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FEATURE ARTICLE 2: DECONSOLIDATED HOUSEHOLD INCOME ACCOUNT
THE HOUSEHOLD SECTOR
The household sector, as currently defined in the ASNA, is a consolidated sector including households, unincorporated enterprises and NPISHs. The 2008 SNA delineates an extra sector for NPISHs, but this has not yet been implemented in the ASNA due to data limitations (footnote 1) . As a result, sectoral accounts for the Australian household sector represent more than just the activity of residential households. By definition, transactions undertaken by NPISHs principally involve households, which receive goods and services from NPISHs as social transfers in kind. NPISHs, in turn, receive a large proportion of their income from households through membership fees and donations. These features partly explain why NPISHs have been consolidated with households in the ASNA.
An NPISH unit is an organisation that provides goods and services to households free or at prices that are not economically significant. As such, these units do not have compensation of employees, gross operating surplus (GOS) - dwellings owned by persons or social assistance benefits. These units are also exempt from the payment of taxes on income. These conceptual differences between an NPISH unit and a household explain why some components of the household income account are not directly impacted by deconsolidation.
DATA SOURCES AND METHODOLOGY
Experimental NPISH estimates are largely derived from two ABS publications, the Australian National Accounts: Non-Profit Institutions Satellite Account (cat. no. 5256.0) and the Australian Industry (cat. no. 8155.0). The Non-profit institutions (NPI) satellite account records the activities of market and non-market NPIs. The scope of experimental estimates for NPISHs is mostly the same as the non-market sector in the NPI Satellite Account. The latest satellite account is based on data from the 2012-13 NPI Survey, and also includes a re-presentation of 2006-07 data from the previous account on an 2008 SNA basis. These two years provide the benchmarks for the NPISH income account.
Australian Industry data are used as indicators to produce time series between the two benchmark years by applying annual percentage movements in indicators to the corresponding benchmark values in the NPISH income account. Secondary indicators are sourced from taxation statistics and the household income account. Latest year estimates have been extrapolated using the published household income account measures.
There were a number of series that were derived using different methodology, including imputed interest, reinvested earnings and non-life insurance claims. The reason for this is that the published income account includes estimates for 2008 SNA concepts that were not measured directly by the NPI satellite account survey. Imputed interest and reinvested earnings were estimated based on proportions of existing estimates within the ASNA.
Final consumption expenditure is also derived differently for NPISH as it consists of their non-market output, which is equal to their operating expenses less any market receipts they may have (footnote 2). Therefore, NPISH final consumption expenditure (NFCE) has been derived by deducting sales of goods and services from the value of non-market output. The reason for deducting sales is to avoid double-counting in the valuation of NFCE, because sales represent transactions between NPISHs and households, and 2008 SNA treats all final consumption expenditure by convention as social transfers in kind to households (footnote 3).
ANALYSIS AND RESULTS
Deconsolidation has not had a significant impact on the household sector. The experimental estimates for total income receivable and total income payable show the same rates of growth as published estimates of the household sector. Total gross income grew at a compound annual rate of 5.9% per year between 2006-07 and 2013-14, increasing by 49.2% over the eight years. Total income payable grew at a compound annual rate of 4.5% per year over the same period, increasing 36.1% (and 36.3% for experimental estimates) over the time series. The weaker growth in total income payable means that growth in gross disposable income was strong. Gross disposable income grew at a compound annual rate of 6.3% per year, with experimental gross disposable income being $1044.4 billion in 2013-14, compared to the published household sector estimate of $1057.1 billion for the same year. The drivers of these differences include Gross Mixed Income (GMI), property income receivable, current transfers receivable and payable and final consumption expenditure.
Gross Mixed Income
This series represents the income from production received by unincorporated enterprises and includes GOS and compensation of employees. The experimental estimates of NPISH GOS have been removed from the published series of GMI in the household income account. The rate of growth in GMI has not been affected because of the small values for NPISH GOS. GMI increased by 52.4% (and 52.5% for published estimates) over the period from 2006-07 to 2013-14 over the time series, growing at a compound annual rate of 6.2% per year.
Property Income Receivable
Total property income receivable includes interest and dividend income amongst other items. Property income has not been significantly impacted because of the small values for NPISH. Experimental estimates for property income increased by 49.2% over the period from 2006-07 to 2013-14, growing at a compound annual rate of 5.9% per year. This compares with a growth rate of 48.6% in published estimates for the same period, and a compound annual rate of 5.8% per year.
Current Transfers Receivable
Transfers are a small source of income for the household sector, but have exhibited strong growth in the experimental series. They averaged 2.3% of total experimental household income between 2006-07 and 2013-14. Total transfers increased by 58.5% in the same period, growing at a compound annual rate of 6.8% per year. Deconsolidated households received $31.8 billion worth of income from current transfers in 2013-14, compared to the published estimate of $37.3 billion.
Current transfers to non-profit institutions represents the difference between the published series and the experimental series in the NPISH income account. The published series is sourced from government finance statistics and includes government grants and volume based government funding. The experimental series is sourced from the satellite account and is significantly less as it includes grants only, leaving volume based and other funding as the residual. This series highlights the conceptual issues associated with the treatment of these transactions as transfers or purchases of goods and services by general government. The broader scope of the published estimate explains the reason for the large difference between the two series.
Current Transfers Payable
Current transfers payable grew at a compound annual rate of 5.5% per year, and averaged 6.2% of total experimental household income between 2006-07 and 2013-14. Households paid $21 billion worth of current transfers in 2013-14, compared to the published estimate of $16.2 billion. The difference between both estimates is largely driven by transfers from households to NPISHs. Transfers to NPISHs increased by 7.4% over the period from 2006-07 to 2013-14, reaching $5.9 billion in 2013-14.
Final consumption expenditure
The experimental estimates show the same annual rates of growth as published estimates. Household final consumption expenditure (HFCE) grew at a compound annual rate of 5.2% per year over the period from 2006-07 and 2013-14, at a slower rate than total income received. Deconsolidated households purchased $865.2 billion worth of goods and services in 2013-14, compared to the published estimate of $878.4 billion for the same year.
NET SAVING RATIO
Net saving is a key aggregate in the published household income account and is calculated by deducting HFCE and consumption of fixed capital from household gross disposable income.
Household net saving is not significantly impacted once estimates of NPISH saving have been removed. As the graph below shows, the household saving ratio has changed marginally each year using data from the deconsolidated household income account. It is an expected result, given the relatively small size of the NPISH sector.
HOUSEHOLD SAVING RATIO, Current prices
The experimental household saving ratio was 1.7% in 2006-07 and 10% in 2013-14. The published ratio was 1.8% and 9.7% over the same period.
The results indicate that deconsolidation has had minimal impact on the published household income account. The impact on the published estimates changed marginally once an NPISH component has been removed. Deconsolidation does enhance the transparency of the accounts; however, the small size of NPISH transactions means that the experimental estimates presented in this article are not significantly different to published estimates for the household income account.
At present, there is no plan to publish a deconsolidated household income account in the ASNA. The NPISH sector is not of a significant scope or size to justify the resources to produce a time series for implementation into the ASNA. The work undertaken to produce experimental estimates is also contingent on the availability of timely data. The key data source is the NPI Satellite Account; however the ABS has only published three satellite accounts for non-profit institutions, representing points in time rather than time series.
1 System of National Accounts, 2008, para. 4.93 <http://unstats.un.org/unsd/default.htm>. <back
2 United Nations, 2003, Handbook on Non-Profit Institutions in the System of National Accounts, para. 4.16 <http://unstats.un.org/unsd/default.htm>. <back
3 System of National Accounts, 2008, para. 9.116 <http://unstats.un.org/unsd/default.htm>. <back
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