ANALYSIS OF RESULTS


THE 2012-13 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 2012-13 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 2013-14) 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 the following key revisions:

• Ownership transfer costs (OTCs) have been revised back to 1994-95 after a review of the associated methodology. In particular, the ratios used to calculate the components of OTCs – stamp duty, government charges, real estate agent fees, and legal fees – were updated after a review of various data sources and relevant state government taxation arrangements.

• Other taxes less subsidies on production and imports have been revised back to 2002-03 due to the inclusion of data for State Government Emissions Reduction Schemes.

• Mining industry value added for 2012-13 has been revised down. Annual reporting provides more coverage of mining activity and information on the value of commodities. Price changes in the mining industry can be better incorporated into annual figures as there is greater certainty on the commodity value at the point of export, since transactions will be adjusted if the metal content of the ore differs from original estimates, and incorporates price changes which occur while the commodities are in transit. Consequently, some parts of the mining industry will be subject to improved information assessments in the establishment of supply-use benchmarks.

• Total Gross Fixed Capital Formation (GFCF) for 2012-13 was revised down, led by revisions to private GFCF resulting from updated source data. Downward revisions to private GFCF were however partially offset by upward revisions to public GFCF, which were driven by the inclusion of audited annual data provided by State and Commonwealth Treasuries which is considered more reliable than the data available on a quarterly basis.

• Household Final Consumption Expenditure (HFCE) estimates for 2012-13 were revised down. A major factor was the adoption of revised methods and assumptions used in compiling estimates on Low Value Threshold (LVT) self-assessed clearances.

The September quarter 2014 issue of Australian National Accounts: National Income, Expenditure and Product (cat. no. 5206.0), to be released on 3 December 2014, will also incorporate these revisions.

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.


OVERVIEW OF AUSTRALIAN ECONOMY IN 2013-14

The Australian economy expanded by 2.5% in 2013-14. Real net national disposable income grew by 1.3%. Terms of trade fell 3.7% in 2013-14 compared to a 10.0% fall in the previous year.

The Household saving ratio was 9.7% for 2013-14, down from 10.3% in 2012-13. Market sector labour productivity increased by 1.9%.

The major contributors to GDP growth in 2013-14 were Household final consumption expenditure, increasing 2.2% and contributing 1.2 percentage points to GDP growth, and Exports of goods and services, growing 5.8% and contributing 1.1 percentage points to GDP growth. Public sector gross fixed capital formation increased by 1.2% and private sector gross fixed capital formation declined by 2.1%. Government final consumption expenditure increased by 2.4%, contributing 0.4 percentage points to GDP growth. The level of inventories fell by $2.9 billion through 2013-14 compared to a rise of $2.5 billion through 2012-13, detracting 0.4 percentage points from GDP growth.

From an industry perspective, the largest increases in value added in 2013-14 were recorded by Mining (9.5%), Rental, hiring and real estate services (7.8%), Financial and insurance services (5.3%) and Health care and social assistance (4.9%). A number of industries saw declines for the year, including Wholesale trade (-2.2%), Electricity, gas, water and waste services (-2.1%) and Manufacturing (-1.8%).

For the Income components of GDP in 2013-14, there was growth in Compensation of employees of 2.9%, Taxes less subsidies on production and imports of 7.1% and Gross mixed income of 2.0%. Gross operating surplus (GOS) increased by 6.0%, the rise in GOS being mainly driven by Private non-financial corporations (6.1%) and Financial corporations (8.2%). GOS for General government (5.8%) and Dwellings owned by persons (5.4%) also experienced growth in 2013-14.

The annual movements for the chain price indexes for GDP and Domestic final demand were 1.6% and 2.4% respectively in 2013-14. The gap in price movements reflects the changes in the Terms of trade.

The Net worth of Australia is defined as the difference between Total assets and Total liabilities. Australia's Net worth at the end of June 2014 was estimated to be $9860.9 billion in current prices, an increase of $728.2 billion (8.0%) since 30 June 2013.


GDP

Following the fall in GDP in volume terms in 1990-91 there have been 23 years of consecutive growth. In 2013-14 GDP increased by 2.5%. For some analytical purposes it is important to understand the impact of population growth on movements in GDP. In 2013-14, GDP per capita increased by 0.8%. 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 2013-14, RNNDI increased by 1.3%, reflecting a fall in the Terms of trade of 3.7% and a larger detraction in Net primary income from non-residents.

Household saving

The Household saving ratio is another key aggregate in the national accounts. Household saving cannot be 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 0.0% in 2002-03. In 2013-14 the ratio was 9.7% down from 10.3% 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

Total final consumption expenditure increased 2.3% in 2013-14, and contributed 1.6 percentage points to GDP growth.

Household final consumption expenditure (HFCE) increased 2.2% and contributed 1.2 percentage points to GDP growth in 2013-14. The increase in HFCE was mainly driven by Total miscellaneous goods and services (up 5.1%), Clothing and footwear (up 5.0%) and Food (up 3.1%).

Government final consumption expenditure increased 2.4% in 2013-14, contributing 0.4 percentage points to growth in GDP. In recent years, Government final consumption expenditure has contributed between 0.0 and 0.7 percentage points to GDP growth.

Private investment decreased by 2.1% in 2013-14, compared to a 2.5% increase in 2012-13. Private investment detracted 0.5 percentage points from GDP growth, down from a contribution of 0.6 percentage points in 2012-13. This fall was driven by decreased investment in Machinery and equipment (down 13.1%) and Non-dwelling construction (down 2.1%) which detracted 0.7 percentage points and 0.2 percentage points respectively, from growth in GDP.

Total dwelling investment increased 4.7% and contributed 0.2 percentage points to GDP growth in 2013-14. This increase follows two consecutive years of falls in Total dwelling investment. The increase in 2013-14 was driven by investment in New and used dwellings (7.6%).

Public gross fixed capital formation increased 1.2% in 2013-14 following decreases in the previous three years. The rise in total public investment was driven by National general government (8.1%). Public investment contributed 0.1 percentage points to GDP growth in 2013-14.

Growth in the domestic economy as measured by Gross National Expenditure (GNE), which is the total expenditure within a given period by Australian residents on final goods and services, showed an increase in 2013-14 of 0.8%. The difference between GNE and GDP is due to a positive contribution from Net exports and the Statistical discrepancy.

INDUSTRY

In 2013-14, the industry shares of current price Gross value added (at basic prices) were similar to the year 2012-13. The industry with the largest share was Financial and insurance services with a share of 9.0%. Mining was the second largest industry with a share of 8.9%, while Construction recorded an 8.4% share. Mining has increased as a share from 5.0% in 2002-03 to 8.9% in 2013-14. Manufacturing has decreased as a share from 11.9% to 6.8% over the same period.

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 62.1% in 1974-75. Since 2008-09, compensation of employees share has trended upwards, though there was a slight fall in 2013-14 to 52.9% from 53.5% in 2012-13.

The profits share (based on Gross operating surplus for Financial and Non-financial corporations) of Total factor income reached 26.9% in 2013-14, 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 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.

In 2013-14, National net saving relative to Net disposable income (Gross disposable income less Consumption of fixed capital) was 9.9%. This ratio generally increased from 1959-60 to a peak in 1973-74 of 19.5%. The series then gradually decreased, eventually reaching its lowest point of 1.9% in 1991-92. Since then National net saving as a proportion of Net disposable income has continued to increase.

In 2013-14, Financial corporations net saving was $24.9 billion. General government net saving was -$13.0 billion and net saving for Non-financial corporations was $21.1 billion while Household net saving was $94.0 billion.

When analysing household saving it is useful to consider Household net worth, currently at $7,564.0 billion as of 30 June 2014. For more information please refer to Balance Sheets.


PRICES IN THE NATIONAL ACCOUNTS

Chain Price Indexes are used to measure price changes. The annual movements in GDP and Domestic final demand chain price indexes for 2013-14 were 1.6% and 2.4% respectively. This difference in price movements was caused by changes in the Terms of trade. Prices of Exports of goods and services showed an increase of 3.7%, however this was offset by a larger rise in the price of imports of 7.6%.

The chain price indexes in 2013-14 for the other major components of GDP, Household final consumption expenditure and Gross fixed capital formation, were 2.9% and 2.2% respectively.
PRODUCTIVITY

Revisions

This update incorporates significant revisions to growth in hours worked industry indices, labour productivity industry indices, market sector aggregates, and real unit labour costs. These revisions resulted from new population benchmarks from the 2011 Census of Population and Housing (Census) applied to the labour force estimates. For more information, see the Labour Force, Australia (cat. no. 6202.0) article: Rebenchmarking Labour Force Estimates to the 2011 Census of Population and Housing.

Results

On an hours worked basis, market sector multifactor productivity (MFP) grew 0.2% in 2013-14 reflecting a 2.4% increase in Gross value added and a 2.2% increase in total labour and capital inputs. Capital services grew 4.5% and hours worked grew 0.5%.

Labour productivity grew 1.9% on a hours worked basis. On a quality adjusted hours worked basis, labour productivity grew 1.3%. The weaker growth in 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, MFP in the market sector grew 1.0% per year on average. Gross value added grew 3.5% per year over the same period while total inputs grew 2.5% per year. For the 2003-04 to 2007-08 cycle, MFP declined 0.4% per year on average. While gross value added grew 3.6% per year, total inputs grew 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 on average. Users interested in productivity measures over a longer time span can still access them via the productivity data cube: Experimental Estimates of Industry Productivity, 2013-14 (cat. no. 5260.0.55.002), to be released on 5 December 2014. 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 2014 was estimated to be $9860.9 billion in current prices, an increase of $728.2 billion (8.0%) since 30 June 2013. Major contributions to this increase came from Land ($418.3 billion), Non-dwelling construction ($148.1 billion) and Assets of shares and other equity ($106.7 billion). Holding gains contributed $510.5 billion, Transactions in assets and liabilities contributed $123.0 billion and Other changes in volume contributed $94.8 billion to the change in Net worth.

Australia's net international investment position as at 30 June 2014 was a net foreign liability of $864.2 billion, down $35.6 billion (4.3%) on the position a year earlier.

Australia's real net worth rose 2.5% over the year ended 30 June 2014, down from 3.3% 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 $7564.0 billion at 30 June 2014, an increase of $708.4 billion (10.3%) 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 through the 1990s. Investment by Non-financial corporations as a proportion of GDP started growing during the 2000s before peaking in 2012-13 at 16.4%. Investment by Non-financial corporations, expressed as a share of GDP, retreated this year at 15.2% of GDP.

Household investment (including dwellings owned by persons) as a proportion of GDP declined steadily between 1959-60 and 1974-75 and remained steady at around 10% of GDP until the mid 2000s where it has consistently fallen to below 10% as overall growth in GDP outpaced growth in household investment. In 2013-14, this was reversed and so household investment as a proportion of GDP is moderately higher at 8.2%.

General government investment as a proportion of GDP was at its highest in the late 1960s and has trended down since then. It was 3.4% of GDP in 2013-14.

The highest ever level of Financial corporations investment, expressed as a proportion of GDP, was recorded in 1988-89 and 1989-90 (2.0%). It has generally fallen since then and was 0.6% of GDP in 2013-14.

In terms of the different asset types, in 2013-14, Private non-dwelling construction represented the largest percentage share at 33.0% of Total gross fixed capital formation, compared to the next largest, Private dwellings investment at 17.6%.

Over the past ten years, as a share of total gross fixed capital formation, Non-dwelling construction has increased in both the private and public sector. Private non-dwelling construction has increased from 17.3% to 33.0% of Total gross fixed capital formation.

General government non-dwelling construction has increased from 4.7% to 7.5% of Total gross fixed capital formation. At an industry level over the past ten years mining has increased its share of investment from 8.0% of Total gross fixed capital formation to 30.6%. Manufacturing's share of investment has decreased from 10.2% to 5.0% of Total gross fixed capital formation.
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 2013-14 the Exports ratio was 20.9% and the Imports ratio was 21.3%.

Since 2000-01 volumes of Imports have grown more strongly, up 147.2%, compared to 45.8% growth in volume of Exports.

Prices received for Exports grew more slowly than the prices paid for Imports for the year 2013-14. 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.

Since 2000-01, Export prices have grown 45.4% and Import prices have fallen 11.8%. See Prices in the National Accounts for more details on Export and Import prices. In 2013-14 the Terms of trade decreased by 3.7%, following on from a steep decrease of 10.0% in 2012-13.

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. In 2013-14, Exports grew more rapidly than Imports in volume terms. Net exports contributed 1.6 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 2013-14 was 3.0%, down from 3.9% in 2012-13.