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ANALYSIS OF RESULTS
The September quarter 2011 issue of Australian National Accounts: National Income, Expenditure and Product (cat. no. 5206.0) to be released on 7 December 2011 will also incorporate the full historical revisions from the 2010-11 issue of the ASNA.
Data from the SU tables are also used to construct Australian National Accounts: Input-Output Tables (cat. no. 5215.0.55.001), which present structural detail underlying the Australian economy and provide weighting patterns for Producer Price Indexes, Australia (cat. no. 6427.0).
The SU Tables are not publically available as they are an internal compilation tool of the Australian System of National Accounts that is used to generate balanced measures of GDP, implement historical revisions and facilitate construction of Input-Output tables.
REVISIONS TO HOUSEHOLD FINAL CONSUMPTION EXPENDITURE (HFCE)
Overview of the HFCE compilation
Household final consumption expenditure (HFCE) consists of expenditure incurred by resident Australian households on consumption of goods or services whether the expenditure is made within the domestic territory or by Australian residents abroad. HFCE also includes an estimated value of barter transactions, goods and services received in kind, and goods and services produced and consumed by the same household. In Australia, HFCE also includes expenditure of a current nature by private Non-Profit Institutions Serving Households (NPISH).
The 2010-11 ASNA incorporates a full historical revision cycle, where annual benchmarks may be revised through the entire time series. HFCE has been revised due to the introduction of new source data. There are several sources of benchmark data for the HFCE estimates. One of the main sources is retail sales data from Retail and Wholesale Industries, Australia: Commodities (RIS) (cat. no. 8624.0). Another key data source is the Household Expenditure Survey, Australia (HES) (cat. no. 6530.0), which provides benchmark estimates for components such as Electricity, gas and other fuels, Transport, Communications, Hotels, cafes and restaurants, and Other goods and services. Benchmark estimates from the 2003-04 and 2009-10 HES have been incorporated. Apart from the HES and the RIS, other data sources that have been used in benchmarking the HFCE estimates include Australian Gambling Statistics published by the Queensland Treasury, Survey of Income and Housing (cat. no. 6523.0) and industry reports from both the Real Estate Institute of Australia and Australian Property Monitors. The implementation of these new data sources has resulted in revisions through the time series as previous adjustments and balancing decisions were also re-assessed.
Services in HFCE now account for over 60% of the total, resulting in greater use of the HES. The HES collects information by personal interview from usual residents of private dwellings. However, the scope of HFCE includes all persons residing in Australia, including people living in private and non-private dwellings such as hotels, boarding houses and institutions and those living in remote areas. HFCE also includes expenditure incurred by NPISH.
NPISH comprises all resident Non Profit Institutions that are not engaged in market production and not subject to government control, such as churches, religious societies and charities. NPISH provide goods and services to households free or at prices that are not economically significant. As NPISH receive most of their income in the form of grants, current income of NPISH units is used as a proxy for their current expenditure. Estimates of current grants from government to NPISH units have been sourced from government finance statistics. Private grants comprising donations and sponsorships have been estimated using data from ABS publication Non-Profit Institutions Satellite Account, 2006-07 (cat. no. 5256.0).
Health and Education services are two areas where there are significant differences between the national accounts and the HES data. While the new methodology used in compiling a HES based estimate for both Health and Education services use existing concepts from the Australian National Accounts Concepts, Sources and Methods (CSM) 2000 (cat.no. 5216.0), most of the data sources used in compiling the estimate have changed from those previously outlined. In addition, both Health and Education services have significant NPISH components resulting in substantial differences to the publised HES data.
For Health services, as the scope of HES only includes out of pocket expenses, estimates of household claims from private health insurance and household claims associated with the health service component of workers compensation and motor vehicle and third party insurance are also compiled using administrative data. Furthermore, for the aged care residential services component of Health services, direct expenditure associated with nursing home fees is imputed using Australian Industry, 2009-10 (cat. no. 8155.0) and included in HFCE.
For Education services, apart from the addition of public and private grants to NPISH units providing education services, payments associated with Higher Education Loan Program (HELP) have been estimated using government sources and incorporated into the HFCE estimate.
The newly estimated benchmarks for both Education and Health services are further confronted during the balancing of the SU tables. In addition, various components used in compiling the HFCE estimate at current prices for Health services are confronted with external and internal published estimates. For example, the out of pocket expenses as derived from HES data have been confronted with estimates published by the Australian Institute of Health and Welfare (AIHW) and the ABS publication on Health Care Services 2009-10 (cat no: 8570.0). Household claims from private health insurance and other insurance such as workers compensation and motor vehicle third party insurance for general practice medical services and specialist medical services have been confronted with that published in ABS publication on Health Care Services 2009-10 (cat. no. 8570.0). HFCE estimates at current prices for the non-benchmark years were extrapolated using movements from the existing HFCE series.
Volume HFCE estimates for most products and services are compiled by deflating the current price estimates using price indexes. Volume estimates for Health, Education, Purchase of vehicles and Actual rent for housing are derived by using volume indicators.
For details of a comparison of consumption expenditure between HES and the Australian System of National Accounts, please refer to Appendix 3 of Household Expenditure Survey 2009-10 (cat. no. 6530.0).
Revisions to the HFCE estimates
The implementation of the latest Retail and Wholesale Industry Commodity survey and Household Expenditure Survey data and other data sources in compiling HFCE estimates at current prices has resulted in substantial revisions to the HFCE estimates across the time series. At the aggregate level revisions to current price growth rates range from -0.6% in 2001-02 to 1.5% in 2009-10. In nominal terms, the revisions range from -$6.4 billion in 2004-05 to $14.2 billion in 2009-10. Revisions to growth in volumes range from -0.6% in 2003-04 to 0.4% in 2009-10.
The significant upward revision to the total HFCE estimate for 2009-10 is predominantly driven by an increase in HFCE for various services including Rent and other dwelling services, Other services, Accommodation services, Transport services, Health and Education services. The revised HFCE series for Actual rent for housing closely aligns with Survey of Income and Housing data and industry reports. Upward revisions to the HFCE estimates for various services such as Air passenger transport services and Accommodation services are supported by various internal ABS data sources including Australian Industry, 2009-10 (cat. no. 8155.0), Business Indicators, Australia (cat. no. 5676.0) and Survey of Tourist Accommodation (cat no. 8635.0), respectively.
Revisions to Food consumption are a major contributor to the downward revisions to HFCE at current prices for all years prior to 2007-08. These revisions are supported by Household Expenditure Survey results. Downward revisions were also made to Operation of vehicles and Recreation and culture. Automotive repair and maintenance services is the main contributor to the downward revision to Operation of vehicles. The significant downward revisions to Recreation and culture are mainly driven by Video, other electronic media rental services and Telecommunication and audio visual equipment. HFCE estimates for these series have also been confronted with various data sources including Australian Industry, 2009-10 (cat. no. 8155.0), Business Indicators, Australia (cat. no. 5676.0) as well as within the balancing framework of SU tables.
For further information about the construction of the SU tables and the revisions to HFCE contact Jennifer Humphrys on Canberra (02) 6252 7506.
CHANGES TO PRODUCTIVITY AND RELATED MEASURES
A conceptual change in output valuation is being introduced for aggregate productivity measures in the 2010-11 issue of the ASNA.
The ABS publishes labour, capital and multifactor productivity (MFP) measures for the market sector and a labour productivity measure for the whole economy. In deriving these measures, production for the market sector is measured by GDP market sector and production for the whole economy is measured by GDP. Starting with this release, these will be replaced by Gross value added market sector and Gross value added, respectively. The difference between the new and old measures of production is that the new measures exclude taxes less subsidies on products. The change means that production for the purposes of productivity measurement will be measured at the prices producers receive (i.e. basic prices), rather than the prices purchasers pay (i.e. purchasers' prices).
The new valuation is consistent with the recommendations of the 2001 OECD Manual - Measuring Productivity, which states that
From the perspective of productivity measurement, the choice of valuation should reflect the price that is most relevant for the producer’s decision making; regarding both inputs and outputs. Therefore, it is suggested that output measures are best valued at basic prices (OECD 2001, p. 77).
The change also brings the ABSs aggregate measures of productivity into line with its Experimental Estimates of Industry Multifactor Productivity (cat. no. 5260.0.55.002), industry-level measures, which were introduced in 2007.
For specific information about productivity measures contact the National Information and Referral Service on 1300 135 070, or Derek Burnell on Canberra (02) 6252 6427.
OVERVIEW OF AUSTRALIAN ECONOMY IN 2010-11
The Australian economy expanded by 2.1% in 2010-11. Real net national disposable income grew by 6.3%, reflecting a bounce back in the Terms of trade (up 20.4%) from the 4.0% fall in the previous year.
The Household saving ratio was 9.2% for 2010-11, up from 8.9% in 2009-10. The index of Market sector(footnote 1) labour productivity decreased by 0.3% in 2010-11.
The major contributor to GDP growth in 2010-11 was Final consumption expenditure, increasing 3.2% and contributing 2.4 percentage points. Gross fixed capital formation increased 4.1% and contributed 1.1 percentage points to GDP growth. Government final consumption expenditure increased 2.5% and Household final consumption expenditure increased 3.4%. The major detractor from GDP growth was Imports of goods and services which increased 10.4% and detracted 2.1 percentage points from GDP growth. Ownership transfer costs fell 15.5% in 2010-11 which detracted 0.2 percentage points from GDP and Gross fixed capital formation by Public corporations declined by 4.6% reducing GDP by 0.1 percentage points. The level of inventories grew $5.3 billion through 2010-11, adding 0.7 percentage points to GDP growth.
From an industry perspective, increases were recorded in the value added of most industries in 2010-11 with Agriculture, forestry and fishing (9.1%) recording the largest increase followed by Professional, scientific and technical services (6.9%), Administrative and support services (6.6%), Construction (6.3%) and Transport, postal and warehousing (3.6%). A number of industries saw declines for the year, including Other services (-3.7%), Rental, hiring and real estate services (-1.9%), Wholesale trade (-0.6%) and Mining (-0.6%).
In the Income components of GDP in 2010-11, there was growth in Compensation of employees of 7.7% and in Gross operating surplus (GOS) of 9.5%. The growth in GOS was mainly driven by growth in Financial corporations (11.8%), Public and Private Non-financial corporations (11.3% and 10.1% respectively). GOS for General government (5.6%) and Dwellings owned by persons (7.4%) increased by more modest rates.
The annual movements for the chain price indexes for GDP and Domestic final demand were 6.0% and 2.2% respectively in 2010-11. The difference in these price movements is mainly due to changes in the prices paid for imports and the prices received for exports.
The Net worth of Australia is defined as the difference between Total assets and Total liabilities. Australia's Net worth at 30 June 2011 was estimated to be $8,089.8 billion in current prices, an increase of $62.7 billion (0.8%) since 30 June 2010.
Following the fall in GDP in volume terms in 1990-91 there have been 20 years of consecutive growth. In 2010-11, GDP increased by 2.1%. For some analytical purposes it is important to understand the impact of population growth on movements in GDP. In 2010-11, GDP per capita increased by 0.6%. Growth rates in GDP and GDP per capita are presented in the following graph.
Another measure of national economic activity is Real net national disposable income (RNNDI). This measure adjusts the volume measure of GDP for the Terms of trade effect, Real net income from overseas and Consumption of fixed capital (depreciation). In 2010-11, RNNDI (up 6.3%) grew by more than GDP, reflecting an increase of 20.4% in the Terms of trade (see International Trade, page 17).
The Household saving ratio is another key aggregate in the national accounts. Household saving is not measured directly. It is calculated by deducting Household final consumption expenditure from Household net disposable income.
The Household saving ratio began trending downwards in the mid 1970s and reached a low of 0.5% in 2002-03. In 2010-11 the ratio was 9.2% up from 8.9% in the previous year.
Caution should be exercised in interpreting the Household saving ratio in recent years, because major components of household income and expenditure may be subject to significant revisions.
EXPENDITURE ON GDP
Final consumption expenditure increased 3.2% in 2010-11, and contributed 2.4 percentage points to GDP growth.
Household final consumption expenditure (HFCE) increased 3.4% and contributed 1.9 percentage points to GDP growth in 2010-11. The main contributor to growth in HFCE in 2010-11 was Recreation and culture (up 6.8%).
Government final consumption expenditure increased 2.5% in 2010-11. It contributed 0.5 percentage points to growth in GDP. In recent years, Government final consumption has contributed between 0.3 percentage points and 0.7 percentage points to GDP growth.
Growth in Private investment increased 4.1% in 2010-11, compared with a -2.8% decrease in 2009-10. Private investment contributed 0.9 percentage points to GDP growth, up from -0.6 percentage points in 2009-10. This increase was mainly driven by investment in Non-dwelling construction (10.1%) which contributed 0.6 percentage points to growth in GDP in 2010-11.
Investment in New and used dwellings increased by 5.2% in 2010-11, while Alterations and additions decreased 0.3%. Total dwelling investment increased 2.8% and contributed 0.2 percentage points to GDP growth.
Public Gross fixed capital formation increased 3.8% in 2010-11 after increasing 24.0% in 2009-10. Investment by Public corporations fell 4.6%, while investment by General government increased by 7.8% in 2010-11. Public investment contributed 0.2 percentage points to GDP growth in 2010-11.
Growth in the domestic economy as measured by Gross National Expenditure (GNE), the total expenditure within a given period by Australian residents on final goods and services, showed an increase in 2010-11 of 4.2%. The difference between GNE and GDP is due to a negative contribution from Net exports and a negative contribution from the Statistical discrepancy.
In 2010-11, the industry with the largest share of current price Gross value added (at basic prices) was Finance and insurance services with a share of 11%. Mining was the second largest industry with a share of 10% overtaking Manufacturing which recorded an 8% share (down from 9% in 2009-10). Mining has increased as a share of GDP from 5% throughout the 1990s to 10% in 2010-11.
INCOME FROM GDP
The Compensation of employees (COE) share of Total factor income remained relatively stable during the 1990s. The highest recorded value of the compensation of employees share of total factor income was 61.9% in 1974-75. In more recent times, the compensation of employees share has been trending down to be 52.8% in 2010-11.
The profits share (based on Gross operating surplus for Financial and Non-financial corporations) of Total factor income reached 28.4% in 2010-11 down from the highest share recorded in 2008-09 of 28.8%. The profits shares recorded since the late 1980s are at a distinctly higher level than those at any time since 1959-60. The profit share measure should not be interpreted as a direct measure of 'profitability' for which it is necessary to relate profits to the level of capital assets employed.
National net saving was positive in 2010-11 at $119.9 billion. The Household saving ratio generally increased from 1959-60 to a peak in 1973-74 of 20%. The series then gradually decreased, eventually reaching its lowest point at 0.5% in 2002-03 (a net saving level of $2.4 billion). Since 2004-05 Household net saving has again been increasing and in 2010-11 Household net saving was $76.3 billion (Household saving ratio of 9.2%).
When analysing household saving it is useful to consider Household net worth, currently estimated to be at $6,000.9 billion at 30 June 2011. For more information please refer to Balance Sheets, page 15.
In 2010-11, Financial corporations net saving was $35.1 billion. General government net saving was -$27.8 billion and net saving for Non-financial corporations was $36.3 billion.
PRICES IN THE NATIONAL ACCOUNTS
Chain price indexes are used to measure prices changes. The annual movements in GDP and Domestic final demand Chain price indexes for 2010-11 were 6.0% and 2.2%, respectively. The difference between these price movements was mainly caused by changes in prices paid for imports and the prices received for exports. Prices of Exports of goods and services showed an increase of 17.1%, driven by an increase in Coal (up 24.5%) in 2010-11. Prices of Imports of goods and services showed a decrease of 2.3%. This was driven by falls in Consumption goods (down 3.9%) and Capital goods (down 7.2%).
The Chain price indexes for the other major components of GDP, Household final consumption expenditure and Gross fixed capital formation, were 2.6% and 0.4% in 2010-11.
The market sector Multifactor Productivity (MFP) estimates on an hours worked basis fell 1.3% in 2010-11, reflecting a 2.4% increase in Gross value added for the market sector against a larger increase of 3.7% in total labour and capital inputs. Both inputs grew significantly in 2010-11: capital services continued to grow strongly, increasing 5.0%, and hours worked grew 2.7% after remaining flat over the previous two years.
Labour productivity for the market sector fell by -0.3%, while quality adjusted labour productivity fell by -0.7%. The stronger fall for quality adjusted labour productivity reflects a positive contribution from changes to labour composition, due to educational attainment and work experience.
Caution needs to be exercised in interpreting the MFP results, which are derived as a residual and are therefore sensitive to any measurement errors in the output and input measures. Furthermore, because the figures for productivity growth are relatively low, such errors assume relatively greater importance. In addition, year to year movements may reflect variations in capacity utilisation over business cycles.
Productivity growth cycles
A common method of examining changes in productivity over an extended period involves identifying and dividing the data into productivity 'growth cycles' (see Glossary). Productivity growth cycle peaks are determined by comparing the original MFP estimates with their corresponding long-term trend estimates. The peak deviations between these two series are the primary indicators of a growth-cycle peak, although the more general economic conditions at the time are also considered.
For the 1998-99 to 2003-04 cycle, real output growth in the market sector averaging 3.6% per annum outweighed the corresponding growth in observed total inputs of labour and capital (averaging 2.5% per annum), resulting in MFP growth averaging 1.0% per annum. For the 2003-04 to 2007-08 cycle, real output growth remained about the same averaging 3.5% per annum. However, total inputs grew significantly stronger, averaging 4.3% per annum, resulting in a decline in MFP averaging -0.5% per annum.
For both productivity growth cycles combined (1998-99 to 2007-08), MFP growth averaged 0.3% per annum. Users interested in productivity measures over a longer time span can still access them via the Productivity data cube: Experimental Estimates of Industry Multifactor Productivity (cat. no. 5260.0.55.002), to be released on 7 December 2011. The longer time span is presented for 12 selected industries (ANZSIC divisions A to K and R).
Australia's Net worth at 30 June 2011 was estimated to be $8,089.9 billion in current prices, an increase of $62.7 billion (up 0.8%) since 30 June 2010. Major contributions to this increase came from Non-dwelling construction (up $110.9 billion) and Dwellings (up $77.9 billion). This was offset by a fall in Land (down $178.7 billion). Transactions in assets (both capital and financial) and liabilities contributed $168.6 billion to the change in Net worth, while holding gains fell $105.8 billion.
Australia's Net international investment position as at 30 June 2011 was a Net foreign liability of $781.1 billion, up $4.2 billion (up 0.5%) on the position a year earlier.
Australia's real net worth rose 2.8% over the year ended 30 June 2011, following growth of 1.9% in the previous year.
Balance sheets are produced in current prices for each institutional sector in the economy. Of these, the household sector had the highest net worth at $6000.9 billion at 30 June 2011, an increase of $7.1 billion (up 0.1%) from the previous year.
INVESTMENT AT CURRENT PRICES
Investment represents about a quarter of the level of GDP. Understanding which sectors are investing and expanding their future economic capacity provides an insight into the underlying dynamics within the economy.
As a proportion of GDP, investment by Non-financial corporations fell during the 1970s and was reasonably stable up to the 1990s. It has generally been above 10% and in 2010-11 investment by Non-financial corporations was 13.2% of GDP. Household investment as a proportion of GDP declined steadily between 1959-60 and 1974-75 and remained steady at around 10% of GDP until recently when it has fallen below 10%. In 2010-11 the ratio to GDP was 8.5%. General government investment as a proportion of GDP peaked at 5.4% in 1967-68 and has generally fallen since then. It was 4.1% of GDP in 2010-11. The highest ever level of Financial corporations investment, expressed as a proportion of GDP, was recorded in 1989-90 (1.8%). It has generally fallen since then and was 0.7% of GDP in 2010-11.
In terms of the different asset types, in 2010-11 private Non-dwelling construction represented the largest percentage share at 22.7% of total Gross fixed capital formation, compared with 21.0% for private Machinery and equipment investment.
Over the last 10 years, private Machinery and equipment has fallen from around 29.3% to 21.0% in 2010-11 as a share of total gross fixed capital formation (GFCF). The relative shares of investment in other asset types have remained relatively stable over the last 10 years, except for private Non-dwelling construction which increased from 15.3% to 22.7%.
The growing importance of international trade to the Australian economy is illustrated by the following graph which shows the ratios of exports and imports of goods and services to GDP in current prices since 1959-60. In 2010-11 the imports ratio was 19.7% and the exports ratio was 21.2%.
Since 2000-01 the volume of Imports has grown more strongly, up 120.0%, compared with 24.0% growth in the volume of Exports.
While in volume terms Imports have been growing faster than Exports, the prices received for Exports have been growing faster than the prices paid for Imports. The Terms of trade represents the relationship between the prices of exports and imports. An increase (decrease) in the Terms of trade reflects Export prices increasing (decreasing) at a faster rate than Import prices.
The strong growth in the Terms of trade over the past ten years reflects growth in Export prices of 53.7% and a fall in Import prices of 18.7%. See Prices in National Accounts on page 14 for more details on Export and Import prices. In 2010-11, the Terms of trade increased by 20.4%, the highest annual increase since the start of the time series in 1959-60.
Net exports represent the difference between Exports and Imports. Net exports detract from GDP growth when the change in the volume of Imports has been greater than the change in the volume of Exports. Since 2001-02 Net exports have detracted from GDP growth, in most part from increasing Imports, with the only exception being 2008-09 when Net exports contributed 1.0 percentage points to GDP growth. In 2010-11 Net exports contributed -2.0 percentage points to GDP growth.
In addition to the trade in goods and services, the flow of funds between Australia and overseas is an important component of the relationship with the rest of the world. Australia has generally been a net borrower of funds from overseas. In the national accounts, this situation is reflected by a negative value for net lending to non-residents. The last time Australia was a net lender of funds to the rest of the world was in 1972-73. The ratio of net borrowing from overseas to GDP in 2010-11 was 2.4%, down from 4.2% in 2009-10.
1 The market sector of the economy consists of the following industries : Agriculture, forestry & fishing, Mining, Manufacturing, Electricity, gas, water & waste services, Construction, Wholesale trade, Retail trade, Accommodation & food services, Transport, postal & warehousing, Information media and telecommunications, Finance & insurance services, Rental, hiring & real estate services, Professional, scientific & technical services, Administrative and recreation services, Arts and recreation services and Other services. <back
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