (which is equal to $700 divided by the number of three month periods in 10 years, which equals $17.50). Aggregate expenditure is equal to 960 households multiplied by $17.50 which equals $16,800 every three months. This is divided by the number of weeks in three months (13) and by the number of households in the sample (1,000) to again give average household expenditure of $1.29 per week.

Recall periods and timing of expenditure

The total period covered by expenditure estimates is a function of the recall or reporting period at the time of interview and the timing of interviewing. For the HES, interviewing is usually conducted through the 12 months of the reference year, that is, the financial year to which the survey nominally relates (for example, 2015-16). For most types of expenditure, data are taken from diaries in which survey respondents record their expenditure over a two week period, beginning the day of initial contact. Diary-derived estimates therefore refer to expenditure during the reference year.

Estimates for infrequently purchased or more expensive items are derived from the household questionnaire, (see Appendix 1 of this publication) which collects expenditure information for goods and services on a recall basis. These less frequently occurring items are collected over periods longer than the two week diary reporting period so that sufficient numbers of households report expenditure to enable the calculation of reliable expenditure estimates. For example, in 2015-16, HES survey respondents were asked to recall how much they spent on furniture and appliances over the last three months, on motor vehicle registration over the last 12 months, and on house purchases over the last three years. For other items, such as insurance, rent and utilities bills, survey respondents were asked for the value of their last payment and the period of time to which it related.

The Household Expenditure Classification (HEC) (see Appendix 6 of this publication) lists the items collected in the household questionnaire and their associated recall periods. In general, longer periods are used for items that are expensive, are acquired infrequently or are acquired at irregular intervals. Shorter periods are used for items which are purchased more frequently or are less significant and therefore not well remembered.

The use of different recall periods means that estimates for different expenditure items, in some cases, refer to different periods. The estimates of average expenditure on motor vehicle registration, for example, cover the 12 months prior to the beginning of interviewing to the end of interviewing (July 2015 to June 2016 for the 2015-16 HES). For house purchases, the period is three years prior to the beginning of interviewing to the end of interviewing (July 2012 to June 2016 for the 2015-16 HES). Household questionnaire derived estimates therefore refer to varying periods prior to the reference year as well as during the reference year.

Studies that use HES data tend to assume that all expenditure estimates refer only to the reference year itself. This is generally true for diary derived estimates but is a valid assumption for estimates derived from the household questionnaire only if expenditure prior to the reference year was the same as during the reference year.

For household questionnaire estimates, if the volumes or prices of purchases were lower during the period prior to the reference year, then average expenditure over the preceding period plus the reference year will be less than average expenditure over the reference year only. Similarly, if prices or volumes were higher during the preceding period, the HES estimate will over estimate average expenditure in the reference year. The longer the preceding period (which is equal to the length of the recall period), the greater the likelihood of discrepancy. In cases where expenditure is expected to have changed, researchers may wish to acknowledge or adjust for these differences.

Weekly household expenditure

Estimates of weekly expenditure do not refer to any given week but are weekly equivalents. They are derived by dividing reported expenditure for all members of the household by the number of weeks in the relevant recall or reporting period, as discussed above. For household questionnaire items, recall periods vary from the last three years to the last three months, and for some items the last payment is reported. For diary items, the reporting period is two weeks.

Expenditure for private purposes

The HES provides estimates of expenditure on goods and services used for private purposes. It therefore excludes expenditure for business and other investment purposes. Operating expenses of unincorporated businesses are either not collected or are deducted from reported expenditure. If survey respondents report business expenditure, it is picked up in questions in the household questionnaire or space provided in the diary, in which there is an opportunity to report amounts which 'have been or will be charged to a business'. If amounts have been or are going to be charged to a business, then these are deducted from expenditure during processing.

Deductions of refunds and trade-ins

The HES measures net or 'out of pocket' private expenditure on durable goods, non-durable goods and services for private purposes. Estimates therefore do not refer to the full costs of goods and services used but only the costs payable by the household for goods and services used.

In the case of a refund which is received or expected, the amount of the refund is deducted from expenditure to produce a net figure. For expenditure on visits to general practitioners, for example, Medicare and private health insurance refunds are deducted.

In the case of trade-ins, these amounts are also deducted from expenditure to produce a net figure. For example, if the cost of a motor vehicle is partially financed by the trade-in of another, the amount of the trade-in is deducted from the cost of the acquired vehicle.

In the case of the sale of land, houses and motor vehicles, the sale price net of outstanding loans is deducted from expenditure and in the case of houses and motor vehicles, amounts of successful insurance claims are deducted from expenditure. Deductions are made even if there is no expenditure on that item by the household. Sales and claims made in the recall period for items that are not replaced during that period are included. This compensates for sales and claims made outside the recall period for items replaced during the recall period.

Where trade-ins, sales and insurance claims exceed the costs of acquisitions of the same expenditure item, expenditure is recorded as negative. For example, if someone sells a luxury motor vehicle and buys a less costly model, the amount of expenditure recorded in the HES would be negative.

Expenditure in-kind

Expenditure in-kind refers to items provided free or at reduced costs by employers to employees for their own private use, or withdrawn from their own business for household consumption. It may also refer to items consumed by the household that have been produced by the household itself (e.g. vegetables), or provided by another household. Non-cash benefits captured in the questionnaire such as rent, telephone, computers and vehicles are included in estimates of expenditure. The non-cash benefit expenditure averages $36 per week per household in 2015-16.

Salary sacrifice

Salary sacrifice is an arrangement under which an employee agrees to forego part of the remuneration, which they would otherwise receive as wages and salaries, in return for the employer or someone associated with the employer, providing benefits of a similar value. It is a particular type of salary packaging where the amount sacrificed can vary at the employee's discretion within guidelines set by the employer. The usual purpose of salary sacrifice is to reduce the amount of income tax paid by the employee.

More detailed information is collected to improve the estimates for this type of expenditure . The additional information captured within the questionnaire was used to model the value of expenditure on motor vehicles and associated running costs such as fuel, insurance, registration, servicing and tyres.

Classification of expenditure

Expenditure is classified according to the HEC – for more detail, see Appendix 6 'Household Expenditure Classification'.

Most of the approximately 700 items included in the classification relate to expenditure on goods and services, which is the primary focus of the HES. The classification also includes 'selected other payments' which comprise income tax, repayments on mortgage principal for the household's place of residence, other housing costs of a capital nature such as internal renovations, superannuation and life insurance.

The commodity codes for the Household Expenditure Classification (HEC) are largely the same as in 2009-10 with a small number of changes, particularly to address emerging technologies and industries between the survey cycles. Estimates for previous cycles have been recompiled to reflect these changes at a broad expenditure level. The list of commodity codes for 2015-16 HES and a concordance with the 2009-10 HEC is included in Appendix 6 of this publication. The expenditure estimates have also been derived for the Classification of Individual Consumption by Purpose (COICOP). The total expenditure estimates differ between the two classifications due to scope differences, in particular the COICOP includes estimates of imputed rent which are out of scope for the HEC. For more detail, see Appendix 8 'HEC and COICOP concordance'.

COMPARISON WITH AUSTRALIAN SYSTEM OF NATIONAL ACCOUNT

The concept of expenditure used in the HES has many similarities to the household sector expenditure concepts used in the Australian System of National Accounts (ASNA), but also differs in some respects.

A comparison between the 2015–16 HES expenditure estimates and the ASNA is expected to be released as additional information in this publication later in 2017.

RELATIONSHIP BETWEEN RECORDED EXPENDITURE AND INCOME

The HES provides information about both the income and the expenditure of households, but it would be misleading to regard the difference between average weekly income and the sum of the items of average weekly expenditure as shown in the tables in this publication as a measure of savings.

First, to be properly understood, the concept of household saving needs to be articulated along with the concept of household wealth (assets and liabilities), and all forms of income and expenditure need to be measured and classified consistently with these concepts. The HES does not attempt to do this. It focuses on usual income being received at the time the data was collected; estimates of personal income tax; expenditure on current consumption of goods and services; and two major items of expenditure which can be regarded as investment ('mortgage repayments - principal (selected dwelling)' and 'superannuation and life insurance'). The two items of investment expenditure are included in the HES because they are a significant regular commitment of many households which have to be financed from income.

Second, there are significant timing differences between the different components of income and expenditure collected:
  • expenditure does not cover all current payments because expenditure was collected on an acquisitions basis;
  • expenditure does not cover a common reference period since expenditure estimates for different items refer to different periods; and
  • income does not cover a common reference period since income estimates for different sources of income refer to different periods; for example, income from wages and salaries relates to usual pay in a pay period, while income from investment and own unincorporated business relates to income in a whole financial year.

HES income and expenditure estimates therefore do not balance for individual households or groups of households and the difference between income and expenditure cannot be considered to be a measure of saving.