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Warning - this document is a previous issue of this product and is out of date. An acrobat version of this document have been released. Please use the acrobat version for the most up to date information Australian System of Government Finance Statistics: Concepts, Sources and Methods (5514.0)
2.28. Australia’s standards for defining institutional sectors and subsectors are based on the SNA93 standards described in appendix 1. As previously noted, the Australian standard is the standard institutional sector classification of Australia (SISCA), which is set out in Standard Economic Sector Classifications of Australia 1998 (ABS Cat. no. 1218.0) or ‘SESCA’. The SISCA standards are applied in the classification of public sector units in the GFS system in Australia.
2.29. As discussed in appendix 1, SNA93 defines three types of institutional units that can qualify as falling within the public sector:
2.30. The institutional sectors comprising the SISCA are as follows:
2.31. Only the first three of these sectors are relevant in the GFS system because, as previously noted, the public sector comprises all units of the general government sector, all public non-financial corporations and quasi-corporations and all public financial corporations and quasi-corporations.
2.32. The composition of the three public sector components in terms of units is discussed below.
2.33. General government comprises all government units (as defined in paragraph 2.29) of the Commonwealth government, each State and Territory government, and each local government authority; and all resident non-market NPIs that are controlled and mainly financed by those governments.
2.34. Included in the sector are government-controlled unincorporated enterprises that engage in market production but do not qualify as quasi-corporations because their operations are too closely integrated with the operations of other government units and are not the subject of a separate full set of accounts.
2.35. All of Australia’s public universities are treated as NPIs that are controlled and mainly financed by government and are therefore included in the general government sector. Each university is established by legislation which gives it the capacity to own assets, incur liabilities and engage in economic activity in its own right. Therefore, each university clearly qualifies as a separate institutional unit.
2.36. Although these universities are funded indirectly from taxation, they each have a high degree of independent revenue-raising capacity and authority to decide how funds are expended. For these reasons, they are not considered to be government units as defined in paragraph 2.29. The universities are treated as NPIs because they cannot distribute surpluses. The question of the institutional sector classification of the universities therefore rests on whether they are controlled and mainly financed by government.
2.37. SNA93 defines government control of a NPI as the ability to determine policy by having the authority to appoint officers managing the NPI. Legislation establishing each of the universities vests responsibility for their management in senates or councils, which include appointees of the establishing government but also include elected and non-elected representatives of other stakeholders. The degree of government control exercised through appointment of officers varies from university to university. Also, other forms of government control are exercised. For example, the fact that the universities are mainly financed by the Commonwealth Government gives that government a significant degree of control.
2.38. Taking into account the combined degree of control of universities exercised in various forms by the Commonwealth Government and State governments and the high degree of government financing, the universities are considered to be mainly controlled and financed by government. Strict application of the rules to each public university individually might result in a minority of them falling outside the general government sector. However, uniform sector classification of all public universities is regarded as an overriding consideration and all have been classified as general government units in the Multijurisdictional sector.
PUBLIC NON-FINANCIAL CORPORATIONS
2.39. This category comprises all resident government controlled corporations and quasi-corporations mainly engaged in the production of market goods and/or non-financial services. Market goods and services are those that are sold at ‘economically significant prices’, which are prices ‘that have a significant influence on the amounts that producers are willing to supply or on the amounts that purchasers wish to buy’ (SNA93, paragraph 4.24). Non-financial services are any services that do not qualify as financial intermediation or auxiliary financial services, both of which are defined in the section below relating to financial corporations. Examples of Australian public non-financial corporations include Telstra and Australia Post and the electricity, railway and port authorities of State and Territory governments.
2.40. For the purposes of sector classification, ancillary corporations are merged with their parent corporation and are therefore included in the non-financial corporations sector if the parent corporation is mainly engaged in production of market goods and/or non-financial services. Ancillary corporations are wholly owned subsidiary corporations that mainly provide services to their parent corporation or other corporations in the same enterprise group.
PUBLIC FINANCIAL CORPORATIONS
2.41. This category comprises all resident government controlled corporations and quasi-corporations mainly engaged in financial intermediation and provision of auxiliary financial services. Financial intermediation is defined as ‘a productive activity in which an institutional unit incurs liabilities on its own account for the purpose of acquiring financial assets by engaging in financial transactions on the market’ (SNA93, paragraph 4.78). Financial intermediaries channel funds from lenders to borrowers by collecting funds from lenders and transforming or repackaging them in ways which suit the requirements of borrowers. Liabilities are incurred by accepting deposits and issuing bills, bonds or other securities. The funds are used to acquire financial assets, principally by making advances or loans to others but also by purchasing bills, bonds or other securities. Auxiliary financial activities are services that are closely related to, and designed to facilitate, financial intermediation. The activities may be performed as secondary activities, by financial intermediaries, or performed on an agency basis by specialists. Examples include securities brokers, flotation companies, loan brokers, agencies that guarantee bills by endorsement, and institutions that arrange hedging instruments such as swaps, options and futures.
2.42. Public financial corporations include institutions that undertake a central bank role, which includes monetary policy development, issuing of national currency, acting as custodian of international reserves, providing banking services to government and regulating the financial system. Thus, the Reserve Bank of Australia and the Australian Prudential Regulation Authority (APRA) are both treated as public financial corporations. Also included as public financial corporations are government controlled banks, insurance companies, pension funds, and economic development corporations and financial auxiliaries owned by Australian governments.
2.43. A central borrowing authority (CBA) has been established by each State and Territory government primarily to provide finance for public corporations and quasi-corporations, and other units owned or controlled by the government, and to arrange investment of their surplus funds. The CBAs borrow funds, mainly by issuing securities, and on-lend to their public sector clientele. Although the CBAs’ lending is confined to the public sector in their jurisdiction, they also engage in other financial intermediation activity for investment purposes, and may participate in the financial management activities of the parent government. Accordingly, the CBAs are treated as public financial corporations. The exception is the Australian Capital Territory’s CBA which does not qualify as a separate institutional unit and is treated as part of the general government sector.
2.44. Also treated as public financial corporations are various housing finance schemes established by State Governments to assist first home buyers. Although the schemes are established under a variety of arrangements, some of which indicate that the schemes could be considered part of general government, they are all classified as public financial corporations or quasi-corporations so that there is uniform treatment.
LEVEL OF GOVERNMENT
2.45. The level of government classification used in Australia’s GFS system is a standard ABS classification that is included in the SESCA. It is based on the SNA93 subdivision of the general government sector into subsectors representing three levels of government (central, state and local). In Australia, the corresponding levels of government are described as national, state/territory and local. The SNA93 level of government classification is an integral part of the institutional sector classification whereas, in Australia, a separate level of government (LOG) classification is defined which can be applied to public corporations as well as to the general government sector. Having a separate classification enables the public sector and each of its components to be classified by LOG, as shown in the following table.
SECTOR BY LEVEL OF GOVERNMENT
2.46. All public sector units that have a national role or function are classified to the national LOG. Units are generally considered to have a national role or function if the political authority underlying their functions extends over the entire territory of Australia or the functions involve policies that are primarily of concern at a national level. The fact that a unit is controlled by the Commonwealth Government is prima facie (but not necessarily conclusive) evidence that the unit has a national role or function. Currently, all Commonwealth-controlled public sector units are classified to the national LOG. Such units include government units controlled by the Commonwealth Government, non-market NPIs that are controlled and mainly financed by the Commonwealth Government, and public non-financial and financial corporations (including the Reserve Bank) controlled by the Commonwealth Government.
2.47. Units that are not controlled by the Commonwealth Government can also be classified to the national LOG. Currently, the only such cases are ‘multi-jurisdictional’ units that have a national role or function. Multi-jurisdictional units are public sector units that cannot be defined unambiguously as under the control of a single government. The main multi-jurisdictional units currently classified to the national LOG are the public universities which, as described above, are mainly financed and partly controlled by the Commonwealth Government but are subject to a degree of control by the establishing State or Territory government. On balance, the public universities are considered to be implementing policy (i.e. tertiary education) that is primarily of concern at a national level.
2.48. All public sector units that have a state or territory role or function are classified to the state/territory LOG. Units are generally considered to have a state or territory role or function if the political authority underlying their functions is limited to a State or Territory or the functions involve policies that are primarily of concern at a state or territory level. The fact that a unit is controlled by a State or Territory government is prima facie (but not necessarily conclusive) evidence that the unit has a state or territory role or function. Currently, all state/territory-controlled public sector units are classified to the state/territory LOG. Such units include government units controlled by a State or Territory government, non-market NPIs that are controlled and mainly financed by a State or Territory government, and all public non-financial and financial corporations that are controlled by a State or Territory government.
2.49. Although units that are not controlled by a State or Territory government, including multi-jurisdictional units, can be classified to the state/territory LOG, none of them are so classified currently.
2.50. All public sector units that have a local role or function are classified to the local LOG. Units are generally considered to have a local role or function if:
The fact that a unit is established as, or directly controlled by, a local government authority is prima facie (but not necessarily conclusive) evidence that the unit has a local role or function. Currently, all local government authorities and the units they control are classified to the local LOG. Such units include each local government authority constituted under one of the various Local Government Acts (or the equivalent) in each State and the Northern Territory, County Councils in New South Wales, Land Councils, Aboriginal Community Councils, all non-market NPIs that are controlled and mainly financed by a local government unit, and all public non-financial and financial corporations that are controlled by a local government unit.
2.51. Although units that are not controlled by local government, including multi-jurisdictional units, can be classified to the local LOG, none of them are so classified currently.
2.52. Government finance statistics are presented for each jurisdiction. In this context, ‘jurisdiction’ means the public sector units over which the Commonwealth Government or an individual State or Territory government has direct control or (in the case of local government authorities) the government which administers the legislation under which the authority was established. Each public sector unit is classified to jurisdiction by reference to the government which exercises such controls over its activities. The categories making up the jurisdiction classification (JUR) are as follows:
2.53. In most cases, classification of units to JUR is straightforward. Thus, each unit that is controlled by the Commonwealth Government is classified to the Commonwealth jurisdiction and each unit that is controlled by a State or Territory government is classified to the jurisdiction of the controlling government. Each local government authority, and all units controlled by local government authorities, are classified to the jurisdiction that administers the local government legislation under which the authority was created. In all cases, this is the State or Territory in which the local government unit is located.
2.54. There are units, however, for which jurisdiction is shared between two or more governments, or classification of a unit to a jurisdiction is otherwise unclear. Such units are included in a ‘multi-jurisdictional’ category, and are excluded from statistics for each of the other jurisdictions.
2.55. All enterprise units are classified to an industry based on the predominant industry of establishments comprising the enterprise. In the hierarchy of standard statistical units, establishments are lower-level units that are used to measure production. They are classified to industry based on their predominant activity. The industries to which establishments can be classified are listed in Australian and New Zealand Standard Industrial Classification 1993 (ABS Cat. no. 1292.0), or ‘ANZSIC’. The industry classification is not used for the publication of government finance statistics but is used internally by the ABS to provide industry-classified GFS information for use in the national accounts.