ANALYSIS OF RESULTS


THE 2010-11 SUPPLY AND USE TABLES

The ABS compiles supply and use (SU) tables to generate balanced annual estimates of Gross domestic product (GDP). The SU tables are compiled from 1994-95 to 2010-11 and result in the annual statistical discrepancies for this period being zero. Years prior to 1994-95 have a non-zero statistical discrepancy because SU tables have not been compiled, and so the data remain unbalanced. Similarly, estimates for the latest year (in this case 2011-12) have a statistical discrepancy because SU tables have not yet been constructed.

The supply table measures the goods and services produced in Australia and imports, while the use table measures the use of goods and services for intermediate consumption, final consumption, gross fixed capital formation, changes in inventories and exports. Domestic supply and intermediate consumption are cross classified by industry and product categories, while the other components are simply classified by product category. The use table also provides information on the generation of income from production for each industry.

A large number of data sources are used to compile the national accounts, such as business activity surveys, household expenditure surveys, investment surveys, foreign trade statistics and government finance statistics. The inconsistencies in these data sources lead to differences in the three independent measures of GDP that can be derived using the production, income and expenditure approaches. The primary purpose of the SU tables is to simultaneously balance the production and expenditure measures of GDP by confronting and balancing the supply and use of each product category. This is done in both current prices and in prices of the previous year, thereby ensuring that there are no statistical discrepancies in either the current price or chain volume estimates. Some data sources are superior to others and the confrontation and balancing process at a detailed level allows the higher quality estimates to be used to improve the lesser quality estimates. The process of confrontation also enables any errors or methodological inconsistencies to be more easily identified. The resulting balanced estimates should therefore not only be consistent but are generally of better quality than the unbalanced estimates.

This release of the Australian System of National Accounts (ASNA) incorporates revisions to the annual estimates back to 2001-02. The following key revisions were made in the 2011-12 ASNA:

• Renewable Energy Certificates (RECs) data has been incorporated back to 2001-02. This has resulted in revisions to Gross operating surplus and Other taxes on production. RECs issued under the Renewable Energy Target (RET) in each reference period are recorded as either a capital transfer or a subsidy. A capital transfer is recorded when permits are received on a one-off or irregular basis and are tied to the recipient having to acquire capital assets. A subsidy is recorded where permits are received on an ongoing basis. In the period of the emissions event a tax on production will be recorded for entities liable under the Clean Energy Act. The surrender of RECs by wholesale purchasers of electricity to meet their proportion of the RET will also be recorded as a tax on production in the period of the emissions event.
• The ABS released an Information Paper: Recording Emissions Reduction Schemes in ABS Statistics (cat. no. 5257.0.55.001) on 30 July 2012. This information paper summarises the nature of emissions permit measures introduced under the Clean Energy Act 2011 as well as the other greenhouse gas schemes currently in operation in Australia (including the Commonwealth RET and the Carbon Farming Initiative), and how the ABS expects to include estimates of these schemes in economic and environment statistics, commencing with the September quarter 2012.
• Financial intermediation services indirectly measured (FISIM) has been revised back to 2002-03. This is the result of a revision to source data provided by the Australian Prudential Regulation Authority (APRA). Specifically the revision was a reclassification of loans from households to business. The impacts of this were revisions to Gross value added for most industries and to Household final consumption expenditure in current price terms.
• Gross fixed capital formation has been revised back to 2008-09 to include data in relation to Public Private Partnerships and to incorporate audited annual financial data published in Government Finance Statistics, Australia (cat.no. 5512.0).
• A review of the allocation between Gross operating surplus for Private non-financial corporations and Gross mixed income has resulted in revisions to these two component series. This in turn has caused revisions to the Net saving estimates within the Private non-financial corporation and Household sectors. The Australian Tax Office has supplied a revised version of the Business income tax data for each financial year back to 2001-02, which is used as an indicator for these two component series.
• Household final consumption expenditure has been revised down in 2010-11 by $3.0 billion. The Total rent and other dwelling services series has been revised down by $1.2 billion as part of improving compilation processes. The Recreational and cultural services series has been revised down by $1.5 billion, as a result of reviewing the methodology and indicator used.
• Industry estimates of Gross value added and Gross operating surplus have been revised back to 2008-09 as a result of updated input data from Australian Industry, 2010-11 (cat. no. 8155.0).
• In 2010-11, Australian and New Zealand Standard Industrial Classification (ANZSIC) Division B - Mining Gross value added growth has been revised up in current price terms by 9.8 percentage points to 37.7%, and has been revised down by 0.8 percentage points to -1.4% in volumes. This is the result of incorporating new data sources from Australian Industry, 2010-11 (cat. no. 8155.0) and revisions to Bureau of Resources and Energy Economics source data.
• In 2010-11, ANZSIC Division A - Agriculture, forestry and fishing Gross value added growth has been revised down in current price terms by 11.3 percentage points to 13.2%, and has been revised down by 2.1 percentage points to 7.0% in volumes. This is the result of using data from Australian Industry, 2010-11 (cat. no. 8155.0) that incorporated higher than previously published intermediate input costs.
• Taxes less subsidies on production and imports have been revised to incorporate audited annual financial data published in Government Finance Statistics, Australia (cat.no. 5512.0).
• There have been a number of revisions to non-produced assets in the national and sectoral balance sheets that are the result of the incorporation of the latest available source data as well as changes to existing methodology and compilation processes. The normal rate of return to produced capital has been reviewed in relation to the subsoil assets component. The new rate of return is derived using cost of extraction data, ASNA capital stock estimates and an appropriate discount rate. Updated mineral extraction cost data were provided for the 2011-12 ASNA. Due to the commercial sensitivity of the data provided, individual commodity costs that were previously published in electronic table 62 Value of Demonstrated Subsoil Assets by Commodity - as at 30 June, will no longer be published.
• For minerals that are mined together, it is difficult to obtain extraction costs for individual commodities, therefore the net present values of copper, gold and antimony; mineral sands - ilmenite, rutile and zircon; nickel, platinum and cobalt; and zinc, lead, silver and cadmium, have been aggregated for publication in electronic table 62 Value of Demonstrated Subsoil Assets by Commodity - as at 30 June. However, users still have access to economic demonstrated resource, price, annual production and resource life data for the individual commodities.
• There are revisions relating to the Consumer durables memorandum item in the national and household sector balance sheets. The scope has been adjusted to better align with the 2008 SNA definition of consumer durables. ASNA consumer durables now consists of the following groups of items: motor vehicles; furniture and floor coverings; household appliances; tools and equipment for house and garden; audio and visual equipment; other durable goods for recreation and culture; jewellery, clocks and watches; and therapeutic medical appliances.

The September quarter 2012 issue of Australian National Accounts: National Income, Expenditure and Product (cat. no. 5206.0), to be released on 5 December 2012, will also incorporate these revisions from the 2011-12 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 publicly available as they are an internal compilation tool of the ASNA that is used to generate balanced measures of GDP, implement revisions and facilitate construction of Input-Output tables.


FEATURE ARTICLE: ADJUSTMENTS TO AUSTRALIA’S GDP FOR UNDERGROUND PRODUCTION

Introduction

One of the main objectives in compiling the national accounts is to produce estimates of Australia’s Gross domestic product (GDP) and its components that are measured as exhaustively as possible within the production boundary prescribed in the framework of the ASNA. A large number of collections, ranging from periodic economic and household surveys to annual and quarterly surveys of industry, as well as a range of non-ABS data such as taxation and administrative data are used in the compilation process. However, there are economic transactions that escape measurement in source data and if left unaccounted for, can have implications for the quality of the national accounts and other business statistics.

These transactions comprise the non-observed economy and typically include transactions that are underground, illegal, informal or household production for own final use. While some activity such as illegal production are outside the scope of the ASNA due to measurement difficulties, explicit adjustments are made to indirectly capture other missing activity such as underground production. The purpose of this article is to examine one particular subset of the non-observed economy called the underground economy.


What is Underground Production?

Underground production can be referred to by many terms such as informal, parallel, concealed, unmeasured, unrecorded, untaxed, cash and black. The OECD publication Measuring the Non-observed Economy: A Handbook defines it as “those activities that are productive and legal but are deliberately concealed from the public authorities to avoid payment of taxes or complying with regulations” (OECD 2002, para. 1.18).

Underground production tends to occur in areas where there is a low level of regulation and a high proportion of cash transactions. Thus it tends to be undertaken by small businesses and concentrated in industries such as Construction, Accommodation, cafes and restaurants, Personal and other services, and Retail trade. Typically, owners of these businesses deal directly with their customers and can avoid taxes by under-reporting their income through skimming of cash receipts and/or overstating their business expenses.

Conversely, underground production is less significant in highly regulated industries, the public sector and industries where large businesses predominate, such as utilities, health, education, communications and finance. This is due to stronger incentives for management to report strong sales and profit performances as well as more stringent independent auditing processes.


Adjustments made to GDP

For the ABS, there is interest is in measuring underground production, because lack of coverage causes imbalances in the internal consistency of the accounts as some parts of economic transactions may be measured while other parts are not. For example, household expenditure on goods and services produced underground may be measured because the purchasers have no reason to hide their purchases, whereas the corresponding production activities are not reported by the producers and are therefore absent from source data. As such the focus is not on those transactions that may escape detection by the tax authorities.

Due to the tendency of some businesses to understate their income and overstate expenses, the ABS makes adjustments to quantify underground activity. The adjustments are applied directly to the income and expenditure measures and then converted into an understatement of income adjustment to gross output and an overstatement of expenses adjustment to intermediate use for incorporation into the supply use framework. Data from various sources are confronted through the compilation of annual SU tables to ensure comprehensive and consistent GDP estimates in the benchmark years. Some of the underground economy adjustments would be implicitly made through the normal balancing process.

Table 1: Level of understatement of income/overstatement of expenses, by ANZSIC division in 2010-11
	Level of adjustment to Gross Value Added	Gross Value Added	Percentage of Adjustment to Gross Value Added
	$m	$m	%
A Agriculture, Forestry and Fishing	93	32 156	0.3
B Mining	1 830	131 109	1.4
C Manufacturing	1 650	107 808	1.5
D Electricity, Gas, Water and Waste Services	286	33 810	0.8
E Construction	10 533	103 338	10.2
F Wholesale Trade	834	59 525	1.4
G Retail Trade	657	61 914	1.1
H Accommodation and Food Services	850	32 560	2.6
I Transport, Postal and Warehousing	705	68 542	1.0
J Information, Media and Telecommunications	430	41 581	1.0
K Financial and Insurance Services	91	133 931	0.1
L Rental, Hiring and Real Estate Services	706	29 166	2.4
M Professional, Scientific and Technical Services	618	88 882	0.7
N Administrative and Support Services	264	34 319	0.8
O Public Administration and Safety	-	68 241	-
P Education and Training	669	59 888	1.1
Q Health Care and Social Assistance	-	80 025	-
R Arts and Recreation Services	189	11 179	1.7
S Other Services	318	25 000	1.3
Ownership of Dwellings	-	107 390	-
Total	20 723	1 310 364	1.6
- nil or rounded to zero (including null cells)

Table 1 shows the adjustments to Gross value added (GVA) in each ANZSIC division after the balancing process was completed for the 2010-11 benchmarked year. Around 70% of the total adjustment was added to output while 30% was deducted from intermediate consumption (with some variation between industries). The adjustments rely on indicative information from aggregated income tax audit data, anecdotal evidence and checks and balances inherent in the national accounting methodology.

The estimated size of the underground producation in 2010-11 was $20,723m. This is 1.5% of the value of GDP of $1,403,888m and 3.4% of total gross operating surplus/gross mixed income (GOS/GMI). This compares to last year’s benchmark value for 2009-10 of $17,591m, which was 1.4% of GDP and 3.2% of GOS/GMI for that year. Similar percentage adjustments have been made in the preceding years, meaning that there is little impact on GDP growth rates.

In 2010-11, Construction had the largest adjustment of understatement of income applied to domestic output of 2.3% as well as the largest adjustment of overstatement of expenses applied to intermediate use of -1.2%. The net effect was a $10,533m upward adjustment to GVA or 10.2% of the value for the division.

The next highest adjustments to GVA were in Accommodation and food services (2.6%) and Rental, hiring and real estate services (2.4%).

For more information regarding the conceptual aspects on underground production the ABS is releasing an information paper on 16 November 2012 titled The Non-Observed Economy and Australia's GDP (cat. no. 5204.0.55.008).


OVERVIEW OF AUSTRALIAN ECONOMY IN 2011-12

The Australian economy expanded by 3.4% in 2011-12. Real net national disposable income grew by 4.3%, reflecting a modest rise in the Terms of trade (up 0.6%) from the 20.5% rise in the previous year.

The Household saving ratio was 10.8% for 2011-12, up from 10.7% in 2010-11. Market sector labour productivity increased by 2.9%.

The major contributors to GDP growth in 2011-12 were Gross fixed capital formation increasing 10.1% and contributing 2.7 percentage points to GDP growth and Final consumption expenditure, increasing 3.1% and contributing 2.2 percentage points. Government final consumption expenditure increased 3.1% and Household final consumption expenditure increased 3.2%. The major detractor from GDP growth was Imports of goods and services which increased 11.5% and detracted 2.3 percentage points from GDP growth. Gross fixed capital formation by Public corporations declined by 3.7% reducing GDP by 0.1 percentage points. The level of inventories grew $4.6 billion through 2011-12 compared with $5.8 billion through 2010-11, detracting 0.1 percentage points from GDP growth.

From an industry perspective, the largest increases in Gross value added (GVA) in 2011-12 were recorded by Mining (6.7%), Agriculture (6.3%) and Wholesale trade (6.2%). Within the Mining industry, Iron ore mining recorded growth of 17.1% for the year. A number of industries saw declines for the year, including Administrative and support services (-2.1%), Electricity, gas, water and waste services (-1.3%), Manufacturing (-0.9%) and Information media and telecommunications (-0.5%).

For the Income components of GDP in 2011-12, there was growth in Compensation of employees of 7.2% and in Gross operating surplus (GOS) of 4.3%. The growth in GOS was mainly driven by growth in Financial corporations (7.4%) and Private non-financial corporations (3.9%). Public non-financial corporations GOS fell 4.8% in 2011-12. GOS for General government (5.5%) and Dwellings owned by persons (4.6%) also experienced growth in 2011-12.

The annual movements for the chain price indexes for GDP and Domestic final demand were 1.5% and 1.4% respectively in 2011-12. The small gap in price movements reflects the small 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 2012 was estimated to be $8,367.4 billion in current prices, an increase of $107.4 billion (1.3%) since 30 June 2011.


GDP

Following the fall in GDP in volume terms in 1990-91 there have been 21 years of consecutive growth. In 2011-12 GDP increased by 3.4%. For some analytical purposes it is important to understand the impact of population growth on movements in GDP. In 2011-12, GDP per capita increased by 1.8%. Growth rates in GDP and GDP per capita are presented in the following graph.

RNNDI

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 2011-12, RNNDI increased by 4.3%, reflecting a smaller detraction in Net primary income from non-residents, as the Terms of trade grew only 0.6%.

Household saving

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 -1.0% in 2002-03. In 2011-12 the ratio was 10.8% up slightly from 10.7% 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 3.1% in 2011-12, and contributed 2.2 percentage points to GDP growth.

Household final consumption expenditure (HFCE) increased 3.2% and contributed 1.7 percentage points to GDP growth in 2011-12. In recent years household consumption has contributed between 0.0 and 2.6 percentage points to GDP growth. The main contributor to growth in HFCE in 2011-12 was Total transport (up 5.6%).

Government final consumption expenditure increased 3.1% in 2011-12, contributing 0.5 percentage points to growth in GDP. In recent years, Government final consumption has contributed between 0.3 percentage points and 0.8 percentage points to GDP growth.

Growth in Private investment increased 13.3% in 2011-12, compared with a 5.7% increase in 2010-11. Private investment contributed 2.8 percentage points to GDP growth, up from 1.2 percentage points in 2010-11. This increase was driven by investment in Non-dwelling construction (36.9%), which contributed 2.3 percentage points to growth in GDP.

Total dwelling investment decreased 4.0% and detracted 0.2 percentage points from GDP growth in 2011-12. Investment in New and used dwellings (down 4.9%) and Alterations and additions (down 2.8%) contributed to the decrease in Total dwelling investment.

Public gross fixed capital formation decreased 2.2% in 2011-12 following a decrease of 2.9% in 2010-11. The fall in total public investment was driven by public corporations (down 3.7%) and by general government (down 1.5%). Public investment detracted 0.1 percentage points from GDP growth in 2011-12.

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 2011-12 of 4.9%. The difference between GNE and GDP is due to negative contributions from Net exports and from the Statistical discrepancy.

INDUSTRY

In 2011-12, the industry shares of current price Gross value added (at basic prices) were similar to the year 2010-11. The industry with the largest share was Finance and insurance services with a share of 11%. Mining was the second largest industry with a share of 10%, while Manufacturing recorded an 8% share. Mining has increased its share from 5% in 2001-02 to 10% in 2011-12.

INCOME FROM GDP

The Compensation of employees (COE) share of Total factor income remained relatively stable throughout the 1990s up until the mid 2000s. The highest recorded value of Compensation of employees share of total factor income was 61.9% in 1974-75. Since 2008-09, Compensation of employees share has continued to trend at a similar level forward, recording 53.1% in 2011-12.

The profits share (based on Gross operating surplus for Financial and Non-financial corporations) of Total factor income reached 28.2% in 2011-12, down from the highest share recorded in 2008-09 of 29.9%. The profits shares recorded since the late 1980s are at a distinctly higher level than those reported at any time since 1959-60. Profit share of total factor income 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 SAVING

National net saving relative to GDP increased to 9.8% in 2011-12. This ratio generally increased from 1959-60 to a peak in 1973-74 of 16.9%. The series then gradually decreased, eventually reaching its lowest point of 1.7% in 1991-92. Since then National net saving has continued to increase.

In 2011-12, Financial corporations net saving was $28.9 billion. General government net saving was -$26.0 billion and net saving for Non-financial corporations was $45.4 billion. Household net saving was $96.1 billion.

When analysing household saving it is useful to consider Household net worth, currently at $6,373.4 billion as of 30 June 2012. For more information please refer to Balance Sheets, page 16.

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 2011-12 were 1.5% and 1.4% respectively. This gap in price movements was mainly caused by changes in prices paid for Imports and the prices received for Exports, which were relatively small in 2011-12. Prices of Exports of goods and services showed an increase of 1.8%, while the Prices of Imports of goods and services showed an increase of 1.2%.

The Chain price indexes in 2011-12 for the other major components of GDP, Household final consumption expenditure and Gross fixed capital formation, were 2.3% and -0.3% respectively. See Table 7 for more details.


PRODUCTIVITY

Revisions

This update incorporates significant revisions to growth in chain volume GVA added for the market sector since 2008-09. The revisions were due to both updated source data as well as improved estimation methods in the supply and use tables. These revisions resulted in less volatile multifactor productivity (MFP), moderating the decline in recent years. MFP growth has been positive in two of the last three years.

There have also been significant revisions to the estimation of labour composition for the market sector. Previously, estimates for the whole economy had been applied to the market sector, which had included the labour composition of workers in the non-market sector. As a result of extending the estimation of labour composition to the industry level, the market sector estimate has been improved to reflect only the workers in market sector industries. Accordingly, growth in labour input was revised downwards in some years, resulting in stronger MFP growth in those years.


Results

On an hours worked basis, market sector MFP rose 0.3% in 2011-12, with total inputs contributing 2.8% to the 3.1% increase in output. Capital services growth contributed 2.6% while hours worked growth contributed 0.2%. Labour productivity grew 2.9%.

On a quality adjusted hours worked basis, market sector MFP rose 0.2% in 2011-12. The weaker growth in MFP measured on this basis is due to the positive contribution of 0.1% from changes in labour composition. On a quality adjusted hours worked basis, labour productivity grew 2.7%.

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, MFP in the market sector grew 1.1% per year. Gross value added was 3.5% per year over the same period while total inputs grew 2.4% per year. For the 2003-04 to 2007-08 cycle, MFP declined -0.5% per year. While Gross value added grew 3.7% per year, total inputs grew significantly stronger, at 4.1% per year between 2003-04 and 2007-08.

For both productivity growth cycles combined (1998-99 to 2007-08), MFP growth averaged 0.4% per year. 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 2012. The longer time span is presented for 12 selected industries (ANZSIC divisions A to K and R).


BALANCE SHEETS

Australia's Net worth at the end of June 2012 was estimated to be $8367.4 billion in current prices, an increase of $107.4 billion (up 1.3%) since 30 June 2011. Major contributions to this increase came from Subsoil assets (up $158.5 billion) and Non-dwelling construction (up $143.0 billion). This was offset by a fall in Land (down $202.6 billion). Transactions in assets and liabilities contributed $195.3 billion to the change in Net worth, and a loss of $87.9 billion in holding gains.

Australia's Net international investment position as at 30 June 2012 was a Net foreign liability of $879.5 billion, up $77.1 billion (up 9.6%) on the position a year earlier.

Australia's real net worth rose 2.4% over the year ended 30 June 2012, from 2.6% growth for 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 $6,373.4 billion at 30 June 2012, a decrease of $149.2 billion (down 2.3%) 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 2011-12 investment by Non-financial corporations was 15.7% 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 where it has fallen below 10%. In 2011-12 the ratio to GDP was 7.9%. General government investment as a proportion of GDP peaked at 5.4% in 1967-68 and has generally fallen since then. It was 3.6% of GDP in 2011-12. 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 0.6% of GDP in 2011-12.

In terms of the different asset types, in 2011-12 Private non-dwelling construction represented the largest percentage share at 29.7% of Total gross fixed capital formation, compared with 21.1% for Private machinery and equipment investment.

Over the last 10 years, Private machinery and equipment has fallen from around 29.3% to 21.1% in 2011-12 as a share of Total gross fixed capital formation. The relative shares of investment in other asset types have remained relatively stable over the last 10 years, except Private non-dwelling construction which increased from 15.0% to 29.7%.


INTERNATIONAL TRADE

The 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 2011-12 the Imports ratio was 21.1% and the Exports ratio was 21.4%.

Since 2000-01 volumes of Imports have grown more strongly, up 144.1%, compared with 29.2% growth in 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 Terms of trade over the past ten years reflects 56.0% growth in Export prices and a fall in Import prices of 16.9%. In 2011-12 the Terms of trade increased by 0.6%, following growth of 20.5% in 2010-11, 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 2000-01 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 2011-12 Net exports contributed -1.3 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 2011-12 was 2.8%, up from 2.4% in 2010-11.