Latest release

Australian System of National Accounts: Concepts, Sources and Methods

This publication outlines the major concepts, definitions, data sources and methods used to prepare the National Accounts estimates

Reference period
2020-21 financial year
Released
9/07/2021

Preface

The national accounts explain how the Australian economy operates, and how it evolves over time, by measuring, classifying, and aggregating these transactions. Gross Domestic Product (GDP) is the highest profile estimate, but the Australian System of National Accounts (ASNA) cover a range of other economic measures. These include a full set of flow accounts for each sector of the economy (income, capital and financial), input-output tables, supply and use tables, satellite accounts, state-based estimates, balance sheets and reconciliation accounts, and productivity estimates.

This publication is a guide to the Australian System of National Accounts. It outlines the major concepts and definitions, describes the data sources and methods used to prepare the estimates, and discusses the accuracy and reliability of the national accounts.

It is designed for both intensive users, such as economic and financial analysts, as well as less intensive users looking to gain a better understanding of national accounts, or the Australian economy in general.

This is the seventh edition of Australian System of National Accounts: Concepts, Sources and Methods. The chapters released in this edition have been updated to reflect changes made to the sources and methods used to compile the Australian System of National Accounts undertaken since the sixth edition.

This is consistent with the following ABS publications, inclusive of the most recent releases:

The first edition of the Australian System of National Accounts: Concepts, Sources and Methods, in its current format, was published in July 2012. This was timed to reflect implementation of the 2008 System of National Accounts (SNA 2008), the Sixth Edition of the IMF’s Balance of Payments and International Investment Position Manual (BPM6) and the 2006 Australian and New Zealand Standard Industrial Classification (ANZSIC06).

The second edition was published in September 2012, and included the chapter on the concepts, sources and methods that underpin the Australian Input-Output tables.

The third edition was published in December 2012 and included five additional chapters covering productivity and analytical measures; state accounts; satellite and environmental-economic accounts; and the quality of the national accounts.

The fourth (December 2013) and fifth (January 2015) and sixth (March 2015) editions reflected changes to the sources and methods used to compile the Australian System of National Accounts. None of these editions included new chapters.

Michael Smedes

Program Manager, Production, Income and Expenditure

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Chapter 1 Introduction

1.1    This chapter describes the nature, purpose and history of the Australian System of National Accounts (ASNA) as well as key improvements since the previous update in 2015. The ASNA is based on the international standard, the System of National Accounts, 2008 (2008 SNA). The 2008 SNA ensures consistency with related manuals, such as the International Monetary Fund Balance of Payments and International Investment Position Manual, sixth edition (BPM6), which was updated simultaneously with the 2008 SNA, as well as Australian Government Finance Statistics, Concepts, Sources and Methods 2015 (AGFS15). Coinciding with the implementation of the revised international standards, the ASNA currently adopts the 2006 Australian and New Zealand Standard Industrial Classification (ANZSIC06).

1.2    Although balance of payments and government finance statistics are an integral part of the Australian National Accounts, a description of concepts and data sources used for these statistics is included only for those aggregates that appear in the National Accounts. A detailed discussion of the key improvements introduced into the ASNA as a result of 2008 SNA implementation can also be found in Information Paper: Implementation of new international statistical standards in ABS National and International Accounts, (September 2009). For a more detailed description of balance of payments statistics, see Balance of Payments and International Investment Positions, Australia: Concepts, Sources and Methods and for Government Finance Statistics, see AGFS15.

Nature, purpose and history of National Accounts

Nature and purpose of National Accounts

1.3    National Accounts provide a systematic statistical framework for summarising and analysing economic events, the wealth of an economy, and its components. Historically, the principal economic events recorded in the National Accounts have been production, consumption, and accumulation of wealth. National Accounts have also recorded the income generated by production, the distribution of income among the factors of production and the use of the income, either for consumption or acquisition of assets. The modern accounts additionally record the value of the economy's stock of assets and liabilities, and record the events, unrelated to production and consumption, that bring about changes in the value of the wealth stock. Such events can include revaluations, write-offs, growth and depletion of natural assets, catastrophes, and transfers of natural assets to economic activity.

1.4    The national accounting framework has always consisted of a set of accounts that are balanced using the principles of double entry accounting. However, the accounts are now fully integrated in that there is a balance between the value of assets and liabilities at the beginning of an accounting period, the transactions and other economic events that occur during the accounting period, and the closing values of assets and liabilities. Accounts for the economy as a whole are supported by accounts for the various sectors of the economy, such as those relating to the government, households and corporate entities. The framework also embraces other, more detailed, accounts such as financial accounts and input and output (I-O) tables, and provides for additional analyses through social accounting matrices and satellite accounts designed to reflect specific aspects of economic activity such as tourism, health and the environment. By applying suitable price measures, the National Accounts can be presented in volume terms as well as in current prices. The time series of the National Accounts can also be adjusted to remove seasonal distortions and to disclose trends.

1.5    National accounting information can serve many different purposes. In general terms, the main purpose of the National Accounts is to provide information that is useful in economic analysis and formulation of macroeconomic policy. The economic performance and behaviour of an economy as a whole can be monitored using information recorded in the National Accounts. National Accounts data can be used to identify causal relationships between macroeconomic variables and can be incorporated in economic models that are used to test hypotheses and make forecasts about future economic conditions. Using National Accounts data, analysts can gauge the impact of government policies on sectors of the economy, and the impact of external factors such as changes in the international economy. Economic targets can be formulated in terms of major national accounting variables, which can also be used as benchmarks for other economic performance measures, such as tax revenue as a proportion of gross domestic product or the contribution of government to national saving. Provided that the National Accounts are compiled according to international standards, they can be used to compare the performance of the economies of different nations.

1.6    However, the full range of information available from a comprehensive national accounting system can serve purposes well beyond immediate concerns of macroeconomic analysts. For example, National Accounts information can be used to analyse income and wealth distribution, financial and other markets, resource allocation, the incidence of taxes and welfare payments, environmental issues, productivity, industry performance, and so on. In fact, the range of analytical purposes that can be served by a complete system of National Accounts has no well-defined limits, and the body of National Accounts data can be seen as a multi-purpose data base that can be used with a high degree of flexibility.

1.7    Surveys and other statistical systems that employ the concepts in the national accounting framework will produce information that is consistent with the National Accounts and with other statistics that are based on the National Accounts framework.

Brief history of National Accounts

1.8    The idea of estimating national income can be traced back to the seventeenth century. Interest in raising revenue and in assessing England's war potential led to attempts by Sir William Petty in 1665 and Gregory King in 1688 to estimate the national income as either the sum of factor incomes or the sum of expenditures. A little later, Boisguillebert and Vauban used a similar approach in estimating France's national income.

1.9    The eighteenth century French economists called the Physiocrats took a step backwards when they restricted the concept of national income by arguing that only agriculture and the extractive industries were productive. However, Quesnay, one of the Physiocrats, set out the interrelationships between the various activities in the economy in his tableau economique, published in 1758, which was the forerunner of the twentieth century work on I-O statistics.

1.10    In his book, the An Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith rejected the Physiocrats' view of the pre-eminent position of agriculture, by recognising manufacturing as another productive activity. However, Smith and the early classical school of economists that he founded did not recognise the rendering of services as productive activity. Karl Marx was also of this view, and the notion persisted in the material product system of National Accounts that was used, until recently, by the centrally planned economies.¹

1.11    Some English economists, in particular Ricardo and Marshall, further refined the concept of production and in the 1920s the welfare economists led by Pigou undertook the first effective measurement of national income.

1.12    The Great Depression of the 1930s, and the attempts by Keynes and others to explain what was happening to the world economy, led economists away from their preoccupation with national income as a single measure of economic welfare. Instead, they attempted to use the new Keynesian General Theory to develop a statistical model of the workings of the economy that could be used by government to develop prescriptions for a high and stable level of economic activity. By the end of the 1930s, the elements of a national accounting system were in place in several countries. The models of Ragnar Frisch and Jan Tinbergen stand out in this period as path-breaking achievements.

1.13    The economic modelling task was given further impetus in the 1940s; first, by the need to efficiently run war-time economies; second, by the publication in 1941 of Wassily Leontief's classic I-O study The Structure of the American Economy; third, by the post-war acceptance by governments of full responsibility for national and international economic management; and last, by the League of Nations publication of an important report about social accounting. By the end of the decade, integrated statistical reporting systems and formal national accounting structures were in place in Australia, the United States, the United Kingdom, Canada, the Scandinavian countries, the Netherlands and France.

1.14    The need of international organisations for comparable data about the economies of member countries was one important factor that prompted development of international standards for national accounting in the late 1940s and early 1950s. The Organisation for European Economic Co-operation sponsored the work of Richard Stone's National Accounts Research Unit at Cambridge University, from which emerged the now-familiar summary accounts of the nation.² Then the United Nations Statistical Office convened its first expert group on the subject. It was also headed by Stone and, in 1953, produced the publication, A System of National Accounts and Supporting Tables (SNA)³, which described the first version of the system that has become the accepted world-wide standard for producing National Accounts.

1.15    There were several other important developments in national accounting in the 1950s. M.A. Copeland and his colleagues in the United States Federal Reserve System prepared the first flow-of-funds tables, which analysed transactions in financial markets. A few countries increased the frequency of National Accounts information by producing quarterly estimates of national income and expenditure (so that their governments could better monitor the business cycle) and also produced information classified by industry and institutional sector (to identify growth industries, poorly performing institutional sectors etc.).

1.16    National accounting's modern era could be said to have started in 1968. In that year, the United Nations Statistical Office published a fully revised version of the SNA, which drew together all the various threads of economic accounting: estimates of national income and expenditure (including estimates at constant prices); I-O production analysis; flow-of-funds financial analysis; and balance sheets of national wealth.⁴ In 1977 the United Nations Statistical Office published detailed international guidelines on the compilation of balance sheet and reconciliation accounts within the SNA framework.⁵

1.17    Since 1968, changes in the structure and nature of economies, the increasing sophistication and growth of financial markets and instruments, emphasis on the interaction of the economy with the environment and other considerations pointed to a need to update the SNA. The task of updating and revising the SNA was coordinated from the mid-1980s by the Inter-secretariat Working Group on National Accounts, working with the assistance of international organisations and experts from national statistical offices around the world. The Working Group consisted of the Commission of the European Communities (Eurostat), the International Monetary Fund (IMF), the Organisation for Economic Co-operation and Development (OECD), the United Nations (UN) and the World Bank. The resulting 1993 SNA was released under the auspices of those five organisations.⁶

1.18    The 1993 SNA aimed to clarify and simplify the 1968 System, while updating the System to reflect new circumstances. The 1993 SNA fully integrated national income, expenditure and product accounts, I-O tables, financial flow accounts and national balance sheets to enable the examination of production relationships and their interaction with countries' net worth and financial positions. 1993 SNA also introduced the concept of satellite accounts to extend the analytical capacity of National Accounts in areas such as tourism, health and the environment. It was one of a quartet of 'harmonised' international statistical standards that included the standards set out in the IMF publications, Balance of Payments Manual 1993 (fifth edition) (BPM5), Manual of Monetary and Financial Statistics (MMFS), and A Manual of Government Finance Statistics (second edition) (GFS). In this context, 'harmonisation' means that the standards employ common concepts and definitions so that valid comparisons can be made of statistics produced from each of the four systems. Complete alignment of the standards was neither feasible nor necessary, because each system serves different purposes. Each system therefore had a proportion of unique concepts and definitions.

1.19    The 2008 SNA was commissioned by the United Nations Statistical Commission to bring the national accounting framework as outlined in the 1993 SNA into line with the needs of data users. It was considered that the economic environment in many countries has evolved significantly since the early 1990s and, in addition, methodological research had resulted in improved methods of measuring some of the more difficult components of the accounts. The 2008 SNA does not recommend fundamental or comprehensive changes. Further consistency with related manuals, such as those on the balance of payments (which was updated simultaneously with the 2008 SNA), on government finance statistics and on monetary and financial statistics, was an important consideration. Therefore, there is more harmonisation between the 2008 SNA and related manuals. The key changes fell into five main groups: assets; the financial sector; globalisation and related issues; the general government (GG) and public sectors; and the informal sector. Australia's policy is to apply each of the standards to the highest feasible degree, a high level of harmonisation will be found between the Australian National Accounts and Australia's balance of payments, government finance, and monetary and finance statistics.

Endnotes

  1. There is an international standard for material product balances: UNSO (1971) Basic Principles of the System of Balances of the National Economy, Studies in Methods, Series F(17). New York:  United Nations Statistical Office (UNSO).
  2. OEEC (1952a) National Accounts Studies, 1951-53. Paris:  Office of European Economic Co-operation; and OEEC (1952b) A Standardized System of National Accounts. Paris:  Office of European Economic Co-operation.
  3. UN (1953) A System of National Accounts and Supporting Tables, Studies in Methods, Series F(2). New York:  United Nations.
  4. UNSO (1968) A System of National Accounts, Studies in Methods, Series F(2), Rev. 3. New York:  United Nations Statistical Office (UNSO).
  5. UNSO (1977) Provisional International Guidelines on the National and Sectoral Balance-sheet and Reconciliation Accounts of the System of National Accounts, Statistical Papers, Series M(60). New York:  United Nations Statistical Office (UNSO).
  6. System of National Accounts 1993. Brussels/Luxembourg, New York, Paris, Washington D.C.:  Commission of the European Communities, International Monetary Fund (IMF), Organisation for Economic Co-operation and Development (OECD), United Nations and World Bank.

National Accounts in Australia

1.20    Australia pioneered work on national wealth in 1890 when Coghlan (the New South Wales Government Statistician) prepared rudimentary balance sheets for New South Wales. However, it was not until almost sixty years later, at the Conference on Research in Income and Wealth in 1948, that national balance sheets again received serious international attention.

1.21    The first official estimates of national income for Australia (based on estimates prepared by Clark and Crawford) were published in 1938 in The Australian Balance of Payments, 1928-29 to 1937-38, although unofficial estimates by several economists had been published in the 1920s and 1930s.⁷ In 1945, the first official set of National Accounts was prepared by the then Commonwealth Bureau of Census and Statistics (CBCS) and published in the Commonwealth Budget Paper Estimates of National Income and Public Authority Income and Expenditure.

1.22    The 1960s and early 1970s were times of significant development for Australian national accounting. The first official quarterly estimates of national income and expenditure were published in December 1960.⁸ In 1963 the CBCS published the first Australian National Accounts: National Income and Expenditure (ANA) bulletin, which included the first annual constant price estimates for Australia.⁹ Experimental I-O estimates were published in 1964.¹⁰ The CBCS began to seasonally adjust its quarterly estimates of national income and expenditure in 1967. Estimates of gross product by industry at constant prices were published for the first time in 1969.¹¹ In 1971, the CBCS first published seasonally adjusted, constant price quarterly estimates of national income and expenditure, which later proved to be among the most used of all national accounting estimates. The CBCS published estimates of national income and expenditure based on the revised SNA (1968 version) in 1973, and also published the first official I-O statistics in the same year.¹²

1.23    In the 1980s, the former CBCS, now called the Australian Bureau of Statistics (ABS), again made significant progress in national accounting. The first full edition of Australian National Accounts: Concepts, Sources and Methods was published in 1981 at about the same time as the first experimental estimates of capital stock.¹³ The ABS conducted a study into the accuracy and reliability of the quarterly estimates of national income and expenditure and published the results in 1982.¹⁴ Experimental State accounts¹⁵ were published in 1984, followed by the first official estimates in 1987.¹⁶ They are now published annually in Australian National Accounts: State Accounts. In 1985, the ABS published an assessment of the effects of rebasing constant price estimates from a 1979-80 base to a 1984-85 base.¹⁷ In 1986, the second set of experimental estimates of capital stock was published¹⁸ followed in 1987 by the first official estimates of capital stock.¹⁹ The first quarterly estimates of constant price gross product by industry were released in 1988.²⁰ These estimates were subsequently incorporated into the quarterly publication, Australian National Accounts: National Income, Expenditure and Product.

1.24    Further significant developments in national accounting and associated statistics occurred during the 1990s. In 1990, the first estimates of multifactor productivity were published.²¹ In 1990, the ABS also published developmental flow of funds accounts, showing the changes in financial assets and liabilities arising from the financing of productive activity in the economy.²² Flow of funds estimates are now published on a quarterly basis, along with estimates of stocks of financial assets and liabilities at the end of each quarter. An Information Paper describing the impact of rebasing constant price estimates from a 1984-85 base to a 1989-90 base was published in 1993.²³ Experimental estimates of national balance sheets for Australia were first released in 1995, followed by the publication of regular annual national and sector balance sheet estimates in 1997.²⁴ Australian National Accounts: Supply Use Tables commencing 1994-95 were first introduced (but not published) into the annual National Accounts in 1998, in conjunction with the implementation of 1993 SNA, as an integral part of the annual compilation of Gross Domestic Product (GDP). They ensure GDP is balanced for all three approaches (production, expenditure and income) and provide the annual benchmarks from which the quarterly estimates are compiled.

1.25    The 1993 SNA was formally introduced into the National Accounts in the September quarter 1998 issue of Australian National Accounts: National Income, Expenditure and Product, which was released in December 1998. Prior information on the nature and impact of implementation of the revised standards and methods was provided in a series of discussion and information papers as follows:

1.26    Preliminary data on a 1993 SNA basis were made available in re-releases of the following publications:

1.27    The first annual national accounts publication on a 1993 SNA basis was Australian System of National Accounts, 1997-98, released in April 1999. This publication provided comprehensive national and sectoral accounts, including balance sheets, as well as estimates of capital stock and multifactor productivity. A significantly updated edition of Australian National Accounts: Concepts, Sources and Methods was published in 2000. It outlined the implementation of the 1993 SNA in the national accounts statistics of Australia.

1.28    There were major changes to the Australian tax system from 1 July 2000 with the introduction of The New Tax System (TNTS). A major feature of the new arrangements was the introduction of a goods and services tax (GST), which affected the prices of a broad range of goods and services in the economy. The GST replaced wholesale sales taxes (WST) and a number of other taxes on production and imports, although not all of these taxes were abolished from 1 July 2000. The introduction of the GST was accompanied by reductions in personal income tax rates and increases in social security payments. There were also changes to company tax arrangements. The information paper, ABS Statistics and The New Tax System, and the feature article in the March quarter 2000 issue of Australian National Accounts: National Income, Expenditure and Product, provide more detail on the impact of this change. The TNTS was introduced into the National Accounts in the September quarter 2000 issue of Australian National Accounts: National Income, Expenditure and Product and 2000-01 issue of the Australian System of National Accounts.

1.29    The first Australian National Accounts: Tourism Satellite Account, 1997-98 was published in 2000 on a pre-GST basis and post-GST from 2002 annually. There have been other satellite accounts published occasionally, namely the Australian National Accounts: Non-Profit Institutions Satellite Account in 2002 and 2009, and the Australian National Accounts: Information and Communication Technology Satellite Account in 2006.

1.30    A significant development in state accounts occurred in 2007 with the estimation of Gross State Product using the production approach (GSP(P)). Consequently, the headline measure of GSP was the average of the existing GSP estimated using the income/expenditure approach and GSP(P). The first estimates were released in Australian National Accounts State Accounts in 2006-07. The information paper, Gross State Product using the Production Approach GSP(P) outlined the methods and sources for estimating GSP(P).

1.31    In February 2012, the System of Environmental and Economic Accounting (SEEA) was elevated as an international statistical standard. Additional parts to the SEEA, namely applications and ecosystems, are still in development. This development process occurred over many years and the ABS was, and will continue to be, at the forefront of the international efforts. Crucially, the SEEA is fully integrated with SNA concepts and therefore provides harmonised information across the environment and economic domains. Where necessary, environmental accounting can extend the asset and production boundaries of the SNA framework to better encapsulate the environment and its resources. The ABS releases a range of annual accounts including Water Account, Australia and Energy Account, Australia and Waste Account, Australia, Experimental Estimates. Land accounts for selected States and regions of Australia are also available, and progress has been made developing environmental expenditure accounts (see discussion paper).

1.32    The 2008 SNA was formally introduced into the National Accounts in the September quarter 2009 issue of Australian National Accounts: National Income, Expenditure and Product and the annual release of Australian System of National Accounts, 2008-09, which were released in December 2009. Prior information on the nature and impact of implementation of the revised standards and methods was provided in the following information papers:

1.33    The standards set out in the 2008 SNA (as well as 1993 SNA) are designed to be applied with a degree of flexibility, and Australia's implementation of the standards reflect local conditions and requirements. Furthermore, decisions are made in isolated instances to depart from the standards because of strong user preference for an alternative view and such departures are noted at appropriate points throughout this manual. The departures are relatively minor and, consequently, they do not affect the comparability of National Accounts information reported by the ABS to international organisations such as the UN and the OECD to a significant extent. A list of the main departures from 2008 SNA is provided in Appendix 2.

Endnotes

  1. Clark, C. & J.G. Crawford (1938) The National Income of Australia. Sydney: Angus and Robertson; CBCS (1938) The Australian Balance of Payments, 1928-29 to 1937-38. Canberra:  Commonwealth Bureau of Census and Statistics (CBCS); the earlier unofficial estimates are discussed in Chapter 2 of N.G. Butlin (1962) Australian Domestic Product, Investment and Foreign Borrowing, 1861 to 1938-39. Cambridge:  Cambridge University Press.
  2. CBCS (1960) Quarterly Estimates of National Income and Expenditure. Canberra:  Commonwealth Bureau of Census and Statistics (CBCS).
  3. CBCS (1963) Australian National Accounts: National Income and Expenditure, 1948-49 to 1961-62. Canberra:  Commonwealth Bureau of Census and Statistics (CBCS).
  4. CBCS (1964) Australian Input-Output Tables, 1958-59. Canberra:  Commonwealth Bureau of Census and Statistics (CBCS).
  5. CBCS (1969) Estimates of Gross Product by Industry at Current and Constant Prices, 1959-60 to 1965-66. Canberra:  Commonwealth Bureau of Census and Statistics (CBCS).
  6. CBCS (1973) Australian National Accounts: Input-Output Tables, 1962-63. Canberra:  Commonwealth Bureau of Census and Statistics (CBCS).
  7. Bailey, Cherylee (1981) Studies in National Accounting: Current-cost and Constant-cost Depreciation and Net Capital Stock. Canberra:  Australian Bureau of Statistics (ABS).
  8. Johnson A.G. (1982) The Accuracy and Reliability of the Quarterly Australian National Accounts. Canberra:  Australian Bureau of Statistics (ABS).
  9. Burrell S., Daniel J., Johnson A. and R. Walters (1984) State Accounts, Australia: Issues and Experimental Estimates. Canberra:  Australian Bureau of Statistics (ABS).
  10. ABS (1987) Australian National Accounts: State Accounts, 1985-86. Canberra:  Australian Bureau of Statistics (ABS).
  11. Dippelsman, R.J. (1985) The Effects of Rebasing the Constant Price Estimates of the Australian National Accounts. Canberra:  Australian Bureau of Statistics (ABS).
  12. Walters, R. and R. Dippelsman (1986) Estimates of Depreciation and Capital Stock, Australia. Occasional Paper 1985/3. Canberra:  Australian Bureau of Statistics (ABS).
  13. ABS (1987) Australian National Accounts: Estimates of Capital Stock, 1985-86. Canberra:  Australian Bureau of Statistics (ABS).
  14. ABS (1988) Australian National Accounts: Gross Product, Employment and Hours Worked, June Quarter, 1988. Canberra:  Australian Bureau of Statistics (ABS).
  15. ABS (1990) Occasional Paper: Estimates of Multifactor Productivity, Australia. Canberra:  Australian Bureau of Statistics (ABS).
  16. ABS (1990) Information Paper: Australian National Accounts: Flow of Funds Developmental Estimates. Canberra:  Australian Bureau of Statistics (ABS).
  17. ABS (1993) Information Paper: Australian National Accounts: Introduction of Constant Price Estimates at Average 1989-90 Prices. Canberra:  Australian Bureau of Statistics (ABS).
  18. ABS (1993) Occasional Paper: National Balance Sheets for Australia: Issues and Experimental Estimates, 1989 to 1992. Canberra:  Australian Bureau of Statistics (ABS).

Purpose of concepts, sources and methods

1.34    The main purpose of this manual is to provide users with an in-depth understanding of the National Accounts statistics as an aid to more effective use and interpretation of the statistics. A detailed understanding of the underlying statistical standards and concepts, and of the methods used to compile the statistics, should enable users to make better judgements about the economic significance, quality and accuracy of the statistics. To achieve this aim, this manual provides an updated account of the concepts, sources and methods used to compile the Australian National Accounts statistics. A number of appendices are also included to provide additional information on particular aspects of national accounting, such as the classifications underlying the accounts.

1.35    Wide spectrums of audiences require information about National Accounts concepts, sources and methods. These range from users with broad, general needs for information about the main aggregates to those with highly specialised needs relating to particular data items. The main categories of users, and their likely needs, are set out below:

  • students at upper high school level or undergraduate level at university – the need is for a broad understanding of the conceptual framework, how the numbers are put together, and the main outputs (publication tables, written and graphic analysis, and explanatory notes) to gain an appreciation of the current performance of the Australian economy;
  • financial journalists – the need is for a broad understanding of the conceptual framework, how the numbers are put together, and the main outputs, to support media comment on the current performance of the Australian economy. These users may need to delve deeper into particular aspects;
  • teachers/teaching academics – a broad understanding of the conceptual framework, how the numbers are put together, and the main outputs, to support teaching about Australia’s economy. These users may also need to delve deeper into particular aspects;
  • financial sector economists, economists working for interest groups, national and international investors, public sector economists in other countries, and international credit rating agencies – a reasonably detailed understanding of the conceptual framework, the sources and how the numbers are put together, to support their interpretation of the statistics and advice to their organisations and clients;
  • international agencies such as the IMF, the OECD, the World Bank and the United Nations Statistics Division – generally these agencies require a reasonably detailed understanding of all aspects of the statistics. Their uses encompass monitoring the extent of country adherence to international standards and practices, the compilation of country groupings and world economic statistics, and modelling work to support the preparation of country reports;
  • academic researchers – a reasonably detailed understanding of the conceptual framework, the sources, and how the numbers are put together, with more detail on particular accounts/items to support research and modelling;
  • National Accounts compilers in other countries – a reasonably detailed understanding of Australian sources and methods, with more detail on particular accounts/items, to compare with their own practices; and
  • the Commonwealth Treasury, the Reserve Bank of Australia (RBA), the Productivity Commission and other public sector economists – a reasonably detailed understanding of Australian sources and methods to support their interpretation of the numbers and forecasting of national accounting aggregates.

1.36    For students and others who need only a broad understanding of the National Accounts statistics, the ABS publication, Measuring Australia’s Economy provides a brief overview of the concepts, structure and classifications of these and the other major economic statistics published by the ABS. The present concepts, sources and methods document should prove a useful extension, but for the most part it may be too detailed for this audience.

1.37    The present document is aimed mainly at the user of National Accounts statistics who is interested in the more detailed aspects. However, it is not a complete description of the ABS National Accounts methodology. That task would require a much larger publication. This publication aims to provide a substantial guide to what the ABS does to compile National Accounts.

The Australian System of National Accounts

Scope of the Australian System of National Accounts

1.38    The ASNA forms a body of statistics that incorporates a wide range of information about the Australian economy and its components. In addition to the long-standing statistics of national income, expenditure and product, the accounts include the financial accounts, I-O tables, balance sheet statistics (including capital stock statistics), multifactor productivity statistics, state accounts, and satellite accounts. The ultimate scope of the ASNA encompasses the full range of statistics that the 2008 SNA recommends for a complete national accounting system. However, like most other countries, Australia does not yet compile the full range of information recommended in the 2008 SNA. The areas where the ABS is yet to implement the 2008 SNA recommendations are identified at relevant points throughout this manual and are summarised in Appendix 2, Differences between ASNA and 2008 SNA.

1.39    The current scope of the ASNA is best described by the list of statistical bulletins that comprise the ASNA data. These are as follows:

1.40    The data on capital stock and balance sheet that were previously available in a separate annual publications are now included in the ASNA.

1.41    In general terms, the information published in the ASNA and NIEP covers the economic transactions related to the economic functions of production, consumption and accumulation of wealth. The functions are recorded in a central set of accounts comprising a gross domestic product account, a national income account, a national capital account, a financial account and a balance sheet. Important economic variables such as gross domestic product, disposable income, final consumption expenditure, gross saving, net lending or borrowing and net worth are recorded in these accounts. Changes to the balance sheet values of financial assets and liabilities arising from events other than transactions (for example, write-offs and revaluations) are recorded in the ASNA. Supporting accounts in these publications provide further breakdowns (for example, by institutional sector and industry) of the variables recorded in the central accounts.

1.42    The information published in the Input-Output Tables and State Accounts can be described as further disaggregations of information included in the ASNA. For example, in the central Supply Use table, the economy's total supply of products is shown according to the industries that produced the products, and the use of products by each industry is recorded, as are the factor incomes generated by each industry. The information published in the State Accounts provides a summary record for each Australian State and Territory of the production account published in the ASNA.  

1.43    Finance and Wealth includes disaggregations of information published in the ASNA and NIEP, but also includes disaggregations of balance sheet information for financial assets and liabilities. The financial accounts include flow of funds statistics, which provide sectoral capital accounts with the corresponding sectoral financial account. The financial accounts provide a breakdown (financial instrument cross-classified by counterparty sector) of transactions recorded in the financial account (counterparty sectors are the sectors with which the subject sector has undertaken the subject transactions). The financial accounts also record the value of financial assets and liabilities at the end of each quarter, broken down by instruments cross-classified by counterparty sector.

1.44    The satellite accounts for Tourism,  Non-Profit Institutions and Information and Communication Technology present specific details on a particular topic (both in monetary and physical terms) in an account which is separate from, but linked to, the information published in the ASNA. Satellite accounts allow an expansion of the National Accounts for selected areas of interest while maintaining the concepts and structures of the core National Accounts. Implicitly data presented in satellite accounts are included in the National Accounts, but they can go further and include data that is not in the National Accounts at all.

1.45    In summary, the ASNA provides a record of Australia's economic wealth and the changes to that wealth brought about by economic activity. The Australian National Accounts statistics are also disaggregated to provide information about economic assets and activities for sectors, industries, and products, and about different types of assets, liabilities, transactions and other economic events. In terms of economic information, the scope of the statistics is therefore very wide, and the only economic activities omitted from that scope are those that fall outside the defined boundaries of production, consumption, accumulation and economic assets. Nevertheless, the ASNA does not necessarily provide all of the macroeconomic measures that analysts require, and statistical offices, including the ABS, are working to improve and extend the body of macroeconomic statistics.

General nature of ASNA methodology 

1.46    The sources and methods used to compile National Accounts are typically many and varied, and the Australian situation is no exception. From the perspective of users of the ASNA, an understanding of the sources of information used and the methods applied to compile the National Accounts is useful because such matters can influence the quality, accuracy and reliability of the statistics. A detailed account of the sources and methods underlying the data compiled for key variables in the central transaction accounts and for specific sets of data, such as appear in the financial accounts and the balance sheets, are outlined in other sections. The next few paragraphs provide a broad description of the processes and infrastructure that underlie compilation of the ASNA.

1.47    Because of the wide range of information included in the ASNA, capture of the data by means of a single survey, or even a few surveys, would not be feasible. Since many parts of the accounts record transactions in which two parties are involved, there are at least two possible sources of information about such transactions, and compilers can economise by targeting the least costly sources of information without compromising the quality of the data significantly. Quality of the data source is of paramount importance. Furthermore, surveys are not the only sources of information, and advantage must be taken of administrative and other records that contain relevant information obtainable at less cost than surveys.

1.48    However, before using information from surveys or administrative records, National Accounts compilers must be sure that the information is consistent with national accounting standards and that there are no gaps or overlaps between the various sources. A high proportion of information used in compiling the Australian National Accounts comes from surveys that use the ABS register of businesses and other organisations (referred to as the 'business register') to provide the target population. The business register is a list of economic units that are defined according to national accounting standards. The units are also defined so as not to overlap, and every effort is made to include all economically significant units so that there are no gaps in the coverage of the relevant fields of economic activity. Although most of the ABS surveys that provide data for the ASNA are used primarily to compile other economic statistics, the survey questions are generally designed to comply with national accounting concepts so that the survey results are consistent with National Accounts statistics. Where administrative data are used, the National Accounts compiler has less control over the application of standards and the possible existence of gaps and overlaps. Some potential sources of this type may be rejected because they cannot be reconciled with survey results or deviate too much from National Accounts standards.

1.49    Once reliable and consistent sources of data have been established, the major task of the National Accounts compilers is to bring together the data in the national accounting framework. In some cases, there may be two sets of data relating to the same variables, in which case discrepancies must be investigated and a choice made as to which data are more reliable. Furthermore, the ASNA includes balances that are equal in concept but are derived from different data sources. For example, net lending or borrowing in the capital account is equal in concept to net change in financial position in the financial account but is derived entirely from non-financial transactions, whereas net change in financial position is derived entirely from financial transactions. Such balances provide a measure of the consistency of the two sets of data and can be used to monitor the accuracy and quality of the statistics. When differences are unavoidable or unresolved, rather than force a balance, compilers may record the differences in the accounts as 'statistical discrepancies' or 'net errors and omissions'.

1.50    Business and administrative records do not always provide information that reflects economic reality. For example, interest charges generally include a service charge as well as a return on capital invested. In such cases, the 2008 SNA prescribes imputation of the required information. In other cases, transaction flows have to be rerouted, as with employers' contributions to superannuation funds on behalf of their employees, which are paid to superannuation funds but are recorded in the ASNA as payable directly to employees as a component of employee remuneration. Therefore, National Accounts compilers must put in place systems to derive such imputed information. Thus, data obtained from surveys or administrative records may be adjusted or rearranged to meet the 2008 SNA requirements.

1.51    Two significant processes are applied by compilers to derive additional data of considerable interest: time series analysis and production of chain volume measures. Time series analysis includes seasonal adjustment and estimation of trend values. Seasonal adjustment involves estimation of seasonal factors in the data and adjustment of the data to remove the seasonal effect. Trend values are estimated by removing irregular movements from seasonally adjusted data. Chain volume estimation involves removing the effects of price changes from source data, which are recorded at current prices.

1.52    Once all adjustments and derivations have been made, compilers should have a complete dataset that can be checked for consistency with data for previous periods and data from other systems. Known as output editing, this form of checking aims to detect errors that may have slipped through at earlier stages of compilation, and which may require inquiry back to the supplier of the source data. Data may be queried because the resulting movement from the previous period (or the same period in the previous year) appears implausible or is inconsistent with the movement of other related variables. After all checks have been completed and errors or inconsistencies explained or removed, the statistics are cleared by a senior statistician for publication.

1.53    Australian National Accounts statistics include major economic indicators that are in strong demand and can influence financial markets. Therefore, care is taken to ensure that no user receives the statistics before the designated release time, with a small number of exceptions. These exceptions relate to designated officers in certain government departments, such as the Treasury and the Department of the Prime Minister and Cabinet, who are required to prepare briefing material on the statistics for their Ministers; they are subject to a strict embargo until the official release of the National Accounts.

1.54    Because Australian National Accounts statistics are often compiled from source data that are preliminary or incomplete, the statistics are often revised when final or more complete information comes to hand. Such revisions to the data are therefore relatively common. Furthermore, seasonally adjusted and trend data are subject to revision because the adjustment factors for seasonal and irregular influences change over time as more data are added to the time series. Similarly, chain volume measures are subject to revision whenever the reference period is changed and when a new base year is introduced.

Uses of Australian National Accounts statistics

1.55    The uses of the statistics included in the ASNA mainly arise from the role of the National Accounts as a framework for evaluating economic performance. However, given the wide range of information included in the ASNA, economic performance can be evaluated at a number of different levels, including the economy as a whole, the various sectors and subsectors of the economy, individual States and Territories, individual industries and individual products. Furthermore, information is available for different time frames, including quarterly data for measuring short-term changes in economic conditions and more detailed annual information for measuring longer-term changes. Seasonally adjusted and trend series facilitate analysis of short-term movements in quarterly data, and chain volume measures help to isolate volume movements in the economic indicators.

1.56    The estimates of national income, expenditure and product are well established as a framework for monitoring the current performance of the Australian economy, and are closely followed and analysed by government and private sector economists, the media, financial markets, credit rating agencies and others with an interest in current economic trends. General interest centres on trend and seasonally adjusted chain volume measures of key variables such as gross domestic product as an indicator of growth, measures of income such as compensation of employees (COE) and gross operating surplus (GOS) of corporations, the expenditure items of final consumption expenditure (government and households) and gross fixed capital formation (GFCF), the ratio of net household saving to net household disposable income, and production classified by industry groupings. Such information is used in short-term economic forecasting, in analyses underlying forecasts and economic policy settings in Commonwealth and State/Territory government budgets, in models of economic activity that simulate the effects of economic policy and behaviour, and in international comparisons of Australia's economic performance with the performance of other countries.

1.57    As well as Australia's National Accounts, the ABS produces annual accounts for each of Australia's States and Territories published in the State Accounts. These provide estimates of GSP and state final demand. An important use of the state accounts is to compare each State and Territory in terms of levels of economic activity and rates of economic growth.

1.58    The financial accounts data (published in Finance and Wealth) have more specialised uses, relating to financial markets and the financial sector. They are used by government and private sector economists as short-term indicators of the demand for credit, which reflects overall economic conditions and expectations. The sectoral and instrument breakdowns in the financial accounts enable detailed analysis of stocks and flows related to borrowing and lending. Depending on economic conditions, user interest may focus, for example, on the borrowing and debt of governments, or on the ratio of debt to equity financing of private corporations. The financial accounts provide an alternative view (to that shown in the real accounts) of national and sectoral saving, and indicate the composition of saving in terms of financial instruments. For example, these accounts can show trends in household saving toward superannuation and the extent of accumulation of household debt. Financial market analysts and participants use the financial accounts to assess growth in the markets for various forms of finance (e.g. deposits, loans, shares, debt securities) and sources of finance (e.g. banks, non-bank depository institutions, life offices and pension funds, non-residents) used by borrowers.

1.59    The national balance sheet data on the level and composition of Australia's assets and liabilities indicate the economic resources of, and claims on, the nation and each sector, and support assessments of the external debtor or creditor position of a country. The monetary estimates of natural resources contained in the balance sheet are underpinned by a dataset of physical estimates detailing levels of particular natural resources. Due to the experimental nature of the monetary estimates, it is considered that monetary estimates on natural resources should be considered in conjunction with the physical estimates, especially for mineral and energy resources. The estimates provide information for monitoring the availability and exploitation of these resources and for assisting in the formulation of environmental policies and resource pricing.

1.60    Sectoral balance sheets provide information necessary for analysing a number of topics. Examples include:

  • the computation of widely used ratios, such as debt-to-equity, non-financial to financial assets, and debt-to-income; and
  • the provision of additional information on the relationship between consumption and saving behaviour.

1.61    Companies can compare the return on their own assets with returns achieved nationwide. Prospective investors may examine the unit values and returns on; for example, the various mineral and energy resources to guide investments in particular industries.

1.62    The ASNA I-O tables provide a much more detailed disaggregation of gross domestic product than is available in the national income, expenditure and production GDP accounts. I-O tables are used to facilitate economic analysis in a number of ways, for example:

  • they provide a means of undertaking comparative analysis of industries within an economy as well as across economies;
  • they provide the basis for a detailed understanding of the linkages and dependencies that exist within an economy;
  • given the set of assumptions implicit in the I-O framework, they provide a means of forecasting the economic effects of a change in demand on economic variables such as value added, prices and employment;
  • they constitute a core component of many modern general equilibrium models which may be used for a number of purposes including forecasting; and
  • they provide a framework whereby the confrontation of data from various sources can be undertaken, thereby providing a means of improving the accuracy of the National Accounts and economic statistics in general.

1.63    Satellite accounts are used to expand the analytical capacity of the National Accounts for selected areas of social concern in a flexible manner, without overburdening or disrupting the National Accounts. They involve the rearrangement of classifications used in the National Accounts and the possible introduction of complementary elements but do not change the underlying concepts of the National Accounts.

1.64    The National Accounts are used as a framework for other economic statistics. Given the comprehensive nature of the National Accounts coverage of economic activity, most economic statistics relate in some way to elements of the National Accounts. Conversely, National Accounts compilers draw upon a wide range of economic statistics to provide information for inclusion in the National Accounts. For these reasons, national statistical offices usually design economic statistics systems that are based on the concepts employed in the National Accounts. Such a strategy ensures that users of economic statistics can relate the statistics to the National Accounts, and that National Accounts compilers have sources of information that are conceptually compatible with the National Accounts. As noted previously, such an integrated approach to the production of economic statistics is followed in the ABS. It is administered through use of a single business register as the source of survey populations for most ABS economic statistics, and the strict application of national accounting concepts in the design of the business register and the surveys, including the units model, data item definitions and classifications.

Chapter 2 Overview of the conceptual framework

Introduction

2.1    The conceptual framework of the ASNA is based on the standards set out in 2008 SNA. The ASNA does not include all the elements of the 2008 SNA framework, although Australia's implementation is extensive. Some minor variations have been adopted in the ASNA to allow for specific Australian data supply conditions or user requirements; these are noted at appropriate points throughout this manual.

2.2    The ASNA records key elements of the Australian economy: production, income, consumption (intermediate and final), accumulation of assets and liabilities, and wealth. These elements comprise economic flows and stocks that are grouped and recorded, according to specified accounting rules, in a set of accounts for the economy as a whole and for various sectors and subsectors. The sectors and subsectors comprise groups of institutional units with the same economic role. Statistics are also produced for industries, which comprise groups of producing units with common outputs. At a more detailed level, I-O statistics are produced that record the supply and use of different types of goods and services, or products, by the various industries. Many of the statistics in the ASNA are compiled as chain volume measures as well as current price terms by application of 2008 SNA recommendations for price and volume measures.

The conceptual elements of ASNA

Institutional units and sectors

2.3    In 2008 SNA, the basic unit for which economic activity is recorded is the institutional unit. An institutional unit is an economic entity that is capable, in its’ own right, of owning assets, incurring liabilities and engaging in economic activities and transactions with other entities. In the Australian system, the legal entity unit is closest to the 2008 SNA concept of the institutional unit. However, in the ASNA, the unit used is the enterprise, which can be a single legal entity or a group of related legal entities that belong to the same institutional subsector. Four main types of institutional units are recognised in 2008 SNA and the ASNA: households, non-profit institutions, government units and corporations (including quasi-corporations).

2.4    Institutional units are grouped into institutional sectors according to their characteristics and institutional role. All households are allocated to the household sector. Corporations and quasi-corporations are allocated to the non-financial corporations sector or the financial corporations sector according to whether their predominant function is production of goods and non-financial services, or production of financial services. Government units are all allocated to the general government sector. The allocation of non-profit institutions depends on the nature of their operations. Those mainly engaged in market production are allocated to the relevant corporate sector. Those mainly engaged in non-market production are allocated to the general government sector if they are controlled and mainly financed by government; otherwise, they are allocated to the non-profit institutions serving households (NPISH) sector. In the ASNA, the NPISH sector is included in the household sector.

2.5    The various domestic sectors and subsectors include only resident institutional units. The concept of residency used in the ASNA is the same as the concept used in balance of payments statistics, and is based on the requirement that an institutional unit must have a centre of predominant economic interest in Australia's economic territory to be an Australian resident unit.

2.6    Further detail on institutional units and sectors is outlined in Chapter 4.

Transactions and other flows

2.7    Economic flows reflect the creation, transformation, exchange, transfer or extinction of economic value and involve changes in the volume, composition or value of assets and liabilities. In the national accounts, economic flows are divided between transactions and other flows. Transactions generally involve interactions by mutual agreement between institutional units, but also include certain events that occur within institutional units, such as consumption of fixed capital and some types of production for the unit's own use. Other economic flows are changes in the value or volume of assets and liabilities that arise from events other than transactions, such as mineral discoveries, catastrophic losses, depletion, write-offs, and growth of natural assets.

2.8    The 2008 SNA groups elementary transactions and other flows into a relatively small number of types according to their nature. They are:

  • Transactions in goods and services (products) describe the origin (domestic output or imports) and use (intermediate consumption, final consumption, capital formation or exports) of goods and services. By definition, goods and services in the SNA are always a result of production, either domestically or abroad, in the current period or in a previous one. The term products is therefore a synonym for goods and services.
  • Distributive transactions consist of transactions by which the value added generated by production is distributed to labour, capital and government and transactions involving the redistribution of income and wealth (taxes on income and wealth and other transfers). The SNA draws a distinction between current and capital transfers, with the latter deemed to redistribute saving or wealth rather than income.
  • Transactions in financial instruments (or financial transactions) refer to the net acquisition of financial assets or the net incurrence of liabilities for each type of financial instrument. Such changes often occur as counterparts of non-financial transactions. They also occur as transactions involving only financial instruments. Transactions in contingent assets and liabilities are not considered transactions in the SNA.
  • Other accumulation entries cover transactions and other economic flows not previously taken into account that change the quantity or value of assets and liabilities. They include acquisitions less disposals of non-produced non-financial assets, other economic flows of non-produced assets, such as discovery or depletion of mineral and energy resources or transfers of other natural resources to economic activities, the effects of non-economic phenomena such as natural disasters and political events (wars for example) and finally, they include holding gains or losses, due to changes in prices, and some minor items.²⁵

Assets and liabilities

2.9    The 2008 SNA (with the ASNA being consistent) states that:

  • Assets and liabilities are the components of the balance sheets of the total economy and institutional sectors. In contrast to the accounts that show economic flows, a balance sheet shows the stocks of assets and liabilities held at one point in time by each unit or sector or the economy as a whole. Balance sheets are normally constructed at the start and end of an accounting period, but they can in principle be constructed at any point in time. However, stocks result from the accumulation of prior transactions and other flows, and they are modified by future transactions and other flows. Thus, stocks and flows are closely related.
  • The coverage of assets is limited to those assets which are subject to ownership rights and from which economic benefits may be derived by their owners by holding them or using them in an economic activity as defined in the SNA. Consumer durables, human capital and those natural resources that are not capable of bringing economic benefits to their owners are outside the scope of assets in the SNA.
  • The classification of assets distinguishes, at the first level, financial and non-financial (produced and non-produced) assets. Most non-financial assets generally serve two purposes. They are primarily objects, usable in economic activity and, at the same time, serve as stores of value. Financial assets are necessarily and primarily stores of value, although they may also fulfil other functions.²⁶

Products and producing units

2.10    Goods and services, also called products, are the result of production. They are exchanged and used for various purposes: as inputs in the production of other goods and services, as final consumption or for investment. Institutional units may produce a variety of products and therefore can be too heterogeneous in terms of their productive activity to provide useful information about industries. Hence 2008 SNA specifies the use of narrower units than institutional units for the purpose of providing statistics about production classified by industry.

2.11    The producing unit recommended in 2008 SNA is the kind-of-activity unit, which is a part of an institutional unit that engages in one productive activity. However, 2008 SNA also suggests that an alternative unit can be used, namely the establishment, which covers all productive activity at a single location.

2.12    In the ASNA, the producing unit is the type of activity unit (TAU), which is the largest unit within a business for which relevant accounts are kept, having regard for industry homogeneity. However, ASNA does not recognise an establishment unit as outlined in 2008 SNA.

2.13    In the ASNA, each TAU is classified to an industry that is defined in the ANZSIC06, which is based on the principles and classification structure set out in the United Nations' International Standard Industrial Classification of All Economic Activities (ISIC), Rev.4. ISIC is the industry classification that the 2008 SNA recommends for use in national accounts.

2.14    Further detail on products and producing units is outlined in Chapter 5.

Relationship with other conceptual frameworks

2.15    The national accounts are important for providing a framework for economic statistics. The accounts provide a conceptual framework for ensuring the consistency of the definitions and classifications used in different, but related, fields of statistics. It also acts as an accounting framework to ensure the numerical consistency of data drawn from different sources. Consistency between different statistical systems enhances the analytical usefulness of all the statistics involved. Therefore, the harmonisation of 2008 SNA and related statistical systems is a key feature of the system.

2.16    ASNA is also harmonised with other statistical systems: the balance of payments, government finance statistics, and monetary and financial statistics. Australia's balance of payments was updated and aligns with BPM6, which was updated simultaneously with the 2008 SNA. Australia's government finance statistics, which feed into the national accounts, align with the International Monetary Fund's revised GFSM released in 2014.

Rules of accounting

2.17    Fundamental to the national accounts is the measurement of economic activity within the economy, i.e. the recording of the transfer of products from one unit to another. 2008 SNA states:

… a distinction is made between legal ownership and economic ownership. The criterion for recording the transfer of products from one unit to another in the SNA is that the economic ownership of the product changes from the first unit to the second. The legal owner is the unit entitled in law to the benefits embodied in the value of the product. A legal owner may, though, contract with another unit for the latter to accept the risks and rewards of using the product in production in return for an agreed amount that has a smaller element of risk in it. Such an example is when a bank legally owns a plane but allows an airline to use it in return for an agreed sum. It is the airline that then must take all the decisions about how often to fly the plane, to where and at what cost to the passengers. The airline is then said to be the economic owner of the plane even though the bank remains the legal owner. In the accounts, it is the airline and not the bank that is shown as purchasing the plane. At the same time, a loan, equal in value to payments due to the bank for the duration of the agreement between them is imputed as being made by the bank to the airline.²⁷

2.18    The 2008 SNA and ASNA accounting rules cover the valuation, time of recording and grouping by aggregation, netting and consolidation of individual stocks and flows.

2.19    All entries in the national accounts should be recorded at the market price current at the time of recording. The appropriate value for exchanges of goods and services is generally the transaction price. Where no transaction price is available, reference is made to the market value of similar goods and services. When no market prices of equivalent goods and services are available, the goods and services are valued at cost. By convention, all non-market goods and services produced by government units and non-profit institutions are valued at cost. Some goods are valued by writing down (depreciating) the initial acquisition costs. Where none of the foregoing methods is feasible, use can be made of the present value of expected future returns. However, this method is not generally recommended.

2.20    2008 SNA recommends that all economic flows be recorded in the national accounts on an accrual basis (i.e. when economic value is created, transformed, exchanged, transferred or extinguished). Accrual recording ensures that economic events are recorded consistently and without distortion arising from leads and lags in accompanying cash flows. In general, use of accrual recording means that:

  1. flows involving change of ownership are recorded when ownership changes;
  2. services are recorded when provided;
  3. distributive transactions, which are those associated with the distribution of income to owners of the factors of production, are recorded as amounts payable accumulate;
  4. interest is recorded as it accumulates rather than when it falls due for payment;
  5. output is recorded as production takes place; and
  6. intermediate consumption is recorded when goods and services are used

2.21    For the most part a strict accrual basis of recording is applied in the ASNA, although special procedures are sometimes required to estimate certain flows on an accrual basis.

2.22    In the national accounts, data are recorded in aggregates (i.e. the sums of the values of stocks and flows of a given type such as total output) and balancing items (i.e. the differences between aggregates on each side of an account or between other balancing items such as saving). A degree of netting is employed in the national accounts in as much as transactions with opposite sign are often combined (e.g. acquisitions and disposals of financial assets are recorded as 'net acquisitions'). Consolidation refers to the elimination of transactions between units in the same sector or subsector from aggregates. In the ASNA, consolidation is generally confined to transactions within establishments, to transfers between institutional units within the general government and household sectors, and to transactions in used fixed assets within sectors. In contrast to 2008 SNA, property income flows within institutional sectors and sectoral (or subsectoral) transactions in financial instruments are consolidated in ASNA. Transactions between establishments of the same enterprise are generally not consolidated, however transactions in financial instruments and related income flows are fully consolidated.

2.23    National accounting is based on the principle of double entry as in business accounting. Each transaction must be recorded twice, once as a resource (i.e. income) and once as a use (i.e. expense). The total of transactions recorded as resources and as uses must be equal, thus permitting a check on the consistency of the accounts. Economic flows that are not transactions have their counterpart directly as changes in net worth. The recording of the consequences of an action as it affects all units and all sectors is based on a principle of quadruple entry accounting, because most transactions involve two institutional units. Correctly recording the four flows involved ensures full consistency in the accounts.

2.24    Further detail on accounting rules is available from Chapter 3.

Endnotes

  1. SNA, 2008, paras. 2.27-2.30.
  2. SNA, 2008, paras. 2.33-2.35.
  3. SNA, 2008, para. 2.47.

The Accounts

The full sequence of accounts

2.25    2008 SNA divides the accounts into two main classes: the integrated economic accounts and the other parts of the accounting structure. The integrated economic accounts use the institutional units and sectors, transactions, and assets and liabilities together with the rest of the world to form the accounts. These are the accounts presented in ASNA, but not in the same format. The other parts of the accounting structure bring in the conceptual elements of production units, products, purposes, employment and population to assist in the production of the integrated economic accounts (e.g. S-U tables) or to present the data in different ways.

2.26    The integrated economic accounts are grouped into three categories:

  1. Current accounts - present production, and the generation, distribution and use of income;
  2. Accumulation accounts - present changes in assets and liabilities and changes in net worth (the difference between assets and liabilities for a given institutional unit or group of units); and
  3. Balance sheets - present stocks of assets and liabilities and net worth. Opening and closing balance sheets are included with the full sequence of accounts.

2.27    The main accounts in the ASNA are as follows:

  • gross domestic product (GDP) accounts - record the value of production (i.e. production of GDP), the income from production (i.e. income from GDP) and the final expenditures on goods and services produced and net international trade in goods and services (i.e. expenditure on GDP);
  • income accounts - show primary and secondary income transactions, final consumption expenditures and consumption of fixed capital;
  • capital accounts - record the net accumulation of non-financial assets through transactions, and the financing of the accumulation by way of saving and capital transfers;
  • financial accounts - show the net acquisition of financial assets and the net incurrence of liabilities; and
  • balance sheets - record the stock of financial and non-financial assets, and financial liabilities at a particular point in time.

2.28    The ASNA accounts are based on the system of accounts outlined in 2008 SNA. Each of the accounts is produced for the economy as a whole and the set of accounts together constitute the consolidated summary accounts. The ABS produces annual income and capital accounts by institutional sector based on 2008 SNA. The quarterly sectoral accounts depict national accounts using the same concepts and definitions as the annual sector accounts. These accounts are compiled for each of the following institutional sectors and subsectors: non-financial corporations (private and public), financial corporations, general government (national and state and local), and households (including NPISH).

2.29    The national accounts also include supplementary tables which provide more detailed presentations of the individual sector accounts. Although production accounts could be constructed for the four individual institutional sectors, major interest centres instead around production on an industry basis. This cuts across the institutional sectors used in the income and capital accounts since the production units are classified by industry without regard to institutional sector.

2.30    Another account that is integral to the national accounts is the external account. This account records the transactions and financial positions of the nation with the rest of the world, from the point of view of the rest of the world. In one sense, the external account is simply another sectoral account. Because of the important role of the rest of the world sector, the account is a major focus of attention for economic analysts and international organisations.

GDP accounts

2.31    The measure of production for the economy as a whole is gross domestic product (GDP). GDP is the sum, for a particular period, of the gross value added of all resident producers (where gross value added is equal to output less intermediate consumption) and net taxes on products. This is referred to as GDP measured by the production approach (GDP(P)). GDP can also be derived as the sum of factor incomes (i.e. compensation of employees, gross operating surplus and gross mixed income) and net taxes on production and imports, or as the sum of all final expenditures by residents (final consumption expenditure and GFCF), changes in inventories and exports less imports of goods and services. These are referred to as GDP measured by the income approach (GDP(I)) and GDP measured by the expenditure approach (GDP(E)), respectively. All three approaches are presented in the ASNA publications. In Australia, the combined presentation of the three approaches is referred to as the GDP accounts. These reflect the 2008 SNA production account.

2.32    Although conceptually each measure should result in the same estimate of GDP, different estimates of GDP are obtained when the three measures are compiled independently using different data sources. However, integration of the annual Australian national accounts estimates with annual balanced S-U tables ensures that the same estimate of GDP is obtained for all three approaches for years in which these tables are available. The S-U tables have been compiled from 1994-95 up to the year preceding the latest completed financial year, except in the June quarter where it is the latest two years.

2.33    Prior to 1994-95, the estimates using each approach are based on independent sources and there are usually differences between the GDP I, E and P estimates. Nevertheless, for these periods, a single estimate of GDP has been compiled by taking a simple average of the I, E and P estimates.

2.34    As a result of the above methods:

  • there are no statistical discrepancies in either current price or chain volume terms for annual estimates from 1994-95 up to the year prior to the latest year (and the latest two years in the June quarter); and
  • statistical discrepancies exist in both current price and chain volume terms between estimates obtained from the GDP I, E and P approaches and the single estimate of GDP for years prior to 1994-95, for the latest year (and the latest two years in the June quarter), and for quarterly estimates. These discrepancies are shown in the relevant tables.

2.35    There is no institutional sector dimension to any of the GDP accounts, although the GDP(I) measure could be classified this way. GDP measured by the production approach (i.e. sum of value added) is presented by industry only. The valuation of GDP in ASNA is at purchasers' prices, so net taxes on products are added to total gross value added to obtain GDP(P).

Income account

2.36    2008 SNA splits the income account into several accounts, distinguishing between the distribution, redistribution and use of income. The distribution of income is decomposed into three main steps: primary distribution (i.e. primary income), secondary distribution (i.e. secondary income) and redistribution in kind (i.e. social transfers in kind). The balancing items at the various stages are meaningful concepts of income provided all kinds of distributive current transactions are included.

2.37    The ASNA includes all such transactions. Each stage is presented in the income account with the balancing items being gross income and gross disposable income for all sectors, and adjusted disposable income for the general government and household sectors. Australia's presentation of the income account differs from 2008 SNA in that transactions regarding the distribution and redistribution of income are presented in one table.

2.38    The sectoral income accounts are a disaggregation of the national income account, recording for each institutional sector. Their net income arising from production and transfers of other sectors, and their uses of income (disbursements). The difference between income and the use of income is net saving. This balancing item is carried forward to the capital account as saving must be used to acquire financial or non-financial assets, or to reduce liabilities.

2.39    The transactions as presented in the ASNA are:

  • Primary income consists of factor incomes (e.g. compensation of employees, gross operating surplus and gross mixed income, and taxes less subsidies on production and imports) and property incomes (e.g. interest, dividends, rent on land and mineral and energy resources, and reinvested earnings of direct investors and investment funds). Gross national income is the balancing item and equals total factor incomes, plus taxes less subsidies on production and imports, plus net primary income receivable from non-residents.
  • Secondary income consists of current transfers. Transfers are resources provided from one institutional unit to another for which nothing of economic value is provided in return. Current transfers include taxes on income and wealth, social contributions (e.g. for workers' compensation) and benefits (e.g. unemployment benefits), current grants between governments, and donations to non-profit institutions. Gross disposable income is the balancing item and is equal to the sum of net primary income receivable and net secondary income receivable.
  • Social transfers in kind exist only in the general government and household sector. They consist of goods and services provided to households by government (or NPISHs) either free or at prices that are not economically significant. They consist of final consumption expenditure undertaken by government (and NPISHs) on behalf of households, for example, education and health services.

Capital account

2.40    The capital account is the first account in the sequence of the accumulation accounts, and records the acquisitions less disposals of non-financial assets, as well as capital transfers involving the redistribution of wealth. It shows sources of funds (receipts) for financing gross capital formation, and the use of these funds (disbursements). Sources of funds comprise consumption of fixed capital, net saving transferred from the national income account and net capital transfers receivable from non-residents. On the disbursements side are shown GFCF, changes in inventories and net acquisitions of non-produced non-financial assets. Conceptually, net lending to non-residents is the balancing item of the national capital account. However, if there are statistical discrepancies in the Expenditure on GDP account, then these discrepancies must also be taken into account before deriving the balancing item. When net lending is negative, the economy is a net borrower from non-residents. Where net lending is positive, the economy is a net lender to non-residents.

2.41    2008 SNA has an entry for acquisitions less disposals of valuables. While conceptually such transactions should be recorded in the capital account, they are currently not recorded in the ASNA due to a lack of a suitable data source. It is worth noting that household final consumption expenditure (HFCE) may include some expenditure on valuables by the household sector.

2.42    The sectoral capital accounts are a disaggregation of the national capital account and show the extent to which the sum of savings and capital transfers are used to finance the acquisition of non-financial assets. The balancing item, net lending/borrowing, reflects the net lending/borrowing of a particular sector to all other sectors. Net lending is the excess of capital finance for capital acquisition and measures the amount an institutional sector has available to finance other sectors. Net borrowing is the existence of a borrowing requirement to finance capital acquisitions due to an insufficient retention of financial resources through saving and capital transfers. Capital accounts are also compiled for selected subsectors.

2.43    As sectoral production accounts are not compiled, it is not possible to show any national statistical discrepancies by sector. Accordingly, the sectoral net lending balance implicitly includes each sector's share of the national statistical discrepancy.

Financial account

2.44    The financial account records the net acquisitions of financial assets and liabilities.

2.45    The financial account explains how net lending/borrowing is affected by changes in the holding of financial assets and liabilities. The sum of these changes, net change in financial position, is conceptually equal in magnitude to the net lending/borrowing item of the capital account. The financial account for each sector shows the financial transactions associated with the net lending transactions recorded in the capital account. These accounts, however, are compiled using different sources, giving rise to differences between the two balancing items, usually due to measurement error. These differences are recorded for each institutional sector in net errors and omissions.

2.46    In the national financial account, transactions in financial assets and liabilities with non-residents are shown. The national financial account is identical to the financial account in the balance of payments. Note that the signs are reversed between the two as the balance of payments is based on the point of view of the resident, whereas the national accounts take the view of the non-resident. Financial accounts are also compiled for each sector and for a wide range of subsectors. In these financial accounts, the transactions relate to financial assets and liabilities with other sectors/subsectors.

Other changes in the volume of assets account

2.47    The other changes in the volume of assets account records the effect of exceptional events that cause not only the value, but also the volume of assets and liabilities to change. They may be divided into three main categories:

  1. normal appearance and disappearance of assets other than by transactions, such as discovery and depletion of mineral and energy resources, and growth and depletion of native forests; economic recognition of produced assets such as public monuments and valuables; the initiation and cancellation of contracts, leases and licences such as patents, broadcast licences and taxi plates; changes in the value of goodwill and marketing assets; and the appearance or disappearance of financial assets;
  2. changes in assets and liabilities due to exceptional, unanticipated events, such as natural disasters (e.g. bushfires, floods and earthquakes), war or severe acts of crime, and uncompensated seizures of assets; and
  3. changes in classification and structure: in the event that the activities of an institutional unit change to the extent that the unit is reclassified from one institutional sector to another (for example, from the non-financial corporations sector to the financial corporations sector), the movements of assets and liabilities between the sectors are recorded as part of other flows in this category.

2.48    The balancing item for this account is changes in net worth due to other changes in the volume of assets. In ASNA, other changes in the volume of assets are recorded in an account that reconciles the values of assets and liabilities recorded in the opening and closing balance sheets.

Revaluation account

2.49    The revaluation account records holding gains and losses which result from changes in the prices of non-financial assets and financial assets and liabilities. Holding gains and losses accrue to the owners of assets and liabilities purely as a result of holding the assets or liabilities over time, without transforming them in any way. Holding gains and losses include not only gains/losses on capital goods (such as fixed assets, land and other natural resources) and financial assets and liabilities, but also inventories, including work-in-progress.

2.50    The balancing item for this account is changes in net worth due to nominal holding gains and losses. In ASNA, holding gains and losses are recorded in an account that reconciles the values of assets and liabilities recorded in the opening and closing balance sheets.

2.51    Holding gains and losses measured based on current prices are called nominal holding gains and losses. 2008 SNA notes that these nominal gains and losses can be further decomposed into neutral holding gains and losses, reflecting changes in the general price level, and real holding gains and losses, reflecting changes in the relative prices of assets. The ASNA shows this decomposition for the total economy and for the household sector.

Balance sheets

2.52    The national balance sheet shows, at certain points, the aggregate value of Australian residents' non-financial assets, their financial claims on non-residents, and their liabilities to non-residents. The balancing item is net worth, representing the difference between assets and liabilities. Net worth is equivalent to the present value of the stock of economic value a unit or sector holds.

2.53    Similar information is shown for each sector in the sectoral balance sheets. For financial assets and liabilities, the amounts shown are the outstanding claims on and liabilities to other sectors on the balance sheet dates. For non-financial assets, the amounts shown represent each sector's share of the Australian value as at the balance sheet dates.

2.54    The opening and closing balance sheets display assets, liabilities and net worth valued at the prices of the date for which the balance sheet is compiled. Conceptually, the entries for assets and liabilities in the closing balance sheet are equal to the entries in the opening balance sheet plus changes in the accumulation accounts; that is, the capital account; the financial account; the other changes in the volume of assets account; and the revaluation account.

2.55    2008 SNA includes entries for valuables and non-produced non-financial assets. Conceptually, these assets should be recorded in the balance sheets. However, valuables and certain non-produced non-financial assets are not recorded in the ASNA due to a lack of suitable data sources. The excluded non-produced non-financial assets are water resources, goodwill and marketing assets and contracts, leases and licences (except for spectrum licenses).

2.56    Supplementing the balance sheets are accounts that show the changes in balance sheet positions during a particular period. In these accounts, changes in balance sheets are decomposed into transactions (which are equivalent to the relevant transactions recorded in the capital and financial accounts), revaluations due to the effect of price changes, and other changes affecting the volume of assets and liabilities.

External account

2.57    The external accounts show the economy's transactions and stock positions with non-residents, from a non-resident perspective.

2.58    In ASNA, external income, capital, financial and balance sheet accounts are provided. The external income account is analogous to the balance of payments current account. As such, its balance is the same as, but opposite in sign to, the balance on the current account as recorded in the balance of payments. The balance on the external capital account (net lending) is the same as, but opposite in sign to, the sum of the current and capital account balances in the balance of payments. The external financial account includes the balance of payments financial account together with net lending of non-residents (the sum of the balance of payments current and capital account balances) and the difference between the two; that is, the balance of payments net errors and omissions item.

Integrated presentation of the Accounts

2.59    Once all elements have been produced, it is possible to present in detail the integrated accounts. The integrated accounts give a complete picture of the accounts of the total economy including balance sheets in a way that permits the principal economic relations and the main aggregates to be shown. The level of detail can vary depending on the purpose.

2.60    The following table provides a summary of the accounts, balancing items and main aggregates within the 2008 SNA and the comparison with the ASNA. The purpose of the table is to illustrate how the ASNA presentation compares with the 2008 SNA presentation.

Table 2.1 Summary of accounts, balancing items and main aggregates
  SNA presentation   ASNA presentation
Account Balancing item Main aggregate Account Main aggregate
Current accounts        
Production account     GDP accounts  
Production account
Goods and services account
Generation of income account
Value added


Operating surplus/mixed income
Domestic product Production of GDP (GDP(P))
Expenditure on GDP (GDP(E))
Income from GDP (GDP(I))
Gross Domestic Product
Distribution of income accounts     National income account  
Allocation of primary income account Balance of primary income National income   Gross national income
Secondary distribution of income account Disposable income National disposable income   Gross disposable income
Redistribution of income in kind account Adjusted disposable income     Adjusted disposable income
Use of income accounts        
Use of disposable income account Saving     Use of gross disposable income
Saving
Use of adjusted disposable income account Saving National saving   Saving
Accumulation accounts        
Capital account Net lending (+) / Net borrowing (-)   Capital account Net lending (+) / Net borrowing (-)
Financial account Net lending (+) / Net borrowing (-)   Financial acounts Net change in financial position
Other changes in the volume of assets account Changes in net worth due to other changes in volume of assets   Included in balance sheets  
Revaluation account Changes in net worth due to nominal holding gains and losses   Included in balance sheets  
Balance sheets     Balance sheets  
Opening balance sheet Net worth National wealth Opening balance sheet Net worth
Changes in assets and liabilities Changes in net worth   Changes in assets and liabilities Changes in net worth
Non-financial assets     Net capital formation  
Financial assets / liabilities     Financial transactions  
Other changes in volume of assets     Other changes in volume  
Revaluations     Revaluations  
Closing balance sheets Net worth National wealth Closing balance sheets Net worth

2.61    The following figure illustrates the integrated accounts as presented in the ASNA:

Figure 2.1 Illustration of the ASNA structure

Illustration of the ASNA structure
This image is an illustration of the ASNA structure.

The Gross Domestic Product (GDP) transaction account is produced from:
• Production of GDP (GDP(P)) - records the value of production.
• Expenditure on GDP (GDP(E)) - the final expenditures on goods and services produced and net international trade in goods and services.
• Income from GDP (GDP(I)) - the income from production.

The remaining structure of Income, Capital, Financial, Other changes in assets, Revaluations and balance sheets are compiled from 5 sectors:
1. Non-financial corporations = Private non-financial corporations + Public non-financial corporations
2. Financial corporations
3. General government = National general government + State and local general government
4. Household (Including unincorporated and NPISH)
5. Rest of the world

Income comprises Sources of income and Uses of income (FCE, COFC) (Saving).
Opening balance sheet comprises Non-financial assets and Financial assets and liabilities (Net worth).
Capital comprises Non-financial assets (Net lending (+)/Net borrowing (-)).
Financial comprises Financial assets and liabilities (Net change in financial position).
Other changes in assets comprises Non-financial assets and Financial assets and liabilities.
Revaluations comprises Non-financial assets and Financial assets and liabilities.
Closing balance sheet comprises Non-financial assets and Financial assets and liabilities (Net worth)

The equation to produce the ASNA is:
Opening level
+ Transactions
+ Other flows (other changes in assets)
+ Other flows (Revaluations)
= Closing level

The Aggregates

2.62    The aggregates, including value added, income, consumption and saving, are composite values which measure one aspect of economic activity. They are summary indicators and key magnitudes for purposes of macroeconomic analysis and comparisons over time. Some aggregates may:

  • be obtained directly as totals of particular transactions (e.g. final consumption, GFCF and social contributions); or
  • result from aggregating balancing items for the institutional sectors (e.g. value added, disposable income and saving).

2.63    Aggregates are commonly presented as net or gross measures. The distinction between the two is based on whether consumption of fixed capital has been deducted from the measure. A gross measure includes consumption of fixed capital, whereas net measures are obtained by deducting consumption of fixed capital from gross measures. 2008 SNA recommends that net measures should be produced where it is possible to do so as they take into account a reduction in the value of previously created fixed assets when they are used up in the production process. However, the SNA recognises that it is very difficult to measure consumption of fixed capital with any precision and acknowledges that gross measures will be commonly used in practice.

2.64    Aggregates are also presented in current price or volume measures. A key advantage of volume measures is that the price effect is eliminated and a real change from one period to another is obtained. However, some aggregates, such as income, are not able to be measured in volume terms as they cannot be broken down into quantity and price components.

Gross Domestic Product (GDP)

2.65    GDP derives from the concept of value added. Gross value added is the difference between output and intermediate consumption. GDP is the sum of gross value added of all resident producer units, plus taxes on products less subsidies on products. This derivation is referred to as GDP measured by the production approach (GDP(P)).

\(\small GDP(P) = Output - Intermediate \: Use + Taxes \: on \: Products - Subsidies \: on \: Products \)

2.66    GDP is also equal to the sum of the final uses of goods and services (all uses except intermediate consumption) measured at purchasers' prices, less the value of imports of goods and services. This derivation is referred to as GDP measured by the expenditure approach (GDP(E)).

\(\small {GDP(E) = Final \: Consumption \: Expenditure \: by \: Households \: (C) \: and \: Government \: (G) \\ \hspace{1.5cm}+ Gross \: Capital \: Formation + Exports \: of \: goods \: and \: services \: (X)\\ \hspace{1.5cm} - Imports \: of \: goods \: and \: services \: (M)}\)

2.67    Finally, GDP is also equal to the sum of primary incomes distributed by resident producer units. This derivation is referred to as GDP measured by the income approach (GDP(I)).

\(\small {GDP(I)=Compensation \: of \: Employees \: (COE) \: + \: Gross \: Operating \: Surplus \: (GOS) \\ \hspace{1.4cm} + \: Gross \: Mixed \: Income \: (GMI)+(Taxes \: on \: Production \: and \: Imports\\ \hspace{1.4cm}-Subsidies \: on \: Production \: and \: Imports \: (NT))}\)

Gross National Income (GNI)

2.68    GNI is equal to GDP less primary incomes payable to non-resident units plus primary incomes receivable from non-resident units. In other words, GNI is equal to compensation of employees, plus gross operating surplus and gross mixed income, plus taxes (less subsidies) on production and imports, less property income payable to the rest of the world plus the corresponding items receivable from the rest of the world. Thus, GNI is the sum of gross primary incomes receivable by resident institutional units or sectors. In contrast to GDP, GNI is not a concept of value added, but a concept of income. By deducting the consumption of fixed capital from GNI, net national income (NNI) is obtained.

\(\small {GNI=COE+GOS+GMI+NT+Net \: primary \: income \: receivable \: from \\ \hspace{1.3cm} non–residents \: (NPINR) \\ \hspace{0.8cm}=GDP+NPINR }\)

Gross National Disposable Income (GNDI)

2.69    Gross national disposable income is equal to GNI less current transfers (other than taxes, less subsidies, on production and imports) payable to non-resident units, plus the corresponding transfers receivable by resident units from the rest of the world. Gross national disposable income measures the income available to the total economy for final consumption and gross saving. By deducting consumption of fixed capital from gross national disposal income, net national disposable income is obtained. National disposable income is the sum of disposable income of all resident institutional units or sectors.

\(\small {GDNI=COE+GOS+GMI+NT+NPINR+Net \: current \: transfers \: receivable \\ \hspace{1.5cm} from \: non–residents \: (NCT) \\ \hspace{1.1cm}=GDP+NPINR+NCT }\)

Other parts of the accounting structure

Supply and use tables

2.70    2008 SNA states that the detailed analysis of production by industries and flows of goods and services by kind of products is an important part of the integrated central framework. A detailed analysis of production activities and product balances is made in the S-U tables presenting:

  • the resources and uses of goods and services for each type of product;
  • the production and generation of income accounts for each industry according to kind of economic activity; and
  • data on factors of production (labour and fixed capital) used by industries.

2.71    S-U tables are a powerful tool to compare and contrast data from various sources and improve the coherence of the economic information system. They permit an analysis of markets and industries and allow productivity to be studied at this level of disaggregation. S-U tables show, for the economy as a whole and for groups of products, the total resources in terms of domestic output and imports, and the uses of goods and services in terms of intermediate consumption, final consumption, gross capital formation and exports. They also provide information on the generation of income from production.

2.72    The S-U tables reconcile how the supply of products (either by domestic production or imports) within the economy in an accounting period is used for intermediate consumption, final consumption, capital formation or exports. Once both sides are equal (i.e. supply = use) for all products, the S-U tables are said to be balanced. Balanced S-U tables provide the benchmarks for the annual current price and chain volume measure for GDP.

Input and output tables

2.73    The ASNA includes symmetric I-O tables which provide a means of undertaking more detailed analysis of the process of production and the use of goods and services (products), and of the income generated by that production than is possible with S-U tables. 'Symmetric' means that the same classifications or units (e.g. the same groups of products) are used in both rows and columns.

2.74    The I-O tables serve two purposes: statistical and analytical. They provide a framework for checking the consistency of statistics on flows of goods and services obtained from different kinds of statistical sources, for example, industrial surveys, household expenditure data, investment surveys, foreign trade statistics, etc. They serve as a coordinating framework for economic statistics, both conceptually for ensuring the consistency of the definitions and classifications used, and as an accounting framework for ensuring the numerical consistency of data drawn from different sources. The I-O framework is also appropriate for calculating much of the economic data contained in the national accounts and detecting weaknesses. This is particularly important for the decomposition of the values of flows of goods and services into prices and volumes for the calculation of an integrated set of price and volume measures. As an analytical tool, I-O data are conveniently integrated into macroeconomic models in order to analyse the link between final demand and industrial output levels.

2.75    The symmetric I-O tables are derived out of the S-U tables. As the latter are data-oriented in nature, adjustments are required in the compilation of the former, particularly with respect to valuation, the treatment of imports, and classifications. The links between the I-O tables and the S-U tables are described in Chapter 22 Input-Output Tables.

Tables of financial transactions and financial assets

2.76    In concept, the accounts show which sectors acquire which financial assets and incur which liabilities. In order to examine the workings of the financial sector, the financial account in ASNA distinguishes various subsectors within financial corporations and eleven categories of financial assets and liabilities.

2.77    Australian National Accounts: Finance and Wealth includes financial instrument market tables for the twelve financial instruments in a from-whom-to-whom framework with nineteen available counterparty sectors and subsectors. Each financial instrument is presented by issuing/accepting/borrowing sector/subsector by counterparty. Transactions and stocks between intra-sector/subsector are also presented for these tables; for example, authorised deposit-taking institutions (ADIs) deposits held by other ADIs. If required, the financial market tables would enable the ASNA to produce the flow-of-funds matrix as described in paragraph 2.150 of the 2008 SNA.

Sources and methods

2.78    ASNA records the essential elements of the Australian economy: production, income, consumption (intermediate and final), accumulation of assets and liabilities, and wealth. As such, many different data sources are used to compile the ASNA. In many cases, these data are infrequent, incomplete, lacking in scope or are simply not on a basis that aligns with national accounts standards. The upcoming chapters provide an overview of the sources and methods employed to convert these different data sources into a coherent set of national accounts.

Chapter 3 Stocks, flows, and accounting rules

Flows and stocks

3.1    The system of national accounts records two basic kinds of information: flows and stocks. Flows refer to actions and to the effects of events that take place within a given period of time, while stocks refer to positions in, or holdings of, assets and liabilities at a given point in time. Unless otherwise indicated, the definitions and rules described are as recommended in 2008 SNA and are applied without variation in the ASNA.

3.2    In the national accounts, flows are recorded in the current accounts, which deal with production, income and the use of income, and in the accumulation accounts, which record capital formation, financial flows, revaluations and other changes in the volume of assets. Stocks, which represent the value of the stock of assets and liabilities at the beginning and end of the accounting period, appear in the balance sheet accounts.

Flows

3.3    Economic flows reflect the creation, transformation, exchange, transfer or extinction of economic value. They involve changes in the volume, composition or value of an institutional unit's assets and liabilities. Economic flows are of two kinds: transactions, and other flows. Most flows are transactions which are recorded in the current accounts and accumulation accounts. Other flows, which are changes in the value of assets and liabilities that do not result from transactions, are recorded in the revaluation account and the other changes in volume of assets account.

Transactions

3.4    A transaction is defined in 2008 SNA as:

. . . An economic flow that is an interaction between institutional units by mutual agreement or an action within an institutional unit that it is analytically useful to treat like a transaction, often because the unit is operating in two different capacities.²⁸

3.5    The latter types of actions are internal transactions. Apart from these, transactions are interactions between institutional units. While the definition of a transaction stipulates that an interaction between institutional units must be by mutual agreement, this does not mean that both units necessarily enter a transaction voluntarily; some transactions, such as payments of taxes, fees or fines, are imposed by force of law. In these cases, there is collective acceptance by the community of the obligation to make the required payments, which are therefore regarded as transactions for national accounting purposes. The system of national accounts recognises and accounts for numerous types of transactions, both monetary and non-monetary, which are described in the following paragraphs.

Monetary transactions

3.6    Most transactions recorded in the national accounts are monetary transactions, where the institutional units involved make or receive payments or incur liabilities or receive assets denominated in units of currency. All monetary transactions are two-party transactions between institutional units. Common monetary transactions included in the ASNA are expenditure on consumption of goods and services, expenditure on capital formation, deposits, loans, wages and salaries, interest, dividends, rent on natural assets, taxes, and social assistance benefits in cash.

3.7    Expenditures on consumption of goods and services, capital formation, deposits, loans, payment or receipt of wages and salaries, and payment or receipt of interest, dividends and rent on natural assets, are two-party transactions involving the provision of a good, service or asset in exchange for a monetary counterpart. These kinds of transactions can be termed 'something for something' transactions, or transactions with a quid pro quo.

3.8    Two-party transactions where goods, services or assets are supplied without a direct counterpart can be termed 'something for nothing' transactions, or transactions without a quid pro quo. Transactions without a quid pro quo are called transfers in the national accounts. Examples of transfers are taxes, social assistance benefits, gifts, and international cooperation (foreign aid). Transactions such as the payment of premiums for non-life insurance, where receipt of benefits is contingent upon some future event, are also classified as transfers. (Strictly speaking, insurance premiums are divided into two components in the national accounts: an imputed service charge; and net premiums, which are equal to premiums less the imputed service charge. Net premiums are a transfer payment while the imputed service charge is included in household or intermediate consumption.)

3.9    A distinction is made between capital and current transfers in the national accounts. Capital transfers involve the transfer of ownership of an asset or oblige one or both parties to acquire or dispose of an asset. Investment grants are examples of capital transfers. Capital transfers redistribute saving or wealth. Current transfers, on the other hand, redistribute income in the form of, for example, income taxes or social assistance benefits.

3.10    Most transactions are treated in the national accounts in a straightforward way; that is, the transactions are recorded in the same way as they appear in the accounts of the institutional units involved. However, some transactions are rearranged to bring out the underlying economic relationships more clearly. Transactions can be rearranged in three ways: rerouting, partitioning, and recognising the principal party to a transaction.

Rerouted transactions

3.11    A transaction that appears to the units involved as taking place directly between units A and C may be recorded as taking place indirectly through a third unit B. Thus, the single transaction between A and C is recorded as two transactions: one between A and B, and one between B and C. In this case the transaction is considered to be “rerouted”.

3.12    Rerouting of three types of transactions occurs in the national accounts:

  1. Employers' social contributions - workers' compensation premiums, and contributions made by employers on behalf of their employees to superannuation funds, are recorded as two transactions: employers are deemed to pay the contributions to their employees and the employees are then deemed to pay the same contributions to non-life insurance corporations or superannuation funds. Although the contributions are paid directly by employers to the funds, this treatment makes it clear that such contributions are part of the compensation of employees and are recorded as a part of labour costs.
  2. Retained earnings of foreign direct investment enterprises and resident and non-resident investment funds - the retention of some or all of the earnings of a foreign direct investment enterprise and investment funds within the enterprise or investment fund can be regarded as a deliberate investment decision by the foreign owners and fund investors. Accordingly, the retained earnings are rerouted in the national accounts by showing them as first remitted to the foreign owners and fund investors as property income and then reinvested in the equity of the direct investment enterprise and investment funds.
  3. Property income of non-life insurance corporations or pension funds - in the national accounts, the property income earned on the reserves of certain insurance and pension funds is deemed to be earned on assets owned by policyholders. The property income is recorded as being paid out to policyholders and then paid back again as premium supplements even though the property income is retained by the corporation.

Partitioned transactions

3.13    When a transaction appearing to the parties involved as a single transaction is recorded as two or more differently classified transactions, the transaction is partitioned. Partitioning does not usually imply the involvement of additional institutional units in the transactions.

3.14    Payments and receipts of interest by financial intermediaries, and non-life insurance premiums, are typical partitioned transactions. In the case of interest, the payments are considered to comprise a pure interest component and a charge for the financial service rendered by the financial institution. Similarly, non-life insurance premiums are considered to constitute a payment to cover the insurance risk and a service charge for arranging the insurance. The individual components are recorded separately in the national accounts.

3.15   A further example of partitioning is the recording of transactions for wholesalers and retailers. Wholesalers and retailers are viewed in 2008 SNA as selling the service of storing and displaying goods. As a result, the output of wholesalers and retailers is measured by the value of the trade margins on the goods they purchase for resale, not the total value of their sales.

Recognising the principal party to a transaction

3.16    When a unit carries out a transaction on behalf of another unit, the transaction should be recorded exclusively in the accounts of the principal, although some service output by the intermediary may be recognised. For example, if a commercial agent makes purchases under the order and at the expense of another party, the purchases are attributed to the latter. The accounts relevant to the agent should only show the fee charged to the principal for the services rendered by the agent.

Non-monetary transactions

3.17    Transactions that do not involve the exchange of cash, or assets or liabilities that are not denominated in units of currency, are non-monetary transactions. As the national accounts record all transactions in monetary values, the values recorded for non-monetary transactions must be estimated. Non-monetary transactions can be either two-party transactions or actions within an institutional unit (internal transactions).

Two-party non-monetary transactions

3.18    Two-party non-monetary transactions consist of the following:

  • Barter transactions, which involve one party providing a good, service or asset other than cash to another party in return for a good, service or asset other than cash.
  • Remuneration in kind, which occurs when an employee accepts payment from an employer in the form of goods and services instead of money (or some other financial asset). Some of the most common types of remuneration in kind are meals and drinks, accommodation, vehicles for personal use of employees, and goods and services produced as outputs from the employer's own production processes.
  • Payments in kind other than remuneration in kind, which occur when payments are made in the form of goods and services, rather than money or some other financial asset (e.g. landlords accepting produce in lieu of rent).
  • Transfers in kind, which occur when one party provides a good, service or asset to the other without receiving anything in return. These can also be called 'something for nothing' transactions, or transactions without a quid pro quo. The most common types of transfers in kind are international aid in the form of goods or services; gifts and charitable contributions in the form goods or services; and social assistance benefits in forms such as the provision of education, health, housing and other services provided to households by government or non-profit institutions. Also included are social transfers in kind which consist of government final consumption expenditure (GFCE) which is undertaken (by government) on the behalf of households.

Internal transactions

3.19    While most transactions recorded in the national accounts are interactions between institutional units, some actions that occur within institutional units are also recorded as transactions. These are known as internal, or intra-unit transactions, which are recorded to give a more analytically useful picture of output and final use.

3.20    Consumption of fixed capital is an important example of an intra-unit transaction which is recorded in the ASNA. The estimation of consumption of fixed capital ensures that the decline in the value of a fixed asset used in production is included as a cost of production.

3.21    Estimates of the value of intra-unit transactions are also made to account for output which is produced and used within the same institutional unit. These transactions include the value of fixed assets produced for own use and the value of goods produced and consumed within households (such as agricultural produce and other 'backyard' production). The supply of output produced within an enterprise for use as intermediate input in the same enterprise is also regarded as an intra-unit transaction, although estimates of the value of such transactions are only recorded in national accounts if the supplying and receiving establishments are geographically separated.

Externalities and illegal actions

3.22    Externalities are unsolicited services, or 'disservices', delivered by one unit to another without mutual agreement. A typical example is a producer's pollution of air or water which is used by other units. Externalities are not market transactions into which institutional units enter of their own accord, and there is no mechanism to ensure that the positive or negative values attached to them by the various parties involved would be mutually consistent. For this reason, 2008 SNA recommends against recording the values of externalities in the national accounts.

3.23    2008 SNA treats illegal actions that fit the characteristics of transactions (notably the characteristic that there is mutual agreement between the parties) in the same way as legal actions. Thus, although the production or consumption of certain goods such as narcotics may be illegal, market transactions in such goods should, in principle, be recorded in the national accounts. Due to the difficulty in identifying and valuing illegal transactions, no explicit estimates for such activities are made in the ASNA. However, some illegal transactions are likely to be included in the national accounts if they are reported as part of legal activities or as income for taxation purposes.

3.24    As illegal actions which constitute crimes against persons or property (e.g. theft or violence) do not meet the criterion of transactions by mutual agreement they are not recorded as transactions.

Other flows

3.25    Other flows are changes in the value of assets and liabilities that do not take place through transactions. They are either other changes in the volume of assets or liabilities or holding gains and losses. Entries classified as other flows all appear in the other changes in volume of assets account or the revaluation account. Both accounts are components of the balance sheet accounts in the ASNA.

Stocks

3.26    Stocks are a position in, or holdings of, assets and liabilities at a point in time. Stocks are usually recorded at the beginning and end of each accounting period. The values of stocks of assets and liabilities are shown in the balance sheets of the system. Stocks are connected with the flows in that changes in their levels result from the accumulation of transactions and other flows over the accounting period in question. In the ASNA, closing balance sheet levels could be viewed as being obtained by the addition to the opening balance sheet levels of net capital formation, financial transactions, other changes in the volume of assets, and revaluations of assets and liabilities. However, in practice the balance sheet values for many components of financial assets and liabilities are obtained directly from survey data.

3.27    Values are recorded for non-financial assets, both produced and non-produced, and for financial assets and liabilities. The coverage of assets is limited to those assets used in economic activity and that are subject to ownership rights. Thus, stocks are not recorded for assets such as human capital and natural resources over which ownership rights cannot be enforced.

3.28    In order to discuss stocks, it is necessary to define assets and liabilities and these definitions depend crucially on the concepts of benefits and ownership. This is described as the asset boundary.

Economic benefits

3.29    An economic benefit is defined as denoting a gain or positive utility arising from an action. It implies a comparison between two states. Sometimes the immediate benefit is in terms of goods and services directly, for example own account production or wages and salaries in kind. More often a benefit is in the form of the medium of exchange (money), for example as wages and salaries. Consumption is an activity that takes place in the current period only but may be financed from past benefits. Production and accumulation also involve benefits postponed to future periods. Thus, means of allowing benefits to be moved from one accounting period to another must be recognised. These take the form of assets and liabilities where a benefit in one period is converted to a benefit in one or more future periods. Similarly, goods and services, or current benefits, may be acquired by committing future benefits in the form of financial liabilities.

Ownership

3.30    Two types of ownership can be distinguished, legal ownership and economic ownership. The legal owner of entities such as goods and services, natural resources, financial assets and liabilities is the institutional unit entitled in law and sustainable under the law to claim the benefits associated with the entities. The economic owner of entities such as goods and services, natural resources, financial assets and liabilities is the institutional unit entitled to claim the benefits associated with the use of the entity in question in the course of an economic activity by virtue of accepting the associated risks.

3.31    Every enterprise has both a legal owner and an economic owner, though in many cases the economic owner and the legal owner of an entity are the same. Where they are not, the legal owner has handed responsibility for the risk involved in using the entity in an economic activity to the economic owner along with associated benefits. In return the legal owner accepts another package of risks and benefits from the economic owner. In general, within the SNA, when the expression “ownership” or “owner” is used and the legal and economic owners are different, the reference should be understood to be to the economic owner.

Endnotes

  1. SNA, 2008, para.3.51.

Balancing items

3.32    A balancing item is obtained by subtracting the total value of the entries on one side of an account from the total value of entries the other side. It cannot be measured independently of the other entries. It does not relate to any specific set of transactions, or any set of assets, and so it cannot be expressed in terms of its own price or quantity units.

Balancing items in the flow accounts

3.33    Balancing items are not simply devices to ensure that accounts balance. They are often used as key macroeconomic indicators to assess economic performance. They encapsulate a great deal of information and include some of the most important entries in the accounts, for example:

  • value added or domestic product;
  • operating surplus;
  • disposable income;
  • saving;
  • net lending or net borrowing;
  • net change in financial position; and
  • current external balance.

Balancing item in the balance sheets

3.34    Net worth, which is defined as the value of all the non-financial and financial assets owned by an institutional unit or sector less the value of all its outstanding liabilities, is the balancing item in the balance sheets. Net worth cannot be measured independently of the other entries, nor does it relate to any specific set of transactions.

3.35    As well as net worth appearing as a stock level, changes in net worth due to different sorts of transactions and other flows may also be derived. Just as the changes in the levels of any asset can be traced through changes in transactions and other flows throughout the period, so changes in total net worth can be exhaustively described according to the transactions and other flows that led to changes in the total level of assets and liabilities.

Grouping stocks and flows in the accounts

3.36    2008 SNA groups flows and stocks according to the classification of transactions, other flows, and entries related to stocks of assets and liabilities. The classification of transactions and other flows has five headings at the highest level, dealing with transactions in products, transactions showing how income is distributed and redistributed within the SNA, transactions in non-produced assets, financial assets and liabilities, and other accumulation entries.

3.37    In general, flows and stocks are entered either in the accounts of the institutional units that own or owned the goods and assets involved; the accounts of units that deliver or take delivery of services; or the accounts of units that provide labour and capital or use them in production.

Accounting rules

3.38    The ASNA's accounting rules cover the quadruple entry accounting principle, valuation, time of recording and grouping by aggregation, netting and consolidation of individual stocks and flows.

Quadruple-entry accounting

3.39    The accounting system underlying the ASNA derives from broad bookkeeping principles. To understand the accounting system for the ASNA, three bookkeeping principles should be outlined:

  1. Vertical double-entry bookkeeping, also known simply as double-entry bookkeeping used in business accounting - each transaction leads to at least two entries, traditionally referred to as a credit entry and a debit entry, in the books of the transactor. It ensures the total value of assets equals the total value of liabilities plus net worth of a unit’s balance sheet;
  2. Horizontal double-entry bookkeeping - is useful for compiling accounts that reflect the mutual economic relationships between different institutional units in a consistent way. It ensures the consistency of recording for each transaction category by counterparties; and
  3. Quadruple-entry bookkeeping - the simultaneous application of both the vertical and horizontal double-entry bookkeeping, which is the accounting system underlying the recording of transactions in the ASNA.

3.40    Quadruple- entry bookkeeping deals in a coherent way with multiple transactors or groups of transactors, each of which satisfies vertical double-entry bookkeeping requirements. A single transaction between two counterparties thus gives rise to four entries. In contrast to business bookkeeping, national accounts deal with interactions among a multitude of units in parallel, and thus require special care from a consistency point of view. As a liability of one unit is mirrored in a financial asset of another unit, for instance, they should be identically valued, allocated in time and classified to avoid inconsistencies in aggregating balance sheets of units by sectors or for the total economy. The same is also true for all transactions and other flows that affect balance sheets of two counterparties.

Valuation

General rules

3.41    The underlying principle of valuation in the system of national accounts is that all entries are recorded, in money terms, at the exchange value current during the accounting period; that is, the value at which flows and stocks are, or could be, exchanged for cash (including transferable deposits). The system does not attempt to determine the utility of the flows and stocks within its scope.

3.42    When goods and services are exchanged for cash or its equivalent, the required values are directly available. In addition, values are directly observable for flows and stocks that concern financial instruments, such as cash holdings or liabilities. The majority of flows and stocks in the national accounts fall into these categories.

3.43    In other cases, where no actual exchange values are available, the preferred method of valuation is by reference to the market value of similar goods, services, or assets. This method is used to estimate the value of the services of owner-occupied dwellings, and of 'backyard' production by households for their own use.

3.44    When no prices for similar products exist, it may be necessary to value goods or services by the amount that it costs to produce them. This is the case for most non-market goods and services produced by general government units and non-profit institutions serving households.

3.45    For some assets, it is necessary to estimate a value by writing down (depreciating) the initial acquisition costs. The value of such assets at a given point in their life is equal to their acquisition cost less the accumulated value of these write-downs. Typically, the current value of fixed assets is estimated by writing down current market prices for the accumulated consumption of fixed capital.

3.46    Where none of the above valuation methods is feasible, flows and stocks can be recorded at the net present value of expected future returns. This method is not generally recommended, as it involves a number of assumptions and the possibility of substantial future revisions to estimates. However, 2008 SNA recognises that it is the most appropriate method of valuation in circumstances where returns from assets are either delayed (as is the case with timber plantations) or spread over a lengthy period (as for mineral and energy resources).

3.47    Flows and stocks concerning foreign currency are converted to their value in national currency at the exchange rate prevailing when the transaction or flow takes place, or in the case of balance sheet items, the date to which the balance sheet applies. The exchange rate used for conversion to national currency is the mid-point between the buying and selling rate, so as to exclude any implicit foreign exchange service charge.

3.48    Valuations contained in business accounts, tax returns and other administrative records, which are widely used sources of data for national accounts purposes, often do not conform to the national accounting valuation standard. This is especially so in the case of depreciation, where rates of depreciation for tax purposes normally deviate from those underlying the national accounting concept of the consumption of fixed capital. In particular, depreciation for tax purposes is based on the historical cost of the assets whereas consumption of fixed capital in the national accounts is based on the current cost of the assets involved.

3.49    In some cases, invoice values may not accord with prices paid in the market for similar items. Where transactions are between affiliated enterprises under common management, the prices adopted for bookkeeping purposes - referred to as transfer prices - may not correspond to prices that would be charged to independent parties. By using artificially high or low prices, transfer pricing could be used as a device for shifting profits among enterprises within a group for taxation (or other) purposes. In principle, such transactions should be identified and re-valued if they are likely to significantly affect the interpretation of the accounts. Instances of transfer pricing are difficult to identify, and subsequently adjust for. In the ASNA, transactions prices are used as there is no current data on transfer pricing.

3.50    To maximise concordance with 2008 SNA accounting rules, surveys of businesses conducted by the ABS request data, where possible on a national accounts basis. Adjustments are made to source data that are not recorded on the required basis.

Special valuations concerning products

3.51    The producer and the user of a given product usually perceive its value differently, because of intervening transport costs, trade margins, taxes, and subsidies on products. In order to keep as close as possible to the views of the transactors, 2008 SNA recommends that outputs of products be valued at basic prices, while inputs, or final purchases, should be valued at purchasers' prices.

3.52    The basic price is the amount receivable by the producer from the purchaser for a unit of a good or service, minus any tax payable (including deductible value added taxes such as the GST) plus any subsidy receivable, as a consequence of production or sale of the unit. Subsidies artificially reduce the sale price, so they are included in the basic price to obtain a measure of the true value of the goods or services produced. Taxes on products, if included, would artificially increase the price, and so are deducted. The basic price also excludes any transport charges invoiced separately by the producer. The basic price therefore measures the amount retained by the producer in respect of the good or service that is produced as output.

3.53    The major output of the wholesale and retail trade industries is the value of the service provided in selling goods (i.e. goods purchased and resold are not treated as part of intermediate consumption). The value of the service is equal to the trade margins realised on the goods sold. The measurement of this service at basic prices is analogous to that for goods producing industries: output at basic prices is the value of the trade margins, including the value of any subsidies received by the wholesaler or retailer, and excluding taxes on production of the service.

3.54    The purchaser's price is the amount paid by the purchaser in order to take delivery of goods or services. Purchasers' prices include any taxes payable (less any subsidies receivable) on production and imports, and any transport charges paid separately by the purchaser to take delivery of goods. Value added taxes, such as the GST, are included in purchasers' prices unless they are allowable as deductions from the purchaser's value-added tax liability. Purchasers' prices are also referred to as market prices.

3.55    Imports and exports of goods are valued free-on-board (f.o.b.); that is, at the exporter's customs frontier.

3.56    The ASNA follows the 2008 SNA recommendations with respect to the valuation of products: in the I-O tables and the associated measures of value added by industry, gross output is measured at basic prices and intermediate inputs are measured at purchasers' prices. Expenditure items are recorded at purchasers' prices. Imports and exports of goods are valued f.o.b.. Details of other aspects of the valuation of imports and exports are contained in the ABS publication, Balance of Payments and International Investment Position, Australia: Concepts, Sources and Methods.

Valuation of other flows

3.57    For the valuation of the other changes in the volume of assets, it is usual to take the value of the asset before and after the change in volume and then to take the difference that is not explained by any transaction as the value of the other change.

3.58    Holding gains and losses accrue continuously and apply to both non-financial and financial assets and liabilities. In general, they are estimated by deducting from the total change in the value of assets those that can be attributed to transactions and to other changes in volumes. Since most financial assets are matched by liabilities, either within the domestic economy or with the rest of the world, it is important that holding gains in one are matched by holding losses in the other and vice versa.

Valuation of positions of financial assets and liabilities

3.59    Stocks of financial assets and liabilities should be valued as if they were acquired in market transactions on the balance sheet reporting date (or on the closest preceding date if the markets are closed on that date). Valuation according to market-value equivalent is needed for valuing financial assets and liabilities that are not traded in financial markets or are traded only infrequently. For these assets and liabilities, it will be necessary to estimate fair values that, in effect, approximate market prices. The present value of future cash flows can also be used as an approximation to market prices provided an appropriate discount rate can be used.

Time of recording

3.60    Flows in the national accounting system are ideally recorded on an accrual basis. Accrual accounting records flows at the time economic value is created, transformed, exchanged, transferred, or extinguished. Accrual accounting enables the profitability of productive activities to be evaluated without the disturbing influences of leads and lags in cash flows, and net worth to be calculated correctly at any given point. In terms of entries in the national accounts this means that:

  • flows which imply a change of ownership are entered when legal ownership changes (this applies to financial assets as well as goods);
  • services are recorded when provided;
  • distributive transactions, such as compensation of employees, interest, rent on land, and social contributions and benefits are recorded in the period during which the amounts payable are built up. Interest on debt is recorded in the accounting period in which it accrues, regardless of whether or not it is actually paid in that period;
  • output is recorded at the time products are created (not when paid for by a purchaser); and
  • intermediate consumption is recorded in the period when the materials are used.

Change of ownership

3.61    In transactions involving the purchase of goods, accrual accounting usually arises naturally from the nature of the transaction. When goods are exchanged for financial assets (e.g. cash), accounting entries reflecting the change of ownership will be recorded at the same time for both the seller and the purchaser. However, the identification of the time of change of ownership is not always straightforward where exports and imports are concerned. In the absence of sources specifying the date of change of ownership, the time at which goods cross the frontiers of countries concerned (obtained from customs records) is usually taken as a proxy for this date. However, for certain exports and imports timing adjustments are made where supplementary information is available to more accurately reflect the time that ownership changes.

3.62    To accord with accrual accounting principles, transactions in financial assets should also be recorded on a change of ownership basis. Financial transactions are shown in the ASNA in the financial accounts.

Acquisition of services

3.63    Services are to be recorded when they are provided. While in most cases this is straightforward, there are types of services that require special treatment. The main types falling into this category are insurance, where the payments of premiums are made in advance, and housing, where the services provided by home ownership are continuous. In the ASNA, provisions are made to account for the services of insurance and housing in each accounting period.

Distributive transactions

3.64    Distributive transactions can be difficult to record on an accrual basis, as the accounting practices of the units involved are not always consistent with national accounting requirements. The most important item (in terms of size) affected in this way in the ASNA is wages and salaries, a component of compensation of employees. In addition, provisions for employee entitlements which qualify as liabilities should also be included, rather than the cash payments of these entitlements. Such liabilities include provisions for long service leave and annual leave, and contributions by employers to unfunded superannuation schemes. Interest on debt is recorded in the period during which the interest accrues. Dividend levels, however, are not unambiguously attributable to a particular earning period, and are therefore recorded when they are declared payable.

Output, intermediate input, changes in inventories, and consumption of fixed capital

3.65    The principle of recording on an accrual basis implies that output is recorded over the period in which the process of production takes place, and the intermediate consumption of goods or services is recorded at the time when the goods or services enter the process of production. Additions to inventories are recorded when products are purchased, produced or otherwise acquired, and deductions from inventories are recorded when products are sold, used up as intermediate consumption or otherwise relinquished.

3.66    In general, the collection methods used in the ASNA result in estimates on an accrual basis, although the extent to which this is possible depends upon the information received from the respondents to ABS economic statistics collections. Consumption of fixed capital is a cost which accrues over the whole period the fixed asset is available for productive purposes. The apportioning to accounting periods depends on the rate of depreciation used to estimate the using up of the asset. To be consistent with other entries in the accounts, consumption of fixed capital must be valued at the prices prevailing during the current accounting period (unlike depreciation for tax purposes, which is based on the historical cost of the assets).

Other flows

3.67    Other changes in the volume of assets are usually discrete events that accrue at precise moments or within fairly short periods of time (e.g. assets being destroyed in a natural disaster such as a bush fire).

Holding gains and losses

3.68    Changes in prices often have a more continuous character, particularly in respect of assets for which active markets exist. In practice, nominal holding gains or losses will be computed between two points in time:

  1. The moment at which:
    • The accounting period begins; or
    • Ownership is acquired from other units (through purchase or a transaction in kind); or
    • An asset is produced; and
  2. The moment at which:
    • The accounting period ends; or
    • The ownership of an asset is relinquished (through sale or a transaction in kind); or
    • An asset is consumed in the production process.

Timing adjustments for international transactions

3.69    Differences in the time of recording by partner economies may occur due to various factors. One of the intrinsic problems with recording international transactions is the difference in time zones as well as from delays in mail deliveries or settlement clearing processes. In most cases, data at some aggregate level rather than individual records are used in the compilation of international accounts. Several data sources may often only approximate the required basis. It is important to make timing adjustments where there are major divergences from the required basis.

Aggregation netting and consolidation

Aggregation

3.70    The vast number of individual transactions, other flows and assets within scope of the national accounts have to be arranged in a manageable number of analytically useful groups. Such groups are formed by crossing two or more classifications. For example, the classification of institutional sectors or industries is crossed with the classification of transactions, other accumulation entries or assets. In addition, incomes need to be distinguished from uses and assets from liabilities.

Netting

3.71    Individual units or sectors may have the same kind of transaction both as a receivable and as a payable (e.g. they both pay and receive interest) and the same kind of financial instrument as both an asset and a liability. Where all the items are shown at their full values, the recording is on a gross basis. Where the values of some items are offset against items on the other side of the account, or against items which have an opposite sign, the recording is on a net basis. Gross recording is applied in most cases, except where a degree of netting is inherent in the classifications themselves. Within the ASNA, an example of net recording is the aggregate for changes in inventories. Rather than record all individual additions to and withdrawals from inventories, the resulting overall changes are recorded in order to show the final effect on gross capital formation. Similarly, the financial accounts record increases in assets and liabilities on a net basis (i.e. acquisitions and disposals are offset) to bring out the final consequences of these types of flows at the end of the accounting period.

Consolidation

3.72    Consolidation refers to the elimination of transactions which occur between two transactors belonging to the same institutional sector or subsector. Consolidation within sectors or subsectors can be useful for the kinds of analysis which focus on the interactions between subsectors of the economy and between resident sectors and the rest of the world, where the overall final position is more significant than the details of gross transactions within sectors. Consequently, in the sector income, capital and financial accounts, transfer flows are generally consolidated. Likewise, the national income, capital and financial accounts are prepared on a consolidated basis; however, non-consolidation is the general rule in some parts of the national accounts, such as the I-O tables.

Chapter 4 Institutional units and sectors

Institutional units

4.1    In any economy, economic activity is undertaken by a variety of transactors. Corporations (both financial and non-financial), government units, households and non-profit institutions all engage in economic activity, but their economic objectives, functions and behaviour differ. For example:

  • Corporations are created for the purpose of producing goods or services for the market at economically significant prices, usually as a source of profits for the units that own them. They undertake either production or accumulation (or both), but do not undertake final consumption. They are divided between those mainly providing financial services and those mainly providing goods or non-financial services.
  • Non-profit institutions (NPIs) are created for the purpose of producing or distributing goods or services, but not for the purpose of generating income or profits for the units that control or finance them. They are diverse in nature with some behaving like corporations, some are effectively part of general government and some undertake activities similar to general government but are independent of it.
  • Government units organise and finance the provision of non-market goods and services to individual households and the community at large, mainly financed out of taxation revenue. They are also concerned with the distribution and redistribution of income and wealth in accordance with government policies. They undertake production (but mainly of a different type from corporations), accumulation and final consumption on behalf of the population.
  • Households are primarily consumer units, although they may also engage in production (i.e. the operation of unincorporated enterprises and non-profit institutions serving households) and accumulation.

4.2    Grouping transactors with similar objectives and types of behaviour into sectors enhances the usefulness of national accounts for purposes of economic analysis. For such purposes, 2008 SNA defines transactor units, called institutional units, and groups them into institutional sectors and subsectors.

4.3    An institutional unit is defined in 2008 SNA as:

… an economic entity that is capable, in its own right, of owning assets, incurring liabilities and engaging in economic activities and in transactions with other entities.²⁹

4.4    An institutional unit is one that is able to:

  • own and exchange goods or assets in its own right;
  • make economic decisions and engage in economic activities for which it is held directly responsible and accountable at law;
  • enter into contracts and incur liabilities on its own behalf; and
  • compile, or is able to compile, a complete set of accounts, including a statement of financial position (i.e. a balance sheet of assets and liabilities).

4.5    In some instances, it is statistically advantageous to recognise some entities which do not meet the above criteria as separate institutional units. Notional institutional units are created to enable the collection of their economic activity. These units do not exist as separate institutional units from their owners and therefore are not institutional units in their own right, even where they operate autonomously and keep a full set of accounts.

4.6    2008 SNA identifies two main types of units that may qualify as institutional units: (i) households; and (ii) legal or social entities whose existence is recognised by law or society, independently of the persons or other entities that may own or control them.

Households

4.7    A household is a group of persons who share the same living accommodation, who pool some, or all, of their income and wealth and who consume certain types of goods and services collectively, mainly housing and food. Many assets are owned, or liabilities incurred, jointly by members of the same household, and income received by individual members may be pooled for the benefit of all members. In addition, many expenditure decisions may be made collectively for the household as a whole. As a result of these circumstances, it is not usually possible to draw up meaningful accounts for individual household members. The individual members of multi-person households are therefore not treated as separate institutional units; rather, the household is treated as the institutional unit.

4.8    As well as individual households, there are units described as institutional households that comprise groups of persons staying in hospitals, retirement homes, convents, prisons, etc. for long periods of time.

4.9    An unincorporated enterprise that is entirely owned by one or more members of the same household is treated as a part of that household and not as a separate institutional unit, except when the enterprise is treated as a 'quasi-corporation'.

Legal or social entities

4.10    The second type of institutional unit is a legal or social entity that engages in economic activities and transactions in its own right. 2008 SNA identifies three main types of legal and social entities: corporations, non-profit institutions and government units. In addition, some unincorporated enterprises belonging to households or government units behave in much the same way as corporations and are treated as quasi-corporations when they have complete sets of accounts. In the system, quasi-corporations are treated in the same way as corporations.

4.11    Corporations are defined in 2008 SNA as entities that are:

  • capable of generating a profit or other financial gain for their owners;
  • recognised at law as separate legal entities from their owners who enjoy limited liability; and
  • set up for purposes of engaging in market production.³⁰

4.12    This implies a broader definition than just the legal sense (i.e. legally constituted corporations) as co-operatives, limited liability partnerships, notional resident units and quasi-corporations are also included.

4.13    Legally constituted corporations are created for the purpose of producing goods or services for the market that may be a source of profit or other financial gain to their owners and are collectively owned by shareholders who have the authority to appoint directors responsible for general management.

4.14    Co-operatives are set up by producers for the purposes of marketing their collective output. They effectively operate like corporations; however the profits of such co-operatives are distributed in accordance with their agreed rules and not necessarily in proportion to shares held. Similarly, partnerships whose members enjoy limited liability are separate legal entities that behave like corporations. In effect, the partners are at the same time both shareholders and managers.

4.15    A quasi-corporation is an unincorporated enterprise owned by a resident institutional unit that has sufficient information to compile a complete set of accounts, is operated as if it were a separate corporation and whose de facto relationship to its owner is that of a corporation to its shareholders. Also included is an unincorporated enterprise owned by a non-resident institutional unit that is deemed to be a resident institutional unit because it engages in a significant amount of production in the economic territory over a long or indefinite period of time and is subject to the income tax laws, if any, of the economy in which it is located even if it may have a tax-exempt status. Such a unit is termed a branch in 2008 SNA.

4.16    A notional resident unit is an artificial unit created if a non-resident unit is the legal owner of immovable assets such as land and other natural resources, and buildings and structures. The only exception is made for land and buildings in extra-territorial enclaves of foreign governments such as embassies, consulates, and military bases.

4.17    Two quite different types of units exist that are both often referred to as holding companies. The first is the head office that exercises some aspects of managerial control over its subsidiaries. These may sometimes have noticeably fewer employees, and more at a senior level, than its subsidiaries but it is actively engaged in production. Such units are allocated to the non-financial corporations sector unless all or most of their subsidiaries are financial corporations, in which case they are treated by convention as financial auxiliaries in the financial corporations sector.

4.18    The type of unit properly called a holding company is a unit that holds the assets of subsidiary corporations but does not undertake any management activities. 2008 SNA states that such units should be classified to the financial corporations sector and treated as captive financial institutions and money lenders even if all the subsidiary corporations are non-financial corporations. ASNA deviates from this treatment with holding companies classified to the sector reflective of the major economic activities of the controlled entities.

4.19    Government units are defined in 2008 SNA as unique types of legal entities established by political processes that have legislative, judicial, or executive authority over other institutional units within a defined area. The principal functions of government units are to (i) assume responsibility for provision of goods and services to the community or individual households and to finance their provision out of taxation and other income; (ii) redistribute income and wealth by means of transfers; and (iii) engage in non-market production.

4.20    Government units may engage in productive activity by:

  • creating a public corporation whose corporate policy, including pricing and investment, it is able to control;
  • creating an NPI that it controls; or
  • producing goods or services itself in a unit it owns but that does not exist as a separate legal entity from the government unit.

4.21    Note that the unit in the last example may be treated as a quasi-corporation if the necessary conditions are met; that is, if the unit sets economically significant prices, is operated and managed in a similar way to a corporation and it has a complete set of accounts.

4.22    Non-profit institutions are defined in 2008 SNA as legal or social entities created for the purpose of producing goods or services whose status does not permit them to be a source of income, profit or other financial gain for the units that establish, control or finance them. In practice, their productive activities are bound to generate either surpluses or deficits but any surpluses they happen to make cannot be appropriated by other institutional units. The articles of association by which they are established are drawn up in such a way that the institutional units that control or manage them are not entitled to a share in any profits or other income they generate. For this reason, they are frequently exempted from various kinds of taxes.

4.23    2008 SNA distinguishes two broad types of NPIs: market producers and non-market producers. NPIs are defined to be market producers if they charge prices or fees which have a significant influence on both the amounts producers are willing to supply and the amounts purchasers are willing to buy (i.e. the prices are 'economically significant'). Market NPIs are also defined to include all NPIs serving businesses. Non-market NPIs dispose of their output free of charge, or at prices that are not economically significant. They are classified to the general government sector if controlled by government units. Non-market NPIs that are independent of government are classified to a separate sector in the national accounts. They are called non-profit institutions serving households or NPISHs and are currently classified to the household sector in the ASNA. NPISHs provide goods and services to households free, or at economically insignificant prices.

4.24    In 2008 SNA, institutional units are described as enterprises in their capacity as producers. The term, 'enterprise' may refer to a corporation, a quasi-corporation, an NPI or an unincorporated enterprise. Since corporations and NPIs other than NPISHs are primarily set up to engage in production, the whole of their accounting information relates to production and associated accumulation activities. Government, households and NPISHs necessarily engage in consumption but may also engage in production; indeed, government and NPISHs always engage in production and many, but not all, households do. Whenever the necessary accounting information exists, the production activity of these units is separated from their other activities into a quasi-corporation. It is when this separation is not possible that an unincorporated enterprise exists within the government unit, household or NPISH.

The ASNA equivalent of 2008 SNA institutional units and enterprises

4.25    The units concepts used in the ASNA are based on the ABS Economic Units Model. The ABS uses an economic statistics units model on the ABS Business Register to describe the characteristics of businesses, and the structural relationships between related businesses. The ABS Business Register is used primarily as a register or frame for the various business surveys run by the ABS, and to support the use of administrative data.

4.26    The Australian Business Register (ABR) is the primary source used to identify new businesses. This information flows through to the ABS Business Register. Businesses are included on the ABR when they register with the Australian Taxation Office (ATO) for an Australian Business Number (ABN). The ABN is used as the reference for all dealings between government and business.

4.27    The units model used by the ABS in determining the structure of businesses is consistent with Australia's Corporations Law and with the definition of institutional units articulated in 2008 SNA. The model consists of the enterprise group (EG), one or more legal entities (LE), one or more type of activity units (TAU), and one or more location units.

4.28    The ABS is unable to actively apply the units model to all ABN registrants. Enterprise groups which are considered sufficiently complex and significant are profiled to create units according to the units model. These groups are known as the profiled population.

4.29    The remainder of ABN registrants are assumed to have simple structures. They are regarded as single legal entity, single enterprise group and TAU. These units are known as the non-profiled population. The two populations are mutually exclusive and cover all organisations in Australia which have registered for an ABN.

4.30    The LE and the TAU are the main institutional and producing units used by the ABS to produce statistical outputs. They do not have a universal relationship with each other, e.g. one to one, one to many, many to one. A variety of relationships exist in some of the larger and more complex Australian enterprise groups. This is a limited departure from the 2008 SNA, which states that there is a hierarchical relationship between institutional and producing units. In the 2008 SNA, the enterprise (the producing view of an individual institutional unit) can be partitioned into one or more establishments. The 2008 SNA statement is true at the EG level, but not necessarily at the LE level.

Figure 4.1 illustrates the nature of the relationships between the unit types in the model. The LE represents the ABN in the diagram as they are usually the same.

Figure 4.1 Illustration of units model used in ASNA

Illustration of units model used in ASNA

*The legal entity (LE) statistical unit is generally the same as the ABN.

4.32    A legal entity is defined as a unit covering all the operations in Australia of an entity which possesses some or all of the rights and obligations of individual persons or corporations, or which behaves as such in respect of those matters of concern for economic statistics. Examples of legal entities include companies, partnerships, trusts, sole (business) proprietorships, government departments and statutory authorities. Legal entities are institutional units.

4.33    There are some differences between the institutional unit and the practices adopted for the ABS Business Register, even though the legal entity statistical unit is considered to closely approximate the institutional unit as defined in 2008 SNA. The ABS Business Register includes, as legal entity units, individual government departments and authorities and some not-for-profit institutions (e.g. church parishes) that have registered for an ABN but that do not meet the definition for recognition as separate institutional units.

4.34    The ABS Business Register also recognises unincorporated businesses (e.g. sole proprietorships, partnerships, family trusts) that are owned and operated by one or more households and have registered for an ABN as legal entities.

4.35    The enterprise group is an institutional unit covering all the operations in Australia of one or more legal entities under common ownership and/or control. It covers all the operations in Australia of legal entities which are related in terms of the current Corporations Law. These may be legal entities, such as trusts and partnerships, as well as companies. Majority ownership is not required for control to be exercised.

4.36    The type of activity unit is comprised of one or more legal entities, sub-entities or branches of a legal entity that can report productive and employment activities via a set of minimum data items. When defining a TAU, the primary importance is that the activity of the unit be homogeneous. A TAU will be created if accounts sufficient to approximate Industry Value Added (IVA) are available at the ANZSIC subdivision level. Good estimates of accounts are sufficient for this purpose.

4.37    A location is a single, unbroken physical area, occupied by an organisation, at which or from which, the organisation is engaged in productive activity on a relatively permanent basis, or at which the organisation is undertaking capital expenditure with the intention of commencing productive activity on a relatively permanent basis at some time in the future (a location not yet in operation). The exception is the agricultural location unit where land parcels operated as a single property are treated as a single location.

Residence

4.38    The ASNA records the economic activity and wealth of resident institutional units. The residence of each institutional unit is the economic territory with which it has the strongest connection, in other words, its centre of predominant economic interest. This concept is consistent with both 2008 SNA and BPM6. Some key features are as follows:

  • the geographic territory under the effective control of the Australia's government;
  • any islands belonging to Australia which are subject to the same fiscal and monetary authorities as the mainland;
  • the land area, airspace, territorial waters, and continental shelf lying in international waters over which Australia enjoys exclusive rights or over which it has, or claims to have, jurisdiction in respect of the right to fish or to exploit fuels or minerals below the sea bed; and
  • territorial enclaves in the rest of the world (that is, geographic territories situated in the rest of the world and used, under international treaties or agreements, by general government agencies of the country). Territorial enclaves include embassies or consulates, military bases, scientific stations, etc. It follows that the economic territory of Australia does not include the territorial enclaves used by foreign governments which are physically located within Australia’s geographical boundaries.

4.39    Specifically, the economic territory of Australia consists of geographic Australia including Cocos (Keeling) Islands and Christmas Island, Norfolk Island, Australian Antarctic Territory, Heard Island and McDonald Islands, Territory of Ashmore Reef and Cartier Island and Coral Sea Islands. However, due to administrative complexities and measurement difficulties, Norfolk Island transactions will not always be captured. Most transactions involving Norfolk Island are not material to Australia's overall economic performance; however, any significant transactions will be identified and included in the relevant statistics.

4.40    An institutional unit has a centre of predominant economic interest in an economic territory when there is a location within the country’s territory from which it engages in economic activities and transactions on a significant scale, on a continuing basis. Such activities are conducted indefinitely or over a longer period of time (generally defined as one year or more). From this definition it follows that short-term production of goods or services undertaken by an Australian enterprise abroad, for example installation of equipment, can be treated as part of the GDP of Australia (and classified as exports of goods or services from Australia).

4.41    In addition, ownership of land or buildings within the economic territory of a country is deemed to give the owner a centre of economic interest in that country. Therefore, all land and buildings are owned by residents. If the centre of predominant economic interest of the non-resident owner of land or buildings remains outside the country where the property is located, the land or buildings are considered to be owned by a foreign direct investment enterprise and controlled by the non-residents. Any rents paid by the tenants of such land or buildings are deemed to be paid to the foreign direct investment enterprise, which in turn makes a transfer of property income to the actual non-resident owner.

4.42    In general, an institutional unit is resident in one and only one economic territory determined by the unit's centre of predominant economic interest. An exception is made for multi-territory enterprises that operate a seamless operation over more than one economic territory; that is, it is run as an indivisible operation with no separate accounts or decisions. Such enterprises are typically involved in cross-border activities and include shipping lines, airlines, hydroelectric schemes on border rivers, pipelines, bridges, tunnels, and undersea cables. If it is not possible to identify a parent or separate branches, it is necessary to prorate the total operations of the enterprise across the individual economic territories.

4.43    Individual members of households who leave the economic territory of a country and return after a limited period (less than one year) continue to be regarded as residents of that country. For example, a member of a resident Australian household who travels abroad for recreation, business, health or other purposes and returns within one year is treated while abroad as a resident of Australia for national accounts (and balance of payments) purposes. In the ASNA, any consumption expenditure undertaken abroad is therefore considered an import of goods or services. An exception to the one-year rule is made in the case of students and medical patients. Students are treated as residents of their country of origin, however long they study abroad. Medical patients abroad are also treated as residents of their country of origin, even if their stay is one year or more.

4.44    Individuals travelling to other countries for seasonal work, and those who cross country borders frequently for work purposes only, also remain residents of their original economic territory. This also applies to locally recruited staff of foreign embassies, consulates, military bases etc., and the crews of ships, aircraft, or other mobile equipment (such as drilling rigs) operating wholly or partly outside the economic territory. The staff of international organisations who work within the enclaves of those organisations are treated as residents of their country of origin if they work for less than one year. If they work with the international organisation for more than one year, they are treated as residents of the host country of the international organisation's enclave.

4.45    Unincorporated enterprises that are not quasi-corporations are not separate institutional units from their owners and, therefore, have the same residence as their owners. Corporations and NPIs are normally expected to have a centre of predominant economic interest in the country in which they are legally constituted and registered. Corporations may be resident in countries different from their shareholders and subsidiary corporations may be resident in countries different from their parent corporations. When a corporation, or unincorporated enterprise, maintains a branch, office or production site in another country in order to engage in production over a long period of time (generally defined as one year or more) but without creating a subsidiary corporation for the purpose, the branch, office or site is considered to be a quasi-corporation (that is, a separate institutional unit) resident in the country in which it is located.

4.46    International organisations established by international agreement (such as the United Nations) are accorded sovereign status, with their own economic territory consisting of the land and structures used by the organisation in the countries where they are physically located. International organisations are therefore not resident units of any country and all transactions with them are treated as transactions with non-residents.

Endnotes

  1. SNA, 2008, para.4.2.
  2. SNA, 2008, para.4.38.

Institutional sectors

4.47    The institutional sectors of 2008 SNA group together similar kinds of institutional units. Corporations, NPIs, government units and households are intrinsically different from each other in that their economic objectives, functions and behaviour are different. Institutional units are allocated to a sector according to the nature of the economic activities they undertake. The three basic economic activities recorded in 2008 SNA are production of goods and services, consumption to satisfy human wants or needs, and accumulation of various forms of capital.

4.48    2008 SNA groups institutional units with similar functions into the following institutional sectors:

  • the non-financial corporations sector;
  • the financial corporations sector;
  • the general government sector;
  • the household sector; and
  • the non-profit institutions serving households sector.

4.49    The figure below shows the 2008 SNA allocation of types of institutional units to institutional sectors. The same allocation rules are followed in the ASNA; however, the NPISH sector is consolidated within the household sector in the Australian System of National Accounts.

Figure 4.2 Illustrative allocation of institutional units to institutional sectors

Figure 4.2 Illustrative allocation of institutional units to institutional sectors

4.50    The sectors of the total economy and the rest of the world are highlighted. Once non-resident units and households are set aside, only resident legal and social entities remain. Three questions determine the sectoral allocation of all such units. The first is whether the unit is a market or non-market producer. This depends on whether most of the unit’s production is offered at economically significant prices or not.

4.51    The second question determining sectoral allocation applies to non-market units, all of which, including non-market NPIs, are allocated either to general government or to the NPISH sector. The determining factor for sectoral allocation is whether a non-market unit is part of, or controlled by, government.

4.52    The third question determining sectoral allocation applies to market units, all of which, including market NPIs, are allocated to either the non-financial corporations sector or the financial corporations sector.

Non-financial corporations sector

4.53    The non-financial corporations sector consists of all resident corporations, notional institutional units and quasi-corporations that are principally engaged in the production of market goods and/or non-financial services, and holding companies with mainly non-financial corporations as subsidiaries. It includes:

  • resident non-financial corporations irrespective of the residence of their shareholders;
  • quasi-corporations (including branches of foreign owned non-financial enterprises that are engaged in significant production in the economic territory on a long-term basis);
  • non-profit institutions that are market producers of goods or non-financial services; and
  • investment funds investing in predominantly non-financial assets such as infrastructure and property.

4.54    2008 SNA identifies three subsectors within the non-financial corporations subsector:

  1. Public non-financial corporations are resident non-financial corporations or quasi-corporations that are government owned or controlled.
  2. National private non-financial corporations are resident non-financial corporations or quasi-corporations that are not controlled by government or non-resident institutional units. Market NPIs are included in this subsector.
  3. Foreign controlled non-financial corporations are resident non-financial corporations or quasi-corporations that are controlled by non-resident institutional units.

4.55 The latter two subsectors are not distinguished in the ASNA. The disaggregation in ASNA is:

  • Public non-financial corporations; and
  • Private non-financial corporations.

4.56    Public non-financial corporations are further dissected into national and state and local subsectors.

4.57    Private non-financial corporations are further dissected into non-financial investment funds and other private non-financial corporations. The inclusion of non-financial investment funds in the non-financial corporations sector is a departure from 2008 SNA which includes all non-money market investment funds in the financial corporations sector. Non-financial investment funds invest in non-financial assets, usually real estate.

4.58    The ABS publication, Australian National Accounts: Finance and Wealth provides a further sectoral breakdown of non-financial corporations into public and private, with the public sector dissected into national and state and local subsectors, and private sector dissected into non-financial investment funds and other private non-financial corporations.

Financial corporations sector

4.59    The financial corporations sector consists of all resident corporations, notional institutional units, quasi-corporations, and market NPIs that are principally engaged in financial intermediation or in auxiliary financial activities. Financial corporations are distinguished from non-financial corporations because of their different roles in the economy, and the inherent differences in their respective functions and activity. Financial corporations are mainly engaged in financial market transactions, which involve incurring liabilities and acquiring financial assets; that is, borrowing and lending money, providing superannuation, life, health or other insurance, and financial leasing or investing in financial assets. In this process, the corporations are not acting as agents, but rather place themselves at risk by trading in financial markets on their own account. Financial auxiliaries are also classified to the financial corporations sector. They include stockbrokers, insurance brokers, investment advisers, trustees, custodians and nominees, mortgage originators and other entities that are engaged in providing services closely related to financial intermediation, even though they do not intermediate themselves.

4.60    Subsectors of the financial corporations sector identified in ASNA are:

  • Central Bank – the Reserve Bank of Australia (RBA).
  • Depository corporations – consist of all resident financial corporations and quasi-corporations, except the central bank, that are principally engaged in financial intermediation and have liabilities in the form of deposits or financial instruments that are close substitutes for deposits such as short-term certificates of deposits. This subsector is dissected into:
    • Authorised deposit-taking institutions; and
    • Other broad money institutions.
  • Superannuation funds and insurance corporations – consist of all funds that provide retirement benefits for specific groups of people and all corporations that provide life and other insurance cover, including reinsurance services. This subsector is dissected into:
    • Superannuation funds;
    • Life insurance corporations; and
    • Non-life insurance corporations.
  • Financial investment funds – these are collective investment schemes that raise funds by issuing shares or units to the public and the proceeds are invested primarily in financial assets. This subsector is dissected into:
    • Money market funds (MMF) – which invest in transferable debt instruments with a residual maturity of no more than one year, bank deposits and instruments that pursue a rate of return that approaches the interest rates of money market instruments; and
    • Non-money market financial investment funds (NMMF) – which invest in financial assets other than short-term assets.
  • Central Borrowing Authorities (CBAs) – are captive financial institutions established by each State and Territory government to primarily provide finance for public corporations and notional institutional units and other units owned or controlled by the government. They raise funds predominantly by issuing securities, arranging the investment of these unit's surplus funds and participating in the financial management activities of the parent government.
  • Securitisers – are financial intermediaries that pool various types of assets such as residential mortgages, commercial property loans and credit card debt, and package them as collateral to issue bonds or short-term debt securities, referred to as asset backed securities.
  • Other financial corporations – include other financial intermediaries, financial auxiliaries, money lenders and other captive financial institutions described as follows:
    • Other financial intermediaries – includes housing finance schemes established by State and Territory governments; economic development corporations owned by government to fund infrastructure developments;
    • Financial auxiliaries – units engaged in activities closely related to financial intermediation, but which do not themselves perform an intermediation role; that is, the auxiliary does not take ownership of the financial assets and liabilities being transacted. The types of corporations included are insurance brokers, loan brokers, investment advisors, managers of superannuation funds, securities brokers, etc.;
    • Money lenders – units providing financial services where most of their assets and liabilities are not transacted on the open markets; for example, pawnshops that predominantly engage in lending; and
    • Other captive financial institutions – units characterised by having a balance sheet holding financial assets on behalf of other companies. These institutions are usually legal entities such as corporations, trusts or partnerships established for a specific or limited purpose; for example, to hold the assets of a group of subsidiary corporations.

General government sector

4.61    The general government sector consists of government units and non-market NPIs that are controlled by government. The general government sector includes all government departments, offices and other bodies mainly engaged in the production of goods and services outside the normal market mechanism for consumption by government itself and the general public. The units' costs of production are mainly financed from public revenues and they provide goods and services to the general public, or sections of the general public, free of charge or at nominal charges well below costs of production. The sector includes government enterprises mainly engaged in the production of goods and services for other general government units. Also included are NPIs that are serving businesses or households and are composed largely of private sector members but are controlled by governments.

4.62    Subsectors within the general government sector in ASNA are:

  • national; and
  • state and local.

4.63    Public universities are treated as non-market NPIs controlled by government and are allocated to the general government sector. They are included in the national subsector together with Commonwealth general government.

4.64    Public universities are defined as non-market NPIs based on their funding arrangements. While most public universities were created by State legislation, the bulk of their funding is received from the Commonwealth government. Public universities are allocated to the government sector on the basis that, while no Australian government is able to control universities in the sense of being able to appoint their managing officers, it is clear that the Commonwealth government is able to exercise a significant degree of control through its funding power.

Household sector

4.65    The household sector consists of all resident households, defined as small groups of persons who share accommodation, pool some or all of their income and wealth, and collectively consume goods and services, principally housing and food. Although households are primarily consumers of goods and services, they also engage in other forms of economic activity through their operation of unincorporated enterprises. Such unincorporated enterprises are included in the household sector because the owners of ordinary partnerships and sole proprietorships will frequently combine their business and personal transactions, and complete sets of accounts in respect of the business activity will often not be available.

4.66    The 2008 SNA suggests that the household sector may be divided into subsectors on the basis of the type of income that is the largest source of income for each household or, alternatively, on the basis of other criteria of an economic, socioeconomic or geographical nature. 2008 SNA advises that statistical agencies determine the number and nature of subsectors to suit their own purposes, in view of differing needs across countries in relation to the analysis of the household sector. ASNA does not include any further dissection.

Non-Profit Institutions serving households sector (NPISH)

4.67    All institutional units of a particular type are grouped together within the same sector with the exception of NPIs. They are classified to various sectors depending on the nature of the NPI. Market NPIs are allocated to either the non-financial corporations sector or the financial corporations sector, depending on which sector they serve. Non-market NPIs that are controlled by government units are allocated to the general government sector. For example, an NPI which is mainly financed by government may be controlled by that government. It would not be considered controlled by government if the NPI remains able to determine its policy or programme to a significant extent.³¹ Other non-market NPIs - those not controlled by government - are allocated to the NPISH sector (note again that the NPISH sector has not been separately identified in the ASNA).

4.68    The NPISH sector includes the following two main kinds of NPISHs that provide goods or services to their members or to other households without charge, or at prices that are not economically significant:

  • organisations whose primary role is to serve their members, such as trade unions, professional or learned societies, consumers' associations, political parties, churches or religious societies, and social, cultural, recreational and sports clubs; and
  • philanthropic organisations, such as charities, relief and aid organisations financed by voluntary transfers in cash, or in kind, from other institutional units.

Rest of the world

4.69    In addition to accounts for the resident sectors, 2008 SNA includes external (rest of the world) accounts, which provide a summary of all transactions of residents with non-residents (e.g. overseas governments, persons and businesses). The rest of the world consists of all non-resident institutional units that enter into transactions with resident units or have other economic links with resident units. It is not a sector for which complete sets of accounts have to be compiled, although it is often convenient to describe the rest of the world as though it were a separate sector.

4.70    As discussed in relation to residence, the rest of the world includes institutional units that may be physically located within the geographical boundary of a country, for example, foreign enclaves such as embassies, consulates or military bases, and international organisations that are not treated as resident institutional units.

Endnotes

  1. See SNA, 2008, para.4.92 for more detail about the degree of control by government.

Institutional sectors and subsectors in the ASNA

Table 4.1    Institutional sectors and subsectors in the ASNA
SECTORS SUBSECTORS
Non-financial corporations Private
    Private non-financial investment funds
    Other private non-financial corporations
  Public
    National
    State and local
Financial corporations Central Bank
  Depository corporations
    Authorised deposit-taking institutions
    Other broad money institutions
  Superannuation funds and insurance corporations
    Superannuation funds
    Life insurance corporations
    Non-life insurance corporations
  Financial investment funds
    Money market funds
    Non-money market financial investment funds
  Central borrowing authorities
  Securitisers
  Other financial corporations
General government National
  State and local
Households (a)  

(a) Including uninccorporated businesses n.e.c. and non-profit insitiutions serving households.

4.71    Institutional sector and associated classifications used in ABS statistics are described in the ABS publication, Standard Economic Sector Classifications of Australia (SESCA). The classifications included in SESCA are based on international standards, adapted to suit Australian situations where appropriate. The institutional sector classification, the SISCA, is the main classification used for sectoring in the ASNA. For simplicity of presentation, the SISCA excludes the private/public, level of government and foreign controlled distinctions that are part of the 2008 SNA classification of institutional sectors. These distinctions are contained in other classifications within SESCA. The table above shows the domestic institutional sectors and subsectors included in the ASNA. Accounts for the rest of the world are grouped as 'external accounts' in ASNA. These accounts conform to the 2008 SNA definition of the rest of the world sector.

4.72    With the exception of the combination of the NPISH and household sectors, the ASNA structure corresponds with the structure outlined in 2008 SNA. The subsectors are a combination of 2008 SNA subsectors (adapted to Australian conditions) and other 2008 SNA-compliant classifications from the SESCA, as follows:

  • the distinction between the private and public subsectors within the non-financial corporations sector is based on the ABS private/public classification;
  • the Commonwealth, state and local, and national subsectors are based on the ABS level of government classification; and
  • unlike 2008 SNA, SISCA and the ASNA distinguish authorised deposit-taking institutions from other broad money institutions, CBAs from captive financial institutions, and securitisers from other financial institutions.

4.73    The national subsector is so named because it includes units that are subject to a degree of control from both Commonwealth and state governments, and that cannot be allocated to either a state or Commonwealth subsector. The national subsector therefore includes multi-jurisdictional units in addition to units that are solely under the jurisdiction of the Commonwealth. At present, public universities are the only multi-jurisdictional institutions that are included in the national subsector.

Concordance between ASNA and 2008 SNA sector and subsector definitions

4.74    The composition of the ASNA institutional sectors and subsectors accords with 2008 SNA definitions in most cases. Instances where the ASNA's sectoral composition differs from the 2008 SNA guidelines are described in the following paragraphs.

Non-MMF investment funds

4.75    2008 SNA includes all non-MMF investment funds within the financial corporations sector. However, in ASNA, only those investment funds investing predominantly in financial assets are treated as financial corporations. Those investing in non-financial assets, such as property, are treated as non-financial corporations. This distinction is based on whether the institution's primary income is obtained from rentals, or dividends and interest.

Quasi-corporations in the non-financial and financial corporations sectors

4.76    One feature of both the non-financial corporations sector and the financial corporations sector is that they are designed to cover businesses which are legally, or clearly act as, entities independent of their owners with regard to their income, consumption and capital financing transactions, and accordingly are required to maintain separate profit and loss and balance sheet accounts. Private enterprises classified to these sectors are mainly companies registered under the Companies Act or other Acts of Parliament. However, 2008 SNA also recommends that all quasi-corporations be treated as corporations and allocated either to the non-financial corporations or the financial corporations sector. In Australia, it is often difficult to distinguish quasi-corporations owned by households where the bulk of quasi-corporations are not presently identifiable from ABS data sources. In the ASNA, unincorporated enterprises identified as quasi-corporations are currently limited to large and easily identified enterprises such as partnerships of companies, unit trusts of companies, credit unions, building societies, branches of overseas corporations, and mutual societies. All sole proprietors, partnerships and trusts of individuals are treated as unincorporated enterprises, and are included in the household sector in the ASNA.

Non-profit institutions serving households (NPISH)

4.77    In the ASNA, the recommendations of 2008 SNA are followed with regard to the sector allocation of NPIs that are market producers, and those that are controlled by government units under certain criteria. Contrary to 2008 SNA recommendations, the SISCA does not include separate subsectors within the corporations and general government sectors for NPIs.

4.78    A lack of data availability on the transactions of NPISHs inhibit the construction of a full range of sector accounts for NPISHs. For more information, see the feature article Deconsolidated Household Income Account in the 2013-14 issue of Australian System of National Accounts.

Chapter 5 Producing units, products and industries

Producing units - Introduction

5.1    Institutional units operate in the economy and are grouped into institutional sectors. However, the production activities of institutional units can be diverse and heterogeneous with respect to the types of production processes and goods and services produced by the producing units belonging to institutional units. For analyses of production, analysts prefer to work with groups of producing units that are engaged in essentially the same kind of production. Such groups are called industries. Therefore, although institutional units can be allocated to industries, for the compilation of statistics classified by industry the units of interest are the producing units owned by institutional units. Producing units are sufficiently homogeneous, in terms of their range of activities, to enable them to be classified to industry at the required level of industry detail, based on their predominant activity.

5.2    Institutional units in their capacity as producers are described as enterprises. Enterprises can be allocated to industries in accordance with the types of productive activities in which they engage. However, as explained below, an enterprise may engage in both principal and secondary types of productive activity, and large corporations may be involved in many different kinds of productive activity simultaneously, encompassing a wide range of goods and services. Therefore, for the analysis of production classified by industry, it is necessary to partition (or split) enterprises into units that are more homogeneous in terms of the range of productive activities in which they engage. These units are described as type of activity units (TAUs) in ASNA.

5.3    The principal activity of a producing unit is the activity with value added that exceeds the value added of any other activity carried out by the same unit. In this context, activities are the kinds of production (based on outputs, inputs, production techniques or output uses) that are defined as the principal activities of each industry in the International Standard Industrial Classification (ISIC), Revision 4, published by the United Nations. A secondary activity is an activity with value added less than that of the principal activity. To be considered as either principal or secondary activities, the outputs from the activities must be goods or services that are capable of being delivered to other units even though they may be used for own consumption or for own capital formation.

5.4    The output of ancillary activity is not intended for use outside the enterprise. Ancillary activity is undertaken within an enterprise to support the principal or secondary activities. Activities which may be classified as ancillary include record keeping; electronic or other forms of communication; purchasing materials and equipment; personnel management; warehousing; transportation; sales promotion; cleaning, repairs and maintenance; security and surveillance. For national accounting purposes, the output of an ancillary activity is not explicitly recognised or recorded, and all inputs to ancillary activities are treated as inputs to the principal or secondary activities that they support. When ancillary activity grows to the point that it has the capacity to provide services outside an enterprise, it is treated as a secondary activity.

Producing units

5.5    The System of National Accounts 2008 (SNA 2008) discusses three types of units into which enterprises can be partitioned for the purpose of industry statistics:

  • Kind-of-activity unit - defined as an enterprise, or a part of an enterprise, which engages in only one kind of (non-ancillary) productive activity, or in which the principal productive activity accounts for the most of the value added.
  • Local unit - an enterprise or a part of an enterprise that engages in productive activity at or from one location.
  • Establishment - a combination of kind-of-activity and local units. This is defined as an enterprise, or a part of an enterprise, that is situated in a single location and in which only a single productive activity is carried out or in which the principal productive activity accounts for most of the value added. Although establishments can engage in secondary activities, 2008 SNA recommends that, if the secondary activity is significant, it should be treated as part of another establishment. Examples of establishments are individual farms, mines, quarries, factories, shops, construction sites and airports³².

5.6    If an enterprise comprises of only a single establishment, the two units coincide and the production account for the establishment is the same as for the enterprise. However, establishments are conceptually distinct from enterprises, in that an establishment does not engage in transactions on its own account, or incur liabilities, enter contracts and so on. The enterprise which owns the establishment is the unit which engages in these types of activities, and makes the decisions concerning the productive activities of the establishment. It follows therefore that only the production account and generation of income account can be compiled by industry as well as by sector. Consequently, it is feasible to calculate output and intermediate use (and therefore value added), compensation of employees, taxes (and subsidies) on production and imports, and operating surplus/mixed income for an establishment.

5.7    The establishment is designed to facilitate industry analysis, which is concerned with the outputs and inputs to the production processes of enterprises. Information about establishments is used to:

  1. value commodities produced and goods and services used in production;
  2. measure industry employment, compensation of employees, operating surplus, changes in inventories and gross fixed capital formation; and
  3. derive estimates of productivity. The enterprise provides information on the broader functions of an institutional unit engaged in production, enabling production to be classified to institutional sectors.

5.8    The following outlines instances where application of these principles is not straightforward:

  • A horizontally integrated enterprise is one in which several different kinds of activities that produce different kinds of goods or services for sale on the market are carried out simultaneously using the same factors of production. Within the SNA, a separate establishment should be identified for each different kind of activity wherever possible.
  • A vertically integrated enterprise is one in which different stages of production, which are usually carried out by different enterprises, are carried out in succession by different parts of the same enterprise. The output of one stage becomes an input into the next stage, with only the output from the final stage being actually sold on the market. Despite the practical difficulties involved in partitioning vertically integrated enterprises into establishments, it is recommended in the SNA that, when a vertically integrated enterprise spans two or more sections of the ISIC, at least one establishment must be distinguished within each section.
  • Government units, especially central governments, may be particularly large and complex in terms of the kinds of activities in which they engage.
    • If an unincorporated enterprise of government is a market producer and there is sufficient information available to treat it as a quasi-corporation, it should be treated as a publicly controlled unit in the non-financial or financial corporations sectors as appropriate.
    • If an unincorporated enterprise of government is a market producer and there is insufficient information to treat it as a quasi-corporation, or if the unincorporated enterprise is a non-market producer, then it remains within the general government sector but it should be treated as an establishment in its own right and allocated to the appropriate industry.
    • Non-market producers such as public administration, defence, health and education providing final goods or services should be partitioned into establishments using activity classification of the ISIC.
  • If the activity of a unit undertaking purely ancillary activities is statistically observable, in that separate accounts for the production it undertakes are readily available, or if it is located in a geographically different location from the establishments it serves, it should be recognised as a separate establishment and classified to its own principal activity. This is a change to the treatment in 1993 SNA where ancillary activities related to an individual establishment were treated as an integral part of the costs of the establishment's principal or secondary activities and no separate unit was created. An enterprise may include central ancillary units that carry out ancillary activities for all establishments of the same enterprise.

The ASNA equivalent of producing units

5.9    The producing unit in the ASNA's units model is the TAU. The TAU is a producing unit comprising of one or more business entities, sub-entities or branches of a business entity that can report production and employment activities via a minimum set of data items. The activity of the unit should be as homogeneous as possible. If accounts sufficient to approximate value added are available at the ANZSIC Subdivision level, a TAU will be formed. Where a business cannot supply adequate data to form a TAU for an individual ANZSIC Subdivision, a TAU will be formed which contains activity in two or more ANZSIC subdivisions.

5.10    In its simplest form, the TAU relates to the ABN of the business. In the case of complex and varied business structures, it may be inappropriate for the TAU to be created to refer to the ABN.

5.11    Ideally, all TAUs are constructed so that two-digit ANZSIC homogeneity is observed. This ensures that good quality industry estimates can be calculated by the ABS at that level. Not all businesses are able to supply a complete set of accounts for every ANZSIC Subdivision in which they have activity.

5.12    Only a small number of data items are required to be available on a quarterly basis. The data items are: total capital expenditure; income from the sale of goods and services; wages and salaries; total inventories; total purchases; and selected expenses. When all these data items are not available from business accounts, a TAU can still be formed if careful estimates can be provided.

5.13    Where businesses cannot provide the necessary data for separate activities, and if separate activities are being carried out at a significant level (in relation to the known/estimated activity of those industries), the TAU may be a candidate for unit splitting. If it is decided to split the TAU for statistical purposes, two or more new TAUs are formed as the statistical units and the former TAU becomes the reporting unit. Data will be reported by the former TAU for its multiple activities and the ABS will apportion it to the new split TAUs for statistical outputs. The estimates for the split units will be produced using benchmarks determined at the time of splitting.

5.14    TAUs are not created based on any geographic criteria. However, it is necessary to create special State and Territory units for some TAUs to accommodate state estimates. This unit is referred to as the TAU State. The TAU State is not stored as a specific unit on the ABS Business Register. Rather, information which allows the TAU State unit to be formed is stored.

5.15    A business unit's productive activity is described as ancillary when its sole function is to provide common types of services for intermediate consumption within the same enterprise group. These are typically services likely to be needed in most enterprise groups, whatever their principal activities; for example, transportation, purchasing, sales and marketing, various financial or business services, personnel, computing and communications, security, maintenance and cleaning.

5.16    The 2008 SNA treatment of ancillary units is that an establishment should be created where the activity of the unit is statistically observable. The ABS does not currently apply the recommended 2008 SNA treatment to ancillary TAUs, as the treatment cannot be applied to all units on the ABS Business Register.

Endnotes

  1. SNA, 2008, paras. 5.12-5.17.

Products and industries

Products

5.17    A product is a good or a service.

5.18    One of the main international standards for the classification of products is the Central Product Classification, Version 2 (CPC, Ver. 2.0), which is based on the intrinsic characteristics of the goods or the nature of the services rendered. This results in a classification structure that is different from that used for industries. Its fundamental principle is that the classification combines in one category goods or services that are normally produced in only one industry as defined in ISIC (i.e. industry of origin principle). It covers the production, trade and consumption of all goods and services

Industries

5.19    An industry is defined as ‘a group of establishments engaged in the same, or similar, kinds of activity’.

5.20    The International Standard for the Classification of Industries (ISIC), is a four-level hierarchical classification, which includes in the same industry grouping all establishments with the same principal activity. It takes into account not only the goods produced and services rendered, but also the inputs into the production process and the technology used in the production process.

5.21    A one-to-one correspondence does not exist between activities and products and hence between industries and products. Certain activities produce more than one product simultaneously, while the same product may sometimes be produced by using different techniques of production.

Products and industries in the ASNA

5.22    TAUs are classified to industries according to the Australian and New Zealand Standard Industrial Classification, 2006 (ANZSIC06). ANZSIC06 has been developed by the ABS and Statistics New Zealand for use in both countries for the compilation and analysis of industry statistics. To ensure international comparability, ANZSIC06 is aligned as closely as possible with the ISIC Rev 4.

5.23    ANZSIC06 comprises four levels, namely Divisions (the broadest level), Subdivisions, Groups and Classes (the lowest level). TAUs are defined to be homogeneous at the subdivision level.

5.24    Industry statistics in the ASNA are presented on a basis that is consistent with ANZSIC06. Value added is presented on an ANZSIC06 industry basis at the Division level, and also at the Subdivision level for the Agriculture, forestry and fishing, Mining, Manufacturing, Electricity, gas, water supply and waste services and Transport, postal and warehousing industries. A number of income components of the ASNA are also presented on an ANZSIC06 industry basis. Industry data in the Supply- Use tables (S-U tables) and Input-Output tables (I-O tables) are classified according to the Supply-Use Industry Classification (SUIC) and Input-Output Industry Group (IOIG) respectively, which are based on ANZSIC06. While some of the S-U and I-O industries correspond to a single ANZSIC06 industry class, most SUIC and IOIG industries constitute a grouping of similar ANZSIC06 industries. These groupings are formed to enable the S-U tables and I-O tables to present a balanced picture of the structure of the economy while maintaining comparability between the latest published tables and earlier ones.

5.25     Product statistics in the ASNA concord with the CPC, Ver. 2.0 to at least the three-digit level. Product data in the S-U tables and I-O tables are classified according to the Supply-Use Product Classification (SUPC) and Input-Output Product Classification (IOPC) respectively. Both classifications are

Chapter 6 Price and volume measures

Introduction

6.1    In the Australian economy, millions of economic transactions take place every day involving the production and sale of goods and services (products). The monetary value of each of these transactions is a product of the quantity produced or sold at a price per unit. In a particular period, the total value of all transactions taking place in an economy is simply the sum of the individual transaction values in that period. This is referred to as the current price value.

6.2    For many purposes, economists and other analysts wish to measure the volume growth of production and expenditures; that is, growth free of the effects of price change. The current price values are subject to the effects of changing prices and so they are unsatisfactory for these purposes. Consider the sale of beef and chicken in the following example:

In period 1, 20 kilos of beef are sold at $1.00 per kilo for a value of $20.00 and 10 kilos of chicken are sold at $2.00 per kilo for a value of $20.00. Total sales of meat are valued at $40.00.  

In period 2, 18 kilos of beef are sold at $1.10 per kilo for a value of $19.80 and 12 kilos of chicken are sold at $2.00 per kilo for a value of $24.00. Total sales of meat are valued at $43.80.

  • In this example, it can help to think of the kilos of beef/chicken as the ‘volume’ estimate, and the value as the current price, with the amount per kilo as the price. This exemplifies the key components in estimating volumes.

6.3    Total sales of meat have increased from $40.00 in period 1 to $43.80 in period 2, but what is the growth in volume terms? One way of answering this question is to hold prices constant in the two periods, at say period 1 prices. The total value of sales in period 2 at period 1 prices is $42.00 (18 kilos of beef @ $1.00 plus 12 kilos of chicken @ $2.00). At period 1 prices, the total value of meat sales has increased from $40.00 to $42.00, which is an increase of 5%. This can be expressed algebraically as:

\(\large{\frac{p_{beef}^1 q_{beef}^2+p_{chicken}^1 q_{chicken}^2}{p_{beef}^1 q_{beef}^1+p_{chicken}^1 q_{chicken}^1}=\frac{(1.00×18)+(2.00×12)}{(1.00×20)+(2.00×10) }=\frac{18.00+24.00}{20.00+20.00}=\frac{42.00}{40.00}=1.05}\)

where \(p\) represents the price and \(q\) represents the quantity.

6.4    This expression is called a Laspeyres volume index. The defining feature is that in calculating growth from one period to another, the prices of the earlier period are applied to both periods. 

6.5    Another way of estimating the volume growth of meat sales is to hold prices constant at period 2 prices. The value of meat sales in period 1 at period 2 prices is $42.00 (20 kilos of beef @ $1.10 per kilo plus 10 kilos of chicken @ $2.00 per kilo). This gives volume growth of 4.3% between the two periods and can be written algebraically as:

\(\large{\frac{p_{beef}^2 q_{beef}^2+p_{chicken}^2 q_{chicken}^2}{p_{beef}^2 q_{beef}^1+p_{chicken}^2 q_{chicken}^1 }=\frac{(1.10×18)+(2.00×12)}{(1.10×20)+(2.00×10) }=\frac{19.80+24.00}{22.00+20.00}=\frac{43.80}{42.00}=1.043}\)

6.6    This expression is called a Paasche volume index. The defining feature is that in calculating growth from one period to another, the prices of the later period are applied to both periods.

6.7    Both the Laspeyres and Paasche indexes are equally valid for calculating the volume growth of meat sales between period 1 and period 2, yet they give different answers. This suggests that an average of the two may be a better estimate than either of them. Fisher’s Ideal Index hereafter referred to as the Fisher index is the geometric mean of the Laspeyres and Paasche and is considered to be a superior index³³.

6.8    Up until the beginning of the twenty first century, most OECD member countries derived volume estimates of aggregates by holding prices constant in a base year; that is, constant price estimates. In effect, constant price estimates are a sequence of Laspeyres indexes from the base year to the current period multiplied by the current price value in the base year. Over time, price relativities change and when estimating volume growth from one period to another it is best to use prices at or about the current period. Both the 1993 and 2008 SNAs recommend the abandonment of constant price estimates in favour of chain volume estimates. Chain volume estimates are derived by linking together period-to-period indexes, such as Laspeyres, Paasche or Fisher indexes. 

6.9    While chain volume estimates are generally superior to constant price estimates in terms of deriving volume growth rates, their use raises a number of issues such as:

  • which index formula should be used (Laspeyres, Paasche or Fisher)?
  • how frequently should the fixed prices change - quarterly or annually?
  • if annually, how should quarterly indexes be derived and how should they be linked together? and
  • unlike constant price estimates, chain indexes are not generally additive; how should contributions to growth be derived?

6.10    Annex A to this chapter addresses these issues in detail whilst this chapter outlines how volume estimates are actually derived in the ASNA.

6.11    There are two principal steps in deriving volume estimates of national accounts aggregates:

  1. the derivation of elemental volume indexes at the most detailed level practicable; and
  2. the aggregation of the elemental volume indexes to the desired level, such as GDP.

6.12    The chapter addresses the second step first because it is best to consider the nature of the aggregate volume indexes before describing how the elemental indexes are derived.

Terminology

6.13     Before proceeding to discuss the aggregation of volume estimates it is necessary to define some of the key terminology to be used to minimise the risk of confusion.

6.14    The base period for an elemental volume index is the period for which the prices are fixed. Hence a Laspeyres volume index from time 0 to time t can be written as:

\(\large{\frac{q^tp^0}{q^0p^0}}\)

and a constant price estimate can be written as: \(q^tp^0\)

6.15    The Laspeyres volume index is equal to the constant price value for period t divided by the current price value for period 0. When elemental volume indexes are aggregated, the current price values in the base period form the weights for combining the elemental volume indexes. The derivation of elemental volume indexes is discussed later in this chapter.

6.16    The reference period is the period for which an index series is set equal to 100. This is an arbitrary number used in order to compare prices or volumes over time. Where the index is instead represented as a volume measure, the reference period of the series is set equal to the current price value. This allows the volume series to be expressed in terms of currency units.

6.17    For constant price estimates the base period and the reference period coincide. For chain volume indexes there is only one reference period, but there are many base periods chained together.

Endnotes

  1. See Chapter 15 Basic Index Number Theory in IMF (2010) Producer Price Index Manual: Theory and Practice. Washington, DC:  International Monetary Fund (IMF).

Chain volume index formulae

6.18    Annual chain volume indexes in the ASNA are derived by compounding successive year-to-year Laspeyres indexes. A Laspeyres volume index from year \(y-1\) to year \(y\) is derived by dividing the value of the aggregate in year y at year \(y-1\) prices (i.e. using the volumes in year \(y\) but the prices of year \(y-1\)) with the current price value in year \(y-1\); that is:

\(\large{L_Q} = \frac{{\sum\limits_{i = 1}^n {P_i^{y - 1}Q_i^y} }}{{\sum\limits_{i = 1}^n {P_i^{y - 1}Q_i^{y - 1}} }},\)

where \(P_i^y\) and \(Q_i^y\) are prices and quantities of the \(i^{th}\) product in year \(y\) and there are \(n\) products.

6.19    Annual chain Laspeyres volume indexes can be formed by multiplying consecutive year-to-year indexes; that is:

\(\large L_Q^y = \frac{{\sum\limits_{i = 1}^n {P_i^0Q_i^1} }}{{\sum\limits_{i = 1}^n {P_i^0Q_i^0} }} \times \frac{{\sum\limits_{i = 1}^n {P_i^1Q_i^2} }}{{\sum\limits_{i = 1}^n {P_i^1Q_i^1} }} \times \frac{{\sum\limits_{i = 1}^n {P_i^2Q_i^3} }}{{\sum\limits_{i = 1}^n {P_i^2Q_i^2} }} \times \ldots \times \frac{{\sum\limits_{i = 1}^n {P_i^{y - 1}Q_i^y} }}{{\sum\limits_{i = 1}^n {P_i^{y - 1}Q_i^{y - 1}} }}\)

6.20    The derivation of quarterly chain Laspeyres volume indexes is in concept no different to compiling annual chain volume indexes. However there is the complication of seasonality to contend with. In the ASNA, annual base years (i.e. annual weights) are used to derive quarterly volume indexes rather than having quarterly base periods. If quarterly base periods were to be used then this should only be done using seasonally adjusted data and not original data.

6.21    Consequently the Laspeyres-type³⁴ volume index from year \(y-1\) to quarter \(c\) in year \(y\) takes the form:

\(\large L_Q^{\left( {y - 1} \right) \to \left( {c,y} \right)} = \frac{{\sum\limits_{i = 1}^n {P_i^{y - 1}4q_i^{c,y}} }}{{\sum\limits_{i = 1}^n {P_i^{y - 1}Q_i^{y - 1}} }} = \sum\limits_{i = 1}^n {\frac{{4q_i^{c,y}}}{{Q_i^{y - 1}}}s_i^{y - 1},} \)

where \(q_i^{c,y}\) , is the volume of product \(i\) in the \(c^{th}\) quarter of year \(y\) and \(s\) is the share (weight) of the \(i^{th}\) item. For more detail see Annex A to this chapter.

Endnotes

  1. The term Laspeyres-type index is used to describe quarterly indexes with annual weights. 

Deriving annually linked quarterly Laspeyres-type volume indexes

6.22    There are several ways of linking annually weighted quarterly Laspeyres-type volume indexes. Annex A to this chapter describes the three methods outlined in 2008 SNA, including the one-quarter overlap method which is used in the ASNA.

6.23    After linking, the quarterly chain volume estimates are benchmarked to their annual counterparts. This benchmarking serves two purposes:

  1. It overcomes the inconsistency arising from the different linking methods required to compile quarterly chain volume estimates versus annual chain volume estimates; and
  2. It ensures the quarterly chain volume estimates are consistent with the data from the annual S-U tables. The Supply-Use tables are explained in more detail in Chapter 7.

6.24    The one-quarter overlap method involves calculating a link factor using overlap values for a single quarter. To link the four quarters of year \( y-1\) at year \( y-2\) average prices with the four quarters of year \( y\) at year \( y-1\) average prices, a one-quarter overlap can be created for either the fourth quarter of year \(y-1\) or the first quarter of year \( y\). The link factor derived from an overlap for the fourth quarter of year \(y-1\):

\(\large{ = \frac{{\sum\limits_{i = 1}^n {P_i^{y - 1}q_i^{4,\left( {y - 1} \right)}} }}{{\sum\limits_{i = 1}^n {P_i^{y - 2}q_i^{4,\left( {y - 1} \right)}} }}}\)

6.25     Multiplying the quarterly values for year \( y-1\) at year \( y-2\) average prices with this link factor puts them on to a comparable valuation basis with the quarterly estimates for year \( y\) at year \(y-1\) prices.

Price Indexes

6.26    The ABS publishes two types of price index in the national accounts:

  • chain Laspeyres price indexes; and
  • implicit price deflators (IPDs).

6.27    The quarterly chain Laspeyres price indexes are derived in the same way as the quarterly chain Laspeyres volume indexes, but they are only derived in original terms and are not seasonally adjusted.

6.28    The IPDs are derived by dividing current price values by the corresponding chain volume measures (CVMs). These are only derived using seasonally adjusted data. They are thus seasonally adjusted chain Paasche price indexes.

Introduction of new base years and re-referencing chain volume estimates

6.29    As described above, the ABS derives its annual and quarterly chain volume estimates using the Laspeyres formula with annual base years. With the exception of the latest quarters, quarterly chain volume estimates are derived by linking together estimates derived in the average prices of the previous year. However, the latest five to eight quarters are derived in the average prices of the latest base year, which is the year before the previous year. The reason for this exception is the delay in deriving the annual current price estimates of gross value added by industry, which are needed to form the base year weights for the volume estimates of GDP(P) and its components (See Chapter 9 for more information on Gross Value Added). Even though estimates of final expenditures could be derived in the average prices of the previous year for all years, the ABS has decided to apply the same approach and timing for all its volume estimates.

6.30    It is ABS practice to introduce a new base year with the release of the September quarter accounts. At the same time, the reference year is advanced one year to coincide with the latest base year, thereby ensuring additivity for the latest quarters. The process is best explained with some examples. 

6.31    In the June quarter release in year y, the quarterly chain volume estimates are derived by linking:

  • the eight quarters from September quarter year \(y-2\) to June quarter year \(y\) in the average prices of financial year \(\frac{y-3}{y-2}\);
  • the four quarters from September quarter year \(y-3\) to June quarter year \(y-2\) in the average prices of financial year \(\frac{y-4}{y-3}\); and
  • all earlier quarters in the average prices of the previous financial year.

Financial year \(\frac{y-3}{y-2}\) is the reference year.

6.32    In the September quarter release in year y, the quarterly chain volume estimates are derived by linking:

  • the five quarters from September quarter year \(y-1\) to September quarter year \(y\) in the average prices of financial year \(\frac{y-2}{y-1}\);
  • the four quarters from September quarter year \(y-2\) to June quarter year \(y-1\) in the average prices of financial year \(\frac{y-3}{y-2}\); and
  • all earlier quarters in the average prices of the previous financial year.

Financial year \(\frac{y-2}{y-1}\) is the reference year.

6.33    Re-referencing results in revisions to the levels of the chain volume measures, but it does not in itself result in revisions to growth rates, although growth rates can be revised for other reasons. One reason is that the introduction of a new reference year coincides with the introduction of a new base year for the latest four quarters. Another reason is the introduction of revised annual estimates, to which the quarterly estimates are benchmarked. 

Contributions to growth

6.34     In the dissemination of quarterly national accounts, contributions to growth play a prominent role - a role that has become more important with the loss of additivity that has accompanied the introduction of chain volume estimates. While the chain volume estimates of the components of an aggregate do not generally add up to the chain volume estimate of the aggregate, it is possible to calculate the contributions of each component to the growth rate of the aggregate. These growth rates are additive, which will be explained below.

6.35     Deriving contributions to growth from additive data, such as constant price estimates, is straightforward. Deriving the contributions to growth of quarterly chain volume estimates is more complex and unlike constant price estimates there is no one formula that can be applied in all cases. Rather, the methods that can be used depend on how the chain volume estimates have been derived, which include: 

  • the index formula used (e.g. Laspeyres or Fisher);
  • annual or quarterly base years;
  • method of linking in the case of annual base years; 
  • the period over which the contributions to growth are calculated (e.g. quarter-to-quarter or quarter on same quarter of previous year); and
  • special features of a component (e.g. changes in inventories).

6.36     The method used in the ASNA compromises the additivity of chain Laspeyres volume indexes in the year following the reference year. This phenomenon arises because the chain volume estimates in this year are in effect values in the prices of the previous year. 

6.37     The quarterly chain volume estimates of the components and the aggregates in year y-1 and year y are re-referenced to their respective annual current price values in year y-1 by multiplying them by their implicit price deflators for year y-1. This amounts to dividing each time series of quarterly chain volume estimates by the annual value of the chain volume estimates in year y-1 and then multiplying the result by the current price value in year y-1. The resulting quarterly chain volume estimates are additive in year y, and so the contributions to growth for quarters within year y are exactly additive.

6.38     To determine the quarterly contribution to growth of a component of an aggregate, the following calculation occurs:

\(\large Contrib.{\left( {{x_i},X} \right)^{c,y}} = \frac{{P_{{x_i}}^{y - 1}}}{{P_X^{y - 1}}} \times \frac{{\left( {x_{CVi}^{c,y} - x_{CVi}^{c - 1,y}} \right)}}{{X_{CVi}^{c - 1,y}}}\)

where 

  • \(X_{CV}^{c,y}\) is the chain volume estimate of an aggregate, such as GDP, in the \(c^{th}\) quarter of year \(y\) and \(P_X^{c,y}\) is the corresponding implicit price deflator; and
  • \(x_{C{V_i}}^{c,y}\) is the chain volume estimate of the \(i^{th}\) component of the aggregate in the \(c^{th}\) quarter of year \(y\) and \(P_{{x_i}}^{c,y}\) is the corresponding implicit price deflator.

6.39    During the 2012-13 annual compilation cycle, improvements were made to the method by which pre-1985-86 volume components of GDP(E) are calculated. These components were previously constant price estimates, and not 'true' chain volume measures. This break in series dated from the initial introduction of chain volume measures to the set of compilation methods underpinning the Australian national accounts. Chain volume measures were originally only implemented back to 1985-86. Prior year estimates were calculated as backcasts of historic constant price estimates.

6.40    Implementation of chain volume measures for pre-1985-86 estimates of GDP(E) was not carried through the complete aggregation structure, but headline components (consumption, investment and trade) are all now calculated as chain volume measures, as well as GDP(E) itself, back to 1959-60. Owing to difficulties in recalculating change in inventories estimates in chain volume terms prior to 1985-86, this component is calculated residually for this part of the time series. The result is that percentage point contributions to chain volume GDP(E) growth are now additive for the full time series. Additionally, real income measures such as real gross domestic income (RGDI) are now fully consistent with the terms of trade series across the full time series.

Effects of benchmarking

6.41     As described earlier, the ABS benchmarks its quarterly chain volume estimates to their annual counterparts. Prior to benchmarking, quarterly estimates in the prices of the previous year are additive, but after benchmarking and re-referencing they are usually not quite additive. This phenomenon arises because each quarterly chain volume series is independently benchmarked to its annual counterpart and the adjustments made to the quarterly estimates of the components are unlikely to be exactly consistent with the adjustments made to the aggregate. Contributions to growth are also unlikely to be perfectly additive after benchmarking, however they can be expected to be sufficiently close to being additive for practical purposes.

Data that are not strictly positive

6.42    The above method cannot be applied to data that are not strictly positive because meaningful implicit price deflators cannot be derived for them, and so the contributions to growth of such variables are derived residually by taking advantage of the fact that quarter-to-quarter contributions to growth are additive (or nearly so). For example, the contribution to growth in GDP of changes in inventories is derived as the difference between the contribution of gross capital formation and the contribution of gross fixed capital formation. 

Deriving elemental volume estimates

6.43     Chain volume estimates are derived by aggregating volume estimates of components at the elemental level; that is, the lowest level at which volume estimates are derived. The level of detail of each element that is aggregated is dependent on the availability of appropriate and high-quality current price and price index or quantity information. The following describes the two basic approaches taken to derive elemental volume estimates, quantity revaluation and price deflation.

Quality revaluation

6.44    The first approach uses quantity data to derive constant price estimates (tonnes, litres, etc.). For an individual product, the estimate of quantity in each period is multiplied by the price per unit of volume (or average unit value) in some base year. This method, referred to as quantity revaluation, can only be applied to produce estimates of reasonable quality if the product is defined narrowly enough to ensure that it is homogeneous in content and free from quality change over time (since a change in quality is defined as a change in volumes rather than as a change in price). Quantity revaluation is at times the preferred approach to obtain a volume estimate, if there is no directly observable market price for a good or service.

Price deflation

6.45    The second approach to obtaining volume estimates is referred to as price deflation. A measure of the price component of the current price value is obtained (usually in the form of a price index) and is divided into the current price value in order to re-value it in the prices of the previous year.  This also allows for the price effect to be isolated from the volume effect – as both price and volume are implicit in a current price value.

6.46    Price deflation is the most commonly used method, largely because most macroeconomic statistics are available only as dollar values, and the very detailed quantity data required for quantity revaluation are unavailable. However, there are also advantages in using price deflation in circumstances where it may be possible to employ either approach. Relative price movements are normally more highly correlated between products and between industries than are relative quantity movements. Therefore, an adequate indicator of price movement can generally be obtained with less data than are required to obtain an equally adequate indicator of quantity movement. There are two other main advantages in using price deflation as opposed to quantity revaluation:

  • in compiling price indexes, specific attention can be given more readily to excluding changes that are attributable to quality change; hence, ensuring that any quality changes that do occur are automatically reflected as volume changes; and
  • if directly relevant price or quantity data are not available to isolate the price and volume effect from a current price value, then the proxy price movements of related products will usually be more accurate indicators than proxy quantity movements.

6.47    In compiling its price indexes, the ABS ensures that as far as practicable they reflect 'pure' price change. When a change in specification of a good or service occurs, any change in price attributable to the change in specification is isolated and excluded where possible. By isolating the ‘pure’ price change in this way, when the price index is applied to a current price value to derive a volume, the volume will reflect both quality and quantity changes. To the extent that this is achieved, the resulting volume estimates reflect improvements (or degradations) in products. For details of how the ABS deals with specification changes in compiling its price indexes, refer to Consumer Price Index: Concepts, Sources and Methods.

6.48    In many cases, the deflator is a fixed-weighted (i.e. the weights used to combine the constituent price indexes are not changed frequently) combination of lower level price indexes. In those cases where both the price and quantity relativities of the constituents of a current price value to be deflated are changing quickly, it is important to construct chain price indexes that are re-weighted frequently. In those cases where price and quantity relativities are not changing rapidly, reweighting is undertaken less frequently. In any case, the ABS aims to deflate at the most disaggregated level practicable.

6.49    Where current price figures are only available at quite an aggregate level, but more detailed prices are available for components, then it is preferable to attempt a disaggregation of the total and deflate the components with the separate price series, rather than deflating at the level of the total using a fixed-weighted deflator. This is to ensure that the detailed level data are built up to their aggregate counterparts, to allow for in-depth and pointed information about products or services to be included in the broader estimates to which they are relevant. A variation on this approach is to use a model to decompose the current price aggregate, deflate the components and then create a Paasche price index from the aggregate current price and volume data. This method is used to deflate quarterly current price estimates of gross fixed capital formation (GFCF) of equipment, which are only available at an aggregate level. A product-flow model is created by using information from the latest annual S-U tables to weight together current quarter manufacturing output and foreign trade data to produce estimates of GFCF of equipment by detailed category. These are deflated using appropriate price indexes and then aggregated and divided into the corresponding current price aggregate to produce a Paasche price index for GFCF of equipment.

6.50    As far as possible the price indexes used for deflation should be on the same valuation basis as the current price data: for example, at basic prices for outputs and purchasers’ prices for final and intermediate expenditures. If a price index with an inappropriate valuation has to be used, then the ABS’s national accounts compilers must ensure that suitable adjustments are made if an event occurs that invalidates the assumption that the price index is a suitable proxy.

Quarterly chain volume estimates of gross value added

6.51    Annual estimates of gross value added by industry are derived in the prices of the previous year by subtracting volume estimates of intermediate consumption from volume estimates of output. This is commonly referred to as double deflation. For quarterly figures, however, in the absence of accurate data for both output and intermediate consumption, double deflation is not generally recommended unless it is applied in quarterly balanced S-U tables. The principal alternative is to extrapolate value added in the base year at a detailed level by indicator series which are deemed to represent the volume movement of value added, such as a volume indicator of output. This is the approach adopted by the ABS for most industries. The exceptions are agriculture and those industries dominated by non-market production. 

6.52    Because of substantial variations in the weather from one year to the next the relationship between agricultural outputs and inputs is erratic, and there is little option but to use double deflation to derive quarterly volume estimates of gross value added for agriculture. 

6.53    In the case of industries dominated by non-market production, such as public administration and defence, volume estimates of gross value added are assumed to grow at the same rate as an indicator of inputs. 

Seasonally adjusted chain-linked volume estimates

6.54    The compilation of seasonally (and calendar) adjusted quarterly chain-linked volume measures is the result of a sequence of operations, including seasonal and calendar adjustment, partial balancing, chain-linking and benchmarking. It is somewhat more complicated than deriving chain-linked original estimates because some of these steps need to be undertaken on unlinked data (partial balancing) and some need to be undertaken on chain-linked data (benchmarking, and seasonal and calendar factor estimation). The objective is to achieve the following for the seasonally adjusted chain linked data:

  • they should be of sufficiently high quality, with no residual seasonality and no over-adjustment (the seasonal component should not contain irregular influences);
  • when expressed in the average prices of the previous year they should be additively consistent, preferably with no statistical discrepancies; and
  • they should be temporally consistent with the same annual chain volume benchmarks used for the original data.³⁵ 

6.55    The following paragraph describes the steps taken in deriving seasonally adjusted, partially balanced and benchmarked, chain-linked quarterly Australian national accounts data:

  1. Seasonally analyse each chain-linked quarterly national account series at the lowest level of aggregation at which seasonal adjustment is undertaken to derive seasonal and calendar adjustment factors.
  2. Derive seasonally adjusted estimates in the average prices of the previous year. If the multiplicative model is used, then the factors can be applied directly to original data in the prices of the previous year (see Chapter 7 for detail on the multiplicative model). If any other model is used the seasonally adjusted chain-linked series needs to be unlinked.
  3. Aggregate the data to derive seasonally adjusted estimates in the average prices of the previous year for all major aggregates.

  4. Partially balance the accounts in a S-U framework.

  5. Chain link the estimates.

  6. Benchmark the chain-linked, seasonally adjusted volume estimates to the corresponding annual data.

  7. Run all the benchmarked series through the seasonal adjustment diagnostics to check for residual seasonality or any other problems. If there are any, go back to step 1 and recalculate the seasonal factors using the balanced and benchmarked original data.

Endnotes

  1. Temporal consistency with annual data is not an intrinsic characteristic of seasonally adjusted data when the seasonal pattern is typically changing over time. It is necessary because the one-quarter overlap method is used to derive the quarterly chain volume estimates.

The compilation of current price and chain volume estimates

6.56    There are three approaches to deriving estimates of GDP: the income approach (GDP(I)); the expenditure approach (GDP(E)); and the production approach (GDP(P)). It is possible to derive volume measures of GDP using the last two approaches, but it is not possible to derive a volume measure of GDP by summing volume estimates of its income components. The reason is that some of the income components of GDP either do not have price and quantity dimensions in the usual sense (e.g. gross operating surplus) or they do not have unique price and quantity dimensions (e.g. wages, for which the price and quantity characteristics differ according to whether they are viewed from the perspective of an employer or of an employee). However, it is possible to derive a volume measure of GDP(I) by dividing the current price estimate of GDP(I) by the implicit price deflator of GDP(E).

6.57    From 1995-96, annual volume estimates of expenditure and production are compiled in the prices of the previous year in a S-U framework. Volume estimates of the supply of products by each Australian industry and imports are confronted and balanced with volume estimates of products used by Australian industries, final domestic expenditures, changes in inventories and exports. The balance between supply and use for each product category ensures that the volume measure of GDP in the prices of the previous year is the same whether it is derived by summing final expenditures and changes in inventories plus exports less imports or by summing the gross value added of each industry and taxes less subsidies on products. In other words, the expenditure and production volume estimates of GDP are identical. The estimates in the prices of the previous year are divided by comparable current price estimates for the previous year to derive year-to-year Laspeyres volume indexes. These are chained to form annual chain volume estimates.

6.58    From 1994-95, annual current price estimates of income, expenditure and production are compiled in a S-U framework in parallel with the volume estimates, so that the annual current price and volume estimates of GDP using the income, expenditure and production approaches are identical from 1994-95 for all but the latest year.

6.59    For current price and volume estimates prior to 1994-95, and for quarterly estimates for all years, the estimates using each approach are only partially balanced, and there are usually differences between the I, E and P estimates. Nevertheless, for these periods, a single estimate of GDP is compiled. In chain volume terms, GDP is derived by averaging the chain volume estimates obtained from each of the three independent approaches. The current price estimate of GDP is obtained by reflating the average chain volume estimate by the implicit price deflator derived from GDP(E).

Annex A Deriving chain volume indexes

6A.1    The following provides a detailed description of the various chain volume measures and the issues associated with using them

Different index formulae

6A.2    The general formula for a Laspeyres volume index from year \(y-1\) to year \(y\) is given by:

\(\large {L_Q} = \frac{{\sum\limits_{i = 1}^n {P_i^{y - 1}Q_i^y} }}{{\sum\limits_{i = 1}^n {P_i^{y - 1}Q_i^{y - 1}} }},\)         - - - - - - - (1)

where \(P_i^y\) and \(Q_i^y\) are prices and quantities of the \(i^{th}\) product in year \(y\) and there are \(n\) products. The denominator is the current price value of the aggregate in year \(y-1\) and the numerator is the value of the aggregate in year \(y\) at year \(y-1\) average prices.

6A.3 A Paasche volume index from year \(y-1\) to year \(y\) is defined as:

\(\large {P_Q} = \frac{{\sum\limits_{i = 1}^n {P_i^yQ_i^y} }}{{\sum\limits_{i = 1}^n {P_i^yQ_i^{y - 1}} }},\)         - - - - - - - (2)

6A.4    A Fisher index is derived as the geometric mean of a Laspeyres and Paasche index:

\(\large {F_Q} = {\left( {{L_Q}{P_Q}} \right)^{1/2}}\)         - - - - - - - (3)

6A.5    A Paasche price index from year \(y-1\) to year \(y\) is defined as:

\(\large {P_P} = \frac{{\sum\limits_{i = 1}^n {P_i^yQ_i^y} }}{{\sum\limits_{i = 1}^n {P_i^{y - 1}Q_i^y} }},\)         - - - - - - - (4)

6A.6    When this Paasche price index is divided into the current price index from year \(y-1\) to year \(y\) a Laspeyres volume index is produced:

\(\large \frac{{\sum\limits_{i = 1}^n {P_i^yQ_i^y} }}{{\frac{{\sum\limits_{i = 1}^n {P_i^{y - 1}Q_i^{y - 1}} }}{{{P_P}}}}} = \frac{{\frac{{\sum\limits_{i = 1}^n {P_i^yQ_i^y} }}{{\sum\limits_{i = 1}^n {P_i^{y - 1}Q_i^{y - 1}} }}}}{{\frac{{\sum\limits_{i = 1}^n {P_i^yQ_i^y} }}{{\sum\limits_{i = 1}^n {P_i^{y - 1}Q_i^y} }}}} = \frac{{\sum\limits_{i = 1}^n {P_i^{y - 1}Q_i^y} }}{{\sum\limits_{i = 1}^n {P_i^{y - 1}Q_i^{y-1}} }} = {L_Q}\)         - - - - - - - (5)

6A.7    Evidently, Laspeyres volume indexes and Paasche price indexes complement each other, and vice versa

Table 6A.1 Comparison of Laspeyres, Paasche and Fisher volume indexes
Sales of beef and chicken
Quantity (kilos) Year 1 Year 2 Year 3 Year 4
  Beef 20 18 16 17
  Chicken 10 12 14 17
Price per kilo ($)        
  Beef 1.00 1.10 1.20 1.30
  Chicken 2.00 2.00 2.10 2.15
Value ($)        
  Beef 20.00 19.80 19.20 22.10
  Chicken 20.00 24.00 29.40 36.55
  Total 40.00 43.80 48.60 58.65
Laspeyres volume index: year 1 to year 2 using year 1 prices
    Values at year 1 prices ($)    
    Year 1 Year 2 Volume index Growth rate
  Beef 20.00 18.00 0.900 -10.0%
  Chicken 20.00 24.00 1.200 20.0%
  Total 40.00 42.00 1.050 5.0%
Laspeyres volume index: year 2 to year 3 using year 2 prices
    Values at year 2 prices ($)    
    Year 2 Year 3 Volume index Growth rate
  Beef 19.80 17.60 0.889 -11.1%
  Chicken 24.00 28.00 1.167 16.7%
  Total 43.80 45.60 1.041 4.1%
Laspeyres volume index: year 3 to year 4 using year 3 prices
    Values at year 3 prices ($)    
    Year 3 Year 4 Volume index Growth rate
  Beef 19.20 20.40 1.063 6.3%
  Chicken 29.40 35.70 1.214 21.4%
  Total 48.60 56.10 1.154 15.4%
Paasche volume index: year 1 to year 2 using year 2 prices
    Values at year 2 prices ($)    
    Year 1 Year 2 Volume index Growth rate
  Beef 22.00 19.80 0.090 -10.0%
  Chicken 20.00 24.00 1.200 20.0%
  Total 42.00 43.80 1.043 4.3%
Paasche volume index: year 2 to year 3 using year 3 prices
    Values at year 3 prices ($)    
    Year 2 Year 3 Volume index Growth rate
  Beef 21.60 19.20 0.089 -11.1%
  Chicken 25.20 29.40 1.167 16.7%
  Total 46.80 48.60 1.038 3.8%
Paasche volume index: year 3 to year 4 using year 4 prices
    Values at year 4 prices ($)    
    Year 3 Year 4 Volume index Growth rate
  Beef 20.80 22.10 1.063 6.3%
  Chicken 30.10 36.55 1.214 21.4%
  Total 50.90 58.65 1.152 15.2%
Comparisons of the volume indexes
    Year 1 to 2 Year 2 to 3 Year 3 to 4  
  Laspeyres 1.050 1.041 1.154  
  Paasche 1.043 1.038 1.152  
  Fisher 1.046 1.040 1.153  

6A.8    The following table provides an example of deriving Laspeyres volume indexes by deflation.

Table 6A.2 Derivation of Laspeyres volume indexes by deflation
  Sales of beef and chicken
Paasche price index: year 1 to year 2 using year 2 quantities
    Values at year 2 quantiles ($)    
    Year 1 Year 2 Price index Growth rate
  Beef 18.00 19.80 1.100 10.0%
  Chicken 24.00 24.00 1.000 0.0%
  Total 42.00 43.80 1.043 43.0%
Paasche price index: year 2 to year 3 using year 3 quantities
    Values at year 3 quantiles ($)    
    Year 2 Year 3 Price index Growth rate
  Beef 17.60 19.20 1.091 9.1%
  Chicken 28.00 29.40 1.050 5.0%
  Total 45.60 48.60 1.066 6.6%
Paasche price index: year 3 to year 4 using year 4 quantities
    Values at year 4 quantiles ($)    
    Year 2 Year 3 Price index Growth rate
  Beef 20.40 22.10 1.083 8.3%
  Chicken 35.70 36.55 1.024 2.4%
  Total 56.10 58.65 1.045 4.5%
Laspeyres volume indexes derived by deflation
    Year 1 to 2 Year 2 to 3 Year 3 to 4  
  Value index 1.095 1.110 1.207  
  Paasche price index 1.043 1.066 1.045  
  Laspeyres volume index 1.050 1.041 1.154  

Chain volume indexes

6A.9    Annual chain Laspeyres and Paasche volume indexes can be formed by multiplying consecutive year-to-year indexes: 

\(\large L_Q^y = \frac{{\sum\limits_{i = 1}^n {P_i^0Q_i^1} }}{{\sum\limits_{i = 1}^n {P_i^0Q_i^0} }} \times \frac{{\sum\limits_{i = 1}^n {P_i^1Q_i^2} }}{{\sum\limits_{i = 1}^n {P_i^1Q_i^1} }} \times \frac{{\sum\limits_{i = 1}^n {P_i^2Q_i^3} }}{{\sum\limits_{i = 1}^n {P_i^2Q_i^2} }} \times ..... \times \frac{{\sum\limits_{i = 1}^n {P_i^{y - 1}Q_i^y} }}{{\sum\limits_{i = 1}^n {P_i^{y - 1}Q_i^{y - 1}} }}\)         - - - - - - - (6)

 \(\large P_Q^y = \frac{{\sum\limits_{i = 1}^n {P_i^1Q_i^1} }}{{\sum\limits_{i = 1}^n {P_i^1Q_i^0} }} \times \frac{{\sum\limits_{i = 1}^n {P_i^2Q_i^2} }}{{\sum\limits_{i = 1}^n {P_i^2Q_i^1} }} \times \frac{{\sum\limits_{i = 1}^n {P_i^3Q_i^3} }}{{\sum\limits_{i = 1}^n {P_i^3Q_i^2} }} \times ..... \times \frac{{\sum\limits_{i = 1}^n {P_i^yQ_i^y} }}{{\sum\limits_{i = 1}^n {P_i^yQ_i^{y - 1}} }},\)         - - - - - - - (7)

6A.10    Chain Fisher indexes can be derived by taking their geometric mean: 

\(\large F_Q^y = {\left( {L_Q^yP_Q^y} \right)^{1/2}}\)         - - - - - - - (8)

6A.11    All of these indexes can be re-referenced by dividing them by the index value in the chosen reference year and multiplying by 100 to produce an indexed series, or by multiplying by the current price value in the reference year to obtain a series in monetary values.

The case for using chain indexes

6A.12    Frequent linking is beneficial when price and volume relativities progressively change. For example, volume estimates of gross fixed capital formation are much better derived as chain indexes than as fixed-weighted indexes (i.e. constant price estimates) mainly because of the steady decline in the relative prices of computer equipment and the corresponding increase in their relative volumes. While chain Fisher indexes perform best in such circumstances and are a much better indicator than fixed-weighted indexes, chain Laspeyres indexes capture much of the improvement from frequent linking. 

6A.13    Conversely, frequent chaining is least beneficial when price and volume relativities are volatile. All chained series are subject to drift (see box below) when there is price and volume instability, but chain Fisher indexes usually drift less than either chain Laspeyres or chain Paasche indexes.

Drift and long-term accuracy

Suppose the prices and quantities are \(p_i^t\)  and \(q_i^t\)  at time t and \(p_i^{t+n}\)  \(n\) periods later at time \(t+n\).

Further suppose that the price in year \(t+n\) \((𝑝^{𝑡+𝑛})\) returns to the same level that it was in year \(t (𝑝𝑡) \)after having diverged from \(𝑝𝑡\) during the intervening years (\(𝑡^2\) to \(𝑡^{𝑛−1}\)). Similarly, the quantity in year \(t+ n\) (\(𝑞^{𝑡=𝑛}\)) also returns to its original level (\(𝑞^𝑡\)) after having diverged between those years. Direct Laspeyres, Paasche and Fisher volume indexes from year \(t\) to year \(t+ n\) would equal 1.

However, it is unlikely that the values of a chain volume index would be identical in these years because of the cumulative effects of changes in the prices and volumes during the intervening years. The extent of the difference (usually expressed as the quotient of the two values) is a measure of the “drift” in the chain volume index between the two time periods.

In reality it is very uncommon for prices and volumes to return to the values observed in an earlier period. Therefore, in practice, the drift and long-term accuracy of a chain or fixed-weighted index can be assessed over a period of time by comparing it with a direct Fisher index; that is, a Fisher index calculated directly from the first to the last observation in a period.

6A.14    Table A.3 below compares the chain Laspeyres, chain Paasche and chain Fisher indexes of meat sales. It shows that in this example:

  • the chain Fisher index and the Fisher index calculated directly from the first year to the fourth year show almost the same growth rate over the four year period; that is, the chain Fisher index shows very little drift; and
  • both the chain Laspeyres and chain Paasche indexes come much closer to the two Fisher indexes than their fixed-weighted counterparts.

6A.15    It is important to note that this is just an example. In the real world, the differences between the different indexes are usually much less.

6A.16    For aggregates such as gross value added of mining and agriculture, and maybe exports and imports, where volatility in price and volume relativities are common, the advantages of frequent linking may be doubtful, particularly using the Laspeyres (or Paasche) formula. For reasons of practicality and consistency, the same approach to volume aggregation has to be followed throughout the accounts. So when choosing which formula to use, it is necessary to make an overall assessment of drift, accuracy and practical matters.

6A.17    In considering the benefits of chain volume indexes against fixed-weighted indexes, the 2008 SNA concludes that: 

. . . it is generally recommended that annual indexes be chained. The price and volume components of monthly and quarterly data are usually subject to much greater variation than their annual counterparts due to seasonality and short-term irregularities. Therefore, the advantages of chaining at these higher frequencies are less and chaining should definitely not be applied to seasonal data that are not adjusted for seasonal fluctuations.³⁶

Table 6A.3 Illustration of chain volume indexes, direct indexes and drift
  Laspeyres     Passche     Fisher  
Chain volume indexes
\(\large L_{CV}^1\) = 100.0 = 100.0 \(\large P_{CV}^1\) = 100.0 = 100.0 \(\large F_{CV}^1\) = 100.0 = 100.0
\(\large L_{CV}^2\) = 100.0 X 1.050 = 105.0 \(\large P_{CV}^2\) = 100.0 X 1.043 = 104.3 \(\large F_{CV}^2\) \({\left( {105.0 \times 104.3} \right)^{0.5}}\) = 104.6
\(\large L_{CV}^3\) = 105.0 X 1.041 = 109.3 \(\large P_{CV}^3\) = 104.3 X 1.038 = 108.3 \(\large F_{CV}^3\) \({\left( {109.3 \times 108.3} \right)^{0.5}}\) = 108.8
\(\large L_{CV}^4\) = 109.3 X 1.154 = 126.2 \(\large P_{CV}^4\) = 108.3 X 1.152 = 124.8 \(\large F_{CV}^4\) \({\left( {126.2 \times 124.8} \right)^{0.5}}\) = 125.5
Direct volume indexes
\(\large L_{DV}^4\) \(\large \frac{{17 \times 1.00 + 17 \times 2.00}}{{40.00}}\) = 127.5 \(\large P_{DV}^4\) \(\large \frac{{58.65}}{{20 \times 1.30 + 10 \times 2.15}}\) = 123.5 \(\large F_{DV}^4\) \({\left( {127.5 \times 123.5} \right)^{0.5}}\) = 125.5

Deriving annual chain volume indexes in the national accounts

6A.18    It is recommended in the 2008 SNA that the annual national accounts should be balanced in both current prices and in volume terms using S-U tables. In most cases, the volume estimates are best derived in the average prices of the previous year rather than some distant base year. This is for two key reasons:

  • assumptions of fixed relationships in volume terms are usually more likely to hold in the previous year’s average prices than in the prices of some distant base year: and;
  • so that the growth rates of volumes and prices are less affected by compositional change. 

6A.19    The compilation of annual S-U tables in current prices and in the average prices of the previous year lends itself to the compilation of annual Laspeyres indexes and to the formation of annual chain Laspeyres indexes. 

6A.20    In order to compute annual Fisher indexes from data balanced in a S-U table, it is conceptually desirable to derive both Laspeyres and Paasche indexes from that data. The former requires balancing the S-U tables of the current year \((y)\) in current prices \((y)\) and in the average prices of the previous year \((y-1)\) and the latter requires balancing S-U tables in the previous year \((y-1)\) in the average prices of that year \((y-1)\) and in the average prices of the current year \((y)\). Thus, the compilation of annual chain Fisher indexes, at least in concept, is somewhat more demanding than compiling annual chain Laspeyres indexes.

Deriving quarterly chain indexes in the national accounts

6A.21    Computationally, the derivation of quarterly chain indexes from quarterly data with quarterly base periods is no different to compiling annual chain indexes from annual data with annual base periods. As recommended by the 2008 SNA, if quarterly volume indexes are to have quarterly base periods and be linked each quarter, then it should only be done using seasonally adjusted data. Furthermore, if the quarterly seasonally adjusted data are subject to substantial volatility in relative prices and relative volumes, then chain indexes should not be formed from indexes with quarterly base periods at all. Even if the quarterly volatility is not so severe, quarterly base periods and quarterly linking are not recommended using the Laspeyres formula because of its greater susceptibility to drift than the Fisher formula.

6A.22    A way round this problem is to derive quarterly volume indexes from a year to quarters. In other words, use annual base years (i.e. annual weights) to derive quarterly volume indexes. Consider the Laspeyres annual volume index in formula 1. It can be expressed as a weighted average of elemental volume indexes:

\(\large {L_Q} = \frac{{\sum\limits_{i = 1}^n {P_i^{y - 1}Q_i^y} }}{{\sum\limits_{i = 1}^n {P_i^{y - 1}Q_i^{y - 1}} }} = \sum\limits_{i = 1}^n {\left( {\frac{{Q_i^y}}{{Q_i^{y - 1}}}} \right)} s_i^{y - 1},\;where\;s_i^{y - 1} = \frac{{P_i^{y - 1}Q_i^{y - 1}}}{{\sum\limits_{i = 1}^n {P_i^{y - 1}Q_i^{y - 1}} }}\) - - - - - - - (9)

\(s_i^{y - 1}\) is the share, or weight, of the \(i^{th}\) item in year \(y-1\).

6A.23    Paasche volume indexes can also be expressed in terms of a weighted average of the elemental volume indexes, but as the harmonic, rather than arithmetic, mean.

6A.24    A Laspeyres-type³⁷ volume index from year \(y-1\) to quarter \(c\) in year \(y\) takes the form:

\(\large L_Q^{(y - 1) \to (c,y)} = \frac{{\sum\limits_{i = 1}^n {P_i^{y - 1}4q_i^{c,y}} }}{{\sum\limits_{i = 1}^n {P_i^{y - 1}Q_i^{y - 1}} }} = \sum\limits_{i = 1}^n {\frac{{4q_i^{c,y}}}{{Q_i^{y - 1}}}} s_i^{y - 1},\) - - - - - - - (10)

where \({q_i^{c,y}}\) is the volume of product \(i\) in the \(c^{th}\) quarter of year \(y\). In this case the annual current price data in year \(y-1\) are used to weight together elemental volume indexes from year \(y-1\) to each of the quarters in year \(y\). The “4” in formula 10 is to put the quarterly data onto a comparable basis with the annual data. Note that constant price (or fixed-weighted) volume indexes are traditionally formed in this way, but the weights are kept constant for many years.

6A.25    2008 SNA describes how chain Fisher-type indexes of quarterly data with annual base periods can be derived:

"Just as it is possible to derive annually chained Laspeyres-type quarterly indices, so it is possible to derive annually chained Fisher-type quarterly indices. For each pair of consecutive years, Laspeyres-type and Paasche-type quarterly indices are constructed for the last two quarters of the first year, year \(y-1\) and the first two quarters of the second year, year \(y\). The Paasche-type quarterly indices are constructed as backward-looking Laspeyres-type quarterly indices and then inverted. This is done to ensure that the Fisher-type quarterly indices are derived symmetrically. In the forward-looking Laspeyres-type indices the annual value shares relate to the first of the two years, whereas in the backward-looking Laspeyres-type indices the annual value shares relate to the second of the two years.

For each of the four quarters a Fisher-type index is derived as the geometric mean of the corresponding Laspeyres-type and Paasche-type indices. Consecutive spans of four quarters can then be linked using the one-quarter overlap technique. The resulting annually chained Fisher-type quarterly indices need to be benchmarked to annual chain Fisher indices to achieve consistency with the annual estimates."³⁸

Choosing between chain Laspeyres and chain Fisher indexes

6A.26    There are several advantages in using the Laspeyres formula:

  • its adoption is consistent with compiling additive S-U tables in both current prices and in the prices of the previous year;
  • quarterly chain volume estimates of both seasonally adjusted and unadjusted data can be derived;
  • it is unnecessary to seasonally adjust volume data at the most detailed level, if desired; and
  • it is simpler and lower risk to construct chain Laspeyres indexes than Fisher indexes.

6A.27    The advantages of using the Fisher formula are:

  • it is more accurate than the Laspeyres formula; and
  • it is more robust and less susceptible to drift when price and volume relativities are volatile.

6A.28    In practice, it is generally found that there is little difference between chain Laspeyres and Fisher indexes for most aggregates. The major threat to the efficacy of the use of the Laspeyres formula in the National Accounts has been computer equipment. The prices of computer equipment relative to improvements in quality have been falling rapidly and the volumes of production and expenditure have been rising rapidly for many years. Consequently, the chain Laspeyres and chain Fisher indexes for aggregates for which computer equipment is a significant component are likely to show differences. Until now, these differences have been insufficient to cause concern and have not been considered to outweigh the advantages of using the Laspeyres formula. This is largely due to the fact that a country such as Australia does not produce a large volume of computers domestically, and as such GDP is unaffected. 

6A.29    There is one other reason why the ABS has chosen to derive chain volume estimates using the Laspeyres formula. A requirement of using quarterly base periods is the availability of quarterly current price data (see formula 9). While there are quarterly current price estimates of final expenditures in the ASNA, there are no quarterly current price estimates of gross value added by industry at the moment. Hence, it is currently not possible to derive chain volume estimates with quarterly base periods for the production measure of GDP.

Deriving annually-linked quarterly Laspeyres-type volume indexes

6A.30    While there are different ways of linking annual Laspeyres volume indexes, they all produce the same result. But this is not true when it comes to linking annual-to-quarter Laspeyres-type volume indexes for consecutive years. Paragraphs 15.46 -15.50 of the 2008 SNA discuss three methods for linking these Laspeyres-type volume indexes; they are:

  • Annual overlap;
  • One-quarter overlap: and
  • Over the year.

6A.31    When a Laspeyres-type quarterly volume index from year \(y-1\) to quarter \(c\) in year \(y\) is multiplied by the current price value for year \(y-1\) divided by four, then a value for quarter \(c\) is obtained in the average prices of year \(y-1\).

\(\large \sum\limits_{i = 1}^n {\frac{{4q_i^{c,y}}}{{Q_i^{y - 1}}}} s_i^{y - 1}\frac{1}{4}\sum\limits_{i = 1}^n {P_i^{y - 1}Q_i^{y - 1}} = \sum\limits_{i = 1}^n {\frac{{4q_i^{c,y}}}{{Q_i^{y - 1}}}} \frac{{P_i^{y - 1}Q_i^{y - 1}}}{{\sum\limits_{i = 1}^n {P_i^{y - 1}Q_i^{y - 1}} }}\frac{1}{4}\sum\limits_{i = 1}^n {P_i^{y - 1}Q_i^{y - 1}} = \sum\limits_{i = 1}^n {q_i^{c,y}P_i^{y - 1}} \) - - - - - - - (11)

6A.32    Hence, the task of linking quarterly Laspeyres-type volume indexes for two consecutive years, year \(y-1\) and year \(y\), amounts to linking the quarterly values of year \(y-1\) in year \(y-2\) average prices with the values of year \(y\) in year \(y-1\) average prices.

Annual overlap method

6A.33    One way of putting the eight quarters described in the previous paragraph onto a comparable valuation basis is to calculate and apply a link factor from an annual overlap. Values for year \(y-1\) are derived in both \(y-1\) prices and \(y-2\) prices and then the former is divided by the latter; thus, giving an annual link factor for year \(y-1\) to year \(y\) is equal to:

\(\large \frac{{\sum\limits_{i = 1}^n {P_i^{y - 1}Q_i^{y - 1}} }}{{\sum\limits_{i = 1}^n {P_i^{y - 2}Q_i^{y - 1}} }}\) - - - - - - - (12)

6A.34    Multiplying the quarterly values for year \(y-1\) at year \(y-2\) average prices with this link factor puts them on to a comparable valuation basis with the quarterly estimates for year \(y\) at year \(y-1\) prices. Note that this link factor is identical to the one that can be used to link the annual value for year \(y-1\) at \(y-2\) average prices with the annual value for year \(y\) at year \(y-1\) average prices. Therefore, if the quarterly values for every year \(m\) at year \(m1\) average prices sum to the corresponding annual value, then the chain-linked quarterly series will be temporally consistent with the corresponding chain-linked annual series.

One-quarter overlap method

6A.35    The one-quarter overlap method, as its name suggests, involves calculating a link factor using overlap values for a single quarter. To link the four quarters of year \(y-1\) at year \(y-2\) average prices with the four quarters of year \(y\) at year \(y-1\) average prices, a one-quarter overlap can be created for either the fourth quarter of year \(y-1\) or the first quarter of year \(y\). The link factor derived from an overlap for the fourth quarter of year \(y-1\) is equal to:

\(\large \frac{{\sum\limits_{i = 1}^n {P_i^{y - 1}q_i^{4,(y - 1)}} }}{{\sum\limits_{i = 1}^n {P_i^{y - 2}q_i^{4,(y - 1)}} }}\) - - - - - - - (13)

6A.36    Multiplying the quarterly values for year \(y-1\) at year \(y-2\) average prices with this link factor puts them on to a comparable valuation basis with the quarterly estimates for year \(y\) at year \(y-1\) prices. 

6A.37    A key property of the one-quarter overlap method is that it preserves the quarter-to-quarter growth rate between the fourth quarter of year \(y-1\) and the first quarter of year \(y\) - unlike the annual overlap method. The “damage” done to that growth rate by the annual overlap method is determined by the difference between the annual and quarter link factors. Conversely, this difference also means that the sum of the linked quarterly values in year \(y-1\) differ from the annual-linked data by the ratio of the two link factors. Temporal consistency can be achieved by benchmarking the quarterly chain volume estimates to their annual counterparts.

6A.38    The following table illustrates the methods used to deriving link factors:

Table 6A.4 Comparison of the methods to derive link factors
Sales of beef and chicken
Annual overlap method
Year 2 to Year 3 Year 3 to Year 4
\(\Large \frac{{\sum\limits_{i = 1}^2 {P_i^2Q_i^2} }}{{\sum\limits_{i = 1}^2 {P_i^1Q_i^2} }}\) \(\Large \frac{{\sum\limits_{i = 1}^2 {P_i^3Q_i^3} }}{{\sum\limits_{i = 1}^2 {P_i^2Q_i^3} }}\)
\(\Large \frac{{(1.1x18) + (2x12)}}{{(1x18) + (2x12)}} = 1.043\) \(\frac{{(1.2x16) + (2.1x14)}}{{(1.1x16) + (2x14)}} = 1.066\)
One-quarter overlap method
Quarter 4 in Year 2 Quarter 4 in Year 3
\(\Large \frac{{\sum\limits_{i = 1}^2 {P_i^2q_i^{4,2}} }}{{\sum\limits_{i = 1}^2 {P_i^1q_i^{4,2}} }}\) \(\Large \frac{{\sum\limits_{i = 1}^2 {P_i^3q_i^{4,3}} }}{{\sum\limits_{i = 1}^2 {P_i^2q_i^{4,3}} }}\)
\(\Large \frac{{(1.1x6) + (2.0x3)}}{{(1.0x6) + (2.0x3)}} = 1.05\) \(\Large \frac{{(1.2x4) + (2.1x3)}}{{(1.1x4) + (2.0x3)}} = 1.0673\)

Over the year method

6A.39    The over-the-year method requires compiling a separate link factor for each type of quarter. Each of the quarterly values in year \(y-1\) at year \(y-2\) average prices is multiplied by its own link factor. The over-the-year quarterly link factor for year \(y-1\) at average year \(y-2\) prices to year y at average year \(y-1\) prices for quarter c is equal to:

\(\large \frac{{\sum\limits_{i = 1}^n {P_i^{y - 1}q_i^{c,(y - 1)}} }}{{\sum\limits_{i = 1}^n {P_i^{y - 2}q_i^{c,(y - 1)}} }}\) - - - - - - - (14)

6A.40    The over-the-year method does not distort quarter-on-same quarter of previous year growth rates, since the chain-links refer to the volumes of the same quarter in the respective previous year valued at average prices of that year. However, it does distort quarter-to-quarter growth rates. In addition, the linked quarterly data are temporally inconsistent with the annual-linked data and so benchmarking is needed. Given these shortcomings, the over-the-year method is best avoided.

6A.41    The following tables provide examples of using the annual and one-quarter overlap methods.

Table 6A.5 Quarterly chain volume measures – annual overlap method: referenced to year 2
      Sales of beef and chicken            
Year   2                     3       4    
Quarter 1 2 3 5 1 2 3 4 1 2 3 4
Beef (kilos) 5 4 3 6 4 5 3 4 4 4 5 4
Chicken (kilos) 2 3 4 3 2 4 5 3 3 4 6 4
Price of beef in previous year ($) 1.00 1.00 1.00 1.00 1.10 1.10 1.10 1.10 1.20 1.20 1.20 1.20
Price of chicken in previous year ($)

2.00

2.00

2.00

2.00

2.00

2.00

2.00

2.00

2.10

2.10

2.10

2.10

Value of beef at previous year's prices ($)

5.00

4.00

3.00

6.00

4.40

5.50

3.30

4.40

4.80

4.80

6.00

4.80

Value of chicken at previous year's prices ($)

4.00

6.00

8.00

6.00

4.00

8.00

10.00

6.00

6.30

8.40

12.60

8.40

Total sales of meat in previous year's prices ($)

9.00

10.00

11.00

12.00

8.40

13.50

13.30

10.40

11.10

13.20

18.60

13.20

Link factor year 2 to 3

1.0429

1.0429

1.0429

1.0429

 

 

 

 

 

 

 

 

Linking year 2 to year 3 ($)

9.39

10.43

11.47

12.51

8.40

13.50

13.30

10.40

 

 

 

 

Link factor year 3 to 4

1.0658

1.0658

1.0658

1.0658

1.0658

1.0658

1.0658

1.0658

 

 

 

 

Linking year 2 and 3 to year 4 ($)

10.00

11.12

12.23

13.34

8.95

14.39

14.18

11.08

11.10

13.20

18.60

13.20

Factor to reference to year 2

0.9383

0.9383

0.9383

0.9383

0.9383

0.9383

0.9383

0.9383

0.9383

0.9383

0.9383

0.9383

Referenced to year 2 ($)

9.39

10.43

11.47

12.51

8.40

13.50

13.30

10.40

10.41

12.39

17.45

12.39

Annualised ($)

43.80

 

 

 

45.60

 

 

 

52.64

 

 

 

Quarterly growth rate (%)

 

11.11

10.00

9.09

-32.88

60.71

-1.48

-21.80

0.14

18.92

40.91

-29.03

Table 6A.6 Quarterly chain volume measures – one- quarter overlap method: referenced to year 2
      Sales of beef and chicken            
Year   2                     3       4    
Quarter 1 2 3 4 1 2 3 4 1 2 3 4

Beef (kilos)

5 4 3 6 4 5 3 4 4 4 5 4
Chicken (kilos) 2 3 4 3 2 3 5 3 3 4 6 4
Price of beef in previous year ($) 1.00 1.00 1.00 1.00 1.10 1.10 1.10 1.10 1.20 1.20 1.20 1.20
Price of chicken in previous year ($) 2.0 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.10 2.10 2.10 2.10
Value of beef at previous year's prices ($) 5.00 4.00 3.00 6.00 4.40 5.50 3.30 4.40 4.80 4.80 6.00 4.80
Value of chicken at previous year's prices ($) 4.00 6.00 8.00 6.00 4.00 8.00 10.00 6.00 6.30 8.40 12.60 8.40
Total sales of meat in previous year's prices ($) 9.00 10.00 11.00 12.00 8.40 13.50 13.30 10.40 11.10 13.20 18.60 13.20
Link factor year 2 to 3 1.05 1.05 1.05 1.05                
Linking year 2 to year 3 ($) 9.45 10.50 11.55 12.60 8.40 13.50 13.30 10.40        
Link factor year 3 to 4 1.0673 1.0673 1.0673 1.0673 1.0673 1.0673 1.0673 1.0673        
Linking year 2 and 3 to year 4 ($) 10.09 11.21 12.33 13.45 8.97 14.41 14.20 11.10 11.10 13.20 18.60 13.20
Factor to reference to year 0.9306 0.9306 0.9306 0.9306 0.9306 0.9306 0.9306 0.9306 0.9306 0.9306 0.9306 0.9306
Referenced to year 2 ($) 9.39 10.43 11.47 12.51 8.34 13.41 13.21 10.33 10.33 12.28 17.31 12.28
Annualised ($) 43.80       45.29       52.20      
Quarterly growth rate (%)   11.11 10.00 9.09 -33.33 60.71 -1.48 -21.80 0.00 18.92 40.91 -29.03

Deriving chain volume estimates of time series that are not strictly positive

6A.42    Some quarterly national accounts series can take positive, negative or zero values, and so it is not possible to derive chain volume estimates for them. The best-known example is changes in inventories, but any variable which is a net measure is susceptible. While it is not possible to derive true chain volume estimates for variables that can change sign or take zero values, it is possible to derive proxy chain volume estimates. The most commonly used approach is to:

  • identify two strictly positive series that when differenced yield the target series;
  • derive chain volume estimates of these two series expressed in currency units; and
  • difference the two chain volume series.

6A.43    The same approach can be used to derive seasonally adjusted proxy chain volume estimates except that after step 2 the two series are seasonally adjusted before proceeding to step 3. 

6A.44    In the case of changes in inventories, the obvious candidates for the two strictly positive series are the opening and closing inventory levels. The chain volume index of opening inventories is referenced to the opening value in the reference year expressed at the average prices of the reference year. Likewise, the chain volume index of closing inventories is referenced to the closing value of inventories expressed at the average prices of the reference year. This ensures that the value of the proxy chain volume measure of changes in inventories is equal to the current price value in the reference year. 

6A.45    Seasonally adjusted current price estimates of changes in inventories are obtained by inflating the proxy chain volume estimates by a suitable price index centred on the middle of each quarter and with the same reference year as the volume estimates.

Endnotes

  1. SNA, 2008, para. 15.44.
  2. The terms Laspeyres-type and Fisher-type indexes are used to describe quarterly indexes with annual weights.
  3. SNA, 2008, paras. 15.53-15.54.

Chapter 7 Annual benchmarks and quarterly estimates

Introduction

7.1    Input-Output (I-O) tables provide a means of undertaking detailed analysis of the process of production and the use of goods and services (i.e. products), and of the income generated in that production. The ASNA includes symmetric I-O tables as well as closely related Supply and Use (S-U) tables. Both types of tables are often referred to as I-O tables.

7.2    The integration of I-O in the overall system of national accounts is an important feature of the ASNA. Its role in the ASNA is primarily related to the goods and services accounts and to the shortened sequence of accounts for industries. Complementing the full sequence of accounts for institutional sectors, which cover all kinds of accounts in the ASNA, are the S-U tables, and subsequently the symmetric I-O tables. These serve to provide a more detailed basis for analysing industries and products through a breakdown of the production account, and the generation of income account and the goods and services account, leading to the symmetric I-O table. 'Symmetric' means that the same classifications or units (e.g. the same groups of products) are used in both rows and columns. When the number of rows of products and columns of industries in S-U tables happens to be equal, they are referred to as square (not symmetric) S-U tables. However, S-U tables are most often rectangular (having more products than industries).

7.3    The I-O and S-U tables serve two purposes: statistical and analytical. They provide a framework for checking the consistency of statistics on flows of goods and services obtained from quite different kinds of statistical sources - industrial surveys, household expenditure surveys, investment surveys, foreign trade statistics, etc. The ASNA, and the I-O tables in particular, serve as a coordinating framework for economic statistics, both conceptually for ensuring the consistency of the definitions and classifications used and as an accounting framework for ensuring the numerical consistency of data drawn from different sources. The I-O framework is also appropriate for calculating much of the economic data contained in the national accounts and detecting weaknesses. This is particularly important for the decomposition of the values of flows of goods and services into prices and volumes for the calculation of an integrated set of price and volume measures. As an analytical tool, I-O data are conveniently integrated into macroeconomic models in order to analyse the link between final demand and industrial output levels. I-O analysis also serves a number of other analytical purposes or uses.

7.4    A fundamental role is played in the ASNA by S-U tables. They show, for the economy as a whole and for groups of products, the total resources in terms of domestic output and imports, and the uses of goods and services in terms of intermediate consumption, final consumption, gross capital formation and exports. They also provide information on the generation of income from production.

7.5    They provide an accounting framework within which the commodity flow method of compiling national accounts - in which the total supplies and uses of individual types of commodities have to be balanced with each other - can be systematically exploited, resulting in improvements in the overall accuracy of the national accounts.

7.6    Commencing with 1994-95, the annual GDP account has been compiled using the product flow method. In other words, the compilation of the GDP account is fully integrated with the compilation of the I-O tables.

7.7    Conceptually, the GDP account and the I-O tables are fully integrated and consistent. The GDP account provides three approaches to measuring GDP: summing the incomes generated by production; summing final expenditures on commodities sold in Australia plus exports less imports of goods and services; and summing the value added at each stage of production. I-O tables are essentially a further disaggregation of the same three approaches. Whereas intermediate consumption is netted out from the GDP account, I-O tables bring these inter-industry flows of commodities back into focus, thereby providing a more developed articulation of the process of economic production, and the structure and interrelationships of industries. An important feature of the I-O tables is that they are fully balanced matrices which allow for the confrontation of data and the resolution of differences at a detailed level.

7.8    The strategy adopted by the ABS in relation to the compilation of I-O tables involves a two stage process whereby a series of S-U tables, in both current prices and in the prices of the previous year, are compiled annually. These tables constitute benchmarks for the annual and quarterly GDP accounts. The analytic I-O tables are compiled as the second stage of this process when the S-U tables for a particular year are deemed to be final.

7.9   This approach to compiling the GDP account allows for the annual and quarterly current price GDP accounts to be benchmarked to balanced S-U tables. This applies for all years from 1994-95 except the latest year and the latest two years with the release of the June quarter national accounts. The S-U tables for each year are effectively compiled three times: first preliminary tables, second preliminary tables, and final tables. The GDP account is benchmarked at each of these three stages. The re-benchmarked GDP account is published first in the September quarter issues of the ASNA. This strategy means that the quarterly accounts will never be projected more than eight quarters from a balanced set of annual accounts. Apart from the most recent year and the June quarter national accounts (for which a balanced estimate is not available), there will be only one measure of annual GDP, and consequently no statistical discrepancies in annual terms.

7.10    Estimates for the latest financial year are obtained by aggregation of the quarterly estimates, which are obtained in turn by extrapolating from the latest annual benchmark estimates using the most appropriate indicators. In some cases these are basically the same sources as those used in constructing the annual S-U tables (e.g. private GFCF on new dwellings is mainly based on data for the value of work done from the Building Activity Survey). In other cases, the indicators used are closely related to the aggregate being estimated (e.g. quarterly gross operating surplus of non-financial corporations is mainly based on data from the Quarterly Business Indicator Survey). In a few cases the indicators used provide only a general indication of movements in the aggregate being estimated.

7.11    As explained previously, the compilation of balanced S-U tables requires three iterations. The sequence of S-U and I-O tables is scheduled for completion according to the following timetable:

1st preliminary end of year t + 16 months
2nd preliminary end of year t + 28 months
Final end of year t + 40 months
Input-output tables (based on 1st preliminary S-U tables) end of year t + 23 months.

7.12    The major implication of this strategy is that the measures of current price annual GDP and its components are consistent between the S-U tables, the I-O tables and the GDP account, at the time that the I-O tables are compiled. It should be noted that the ABS does not revise I-O tables once they have been published, whereas the S-U tables and the GDP account may be revised for all periods whenever an historical revision is undertaken, and when the final S-U tables are produced. Income and expenditure-based GDP are also equal within the GDP account for all years from 1994-95 in current-price annual terms, except for the latest year, and the June quarter national accounts.

7.13    The volume movements derived from these tables are used to benchmark the volume movements published in the annual and quarterly GDP accounts. Volume movements in respect of the gross value added for industries compiled in this way are considered to be markedly superior to those produced by previous estimation methods.

7.14    The preferred method for estimating the volume change in an industry's value added is through double deflation. This means that value added, in the prices of the previous year (or some other base period), is obtained by deflating outputs and intermediate inputs separately. The value-added estimate for the industry is computed as the difference between these output and input measures.

7.15    The double deflation method cannot be used for all industries. The method applied to remove price effects depends on the robustness of information available. The double deflation method demands a high level of reliability in the current price production accounts, and in the price or quantity data used for deflation. This technique introduces the possibility of numerous and compounding measurement errors in situations where data may not meet the required standards. Gross value added is the difference between two large aggregates, so that a small error in one can significantly affect gross value added.

7.16    It is common for indicator series to estimate the volume movements of value added using only one component, either output or input, because of the problems associated in trying to estimate volumes using double deflation. This is referred to as the single indicator method.

7.17    In ASNA, the single indicator method is applied to estimate the quarterly volume measures for most industries and is based on output indicators. The sum of the four quarters’ volume estimates is used to confront the annual volume estimates, which are mostly derived using the double deflation method.

7.18    It is also necessary to consider the appropriate way to estimate volumes for non-market producer activity as output is valued on the basis of the inputs. The 2008 SNA recommends three possible methods for compiling volume estimates or the output of non-market producers:

  1. derive a proxy output price index;
  2. output volume method; and
  3. input volume method.

The second approach is recommended for non-market producers providing individual services and has been implemented for the education and health industries in the ASNA. The third approach is recommended for non-market producers providing collective services (such as defence). To date, this approach has not been adopted in ASNA.

Annual benchmarks - Supply and use approach

Product flow method or product balance method

7.20    When S-U tables are first prepared during their compilation, they are unlikely to balance and until they are brought into balance, GDP measures from the production, income and expenditure approaches will differ. Only S-U tables provide a sufficiently rigorous framework to eliminate discrepancies in the measured flows of goods and services throughout the economy, in order to ensure the alternative measures of GDP converge to the same value. The technique that enables this convergence is referred to as the 'product flow' or 'product balance' method.

7.21    The amount of a product available for use within the economy must have been supplied either by domestic production or by imports. The same amount of the product entering an economy in an accounting period must be used for intermediate consumption; final consumption; capital formation (including changes in inventories); or exports. These two statements can be combined to give a statement of a product balance:

\(\small {Output{\rm{ }} + {\rm{ }}imports{\rm{ }} = \\ {\rm{ }}Intermediate{\rm{ }}\:consumption{\rm{ }} + {\rm{ }}final{\rm{ }}\:consumption{\rm{ }} + {\rm{ }}capital{\rm{ }}formation{\rm{ }} + {\rm{ }}exports}\)

7.22    The uses of products are usually valued at purchasers' prices and supply at basic prices, given the accounting and valuation rules that underpin the national accounts. It is therefore necessary to add trade and transport margins, and taxes on products less subsidies on products to the left-hand (or supply) side of the identity, so that both sides are expressed in purchasers' prices. A fuller articulation of the product balance for any product thus recognises that the sum of output at basic prices plus imports plus trade and transport margins plus taxes on products less subsidies on products is equal to the sum of intermediate consumption, final consumption and capital formation — all expressed at purchasers’ prices — plus exports.

7.23    Since the figures for output and intermediate consumption correspond to the entries for output and intermediate consumption in the production account, the identity of the sum of all product balances may be rearranged to become:

\(\small {Output{\rm{ }}-{\rm{ }}intermediate{\rm{ }}\:consumption{\rm{ }} + {\rm{ }}taxes{\rm{ }}\:on{\rm{ }}\:products{\rm{ }}-{\rm{ }}subsidies{\rm{ }}\:on{\rm{ }}\:products{\rm{ }} = \\ {\rm{ }}Final{\rm{ }}\:consumption{\rm{ }} + {\rm{ }}capital{\rm{ }}\:formation{\rm{ }} + {\rm{ }}exports{\rm{ }}-{\rm{ }}imports}\)

7.24    The left-hand side of this identity is equivalent to GDP at market prices, also known as the ''production approach'' to GDP. The right-hand side is also equal to GDP at market prices and is known as GDP measured by the ''expenditure approach''.

7.25    Value added can be disaggregated to show all the components of the generation of income account which is commonly referred as GDP measured by the income approach. That is:

\(\small {Output{\rm{ }}-{\rm{ }}intermediate{\rm{ }}\:consumption{\rm{ }} + {\rm{ }}taxes{\rm{ }}\:on{\rm{ }}\:products{\rm{ }}-{\rm{ }}subsidies{\rm{ }}\:on{\rm{ }}\:products{\rm{ }} = \\ {\rm{ }}Compensation{\rm{ }\:}of{\rm{ }}\:employees{\rm{ }} + {\rm{ }}gross{\rm{ }}\:operating{\rm{ }}\:surplus{\rm{ }} + {\rm{ }}gross{\rm{ }}\:mixed{\rm{ }}\:income{\rm{ }}\\ + {\rm{ }}taxes{\rm{ }}\:on{\rm{ }}\:production{\rm{ }}\:and{\rm{ }}\:imports{\rm{ }}-{\rm{ }}subsidies{\rm{ }}\:on{\rm{ }}\:production{\rm{ }}\:and{\rm{ }}\:imports}\)

7.26    The S-U current price balancing process is undertaken through both manual and automated balancing, where significant discrepancies are resolved through evidence based balancing decisions, and small, remaining differences are resolved using a constrained optimisation tool. Balancing decisions are based on a variety of data sources and supporting evidence such as industry annual reports; industry body commentary; industry events news articles; and state of industry profiles.

Goods and services account

7.27    The goods and services account shows that all output from within the production boundary, plus imports (output from abroad), must be accounted for in one of the other two basic activities of the SNA, consumption of goods and services or accumulation of goods and services (or exported, implying either consumption or accumulation abroad).

7.28    The whole sequence of accounts can be viewed as built around the goods and services account by adding transactions relating to the generation, distribution and redistribution of income and saving. When these transactions are aggregated across all sectors and the rest of the world, total resources are equal to total uses. If these were to be ''consolidated'' out of the sequence of accounts, only the goods and services account would be left.

Quarterly estimation methods

Direct sources

7.29    The preferred method of compiling quarterly national accounts estimates is to use a high-quality data source which provides data for the aggregate being measured according to the conceptual basis required for the national accounts. In such cases both the quarterly and annual estimates may be compiled from the same source, the annual estimates being obtained simply as the sum of the quarterly estimates.

Indirect sources

7.30    Annual national accounts estimates are considered to be superior to quarterly estimates. In the case of the income, expenditure and production components of GDP, the annual estimates are balanced in S-U tables, unlike their quarterly counterparts. Therefore, it is desirable to ensure the quarterly estimates are temporally consistent with their annual counterparts. This is achieved by using mathematical procedures to “benchmark” the quarterly estimates to the annual estimates.

7.31    Three commonly used statistical benchmarking procedures are:

  1. pro rata adjustment;
  2. Denton difference method; and
  3. Denton proportional method.

Pro rata adjustment

7.32    In many cases, the quarterly data sources used to compile the national accounts are less reliable, less detailed and/or less appropriate than those used for compiling the annual national accounts benchmarks for particular aggregates. Consequently, indicator series are used to allocate (on a pro rata basis) annual estimates for such aggregates to the quarters of each financial year, and to extrapolate forward for the quarters of the latest incomplete year.

7.33    This benchmarking method simply consists of multiplying the quarterly preliminary estimates in a year by the ratio of the annual national accounts variable to the sum of the preliminary estimates of the four quarters.

7.34    While this method preserves the quarterly growth rates within the year, it changes the growth rate between the last quarter of one year and the first quarter of the next. The extent of the change to this growth rate is determined by how much the annual benchmark-to-preliminary estimate ratio has changed between the two years; that is, the ratio of the annual benchmark to the sum of the preliminary estimates for the corresponding four quarters. If the ratio were to change from 1.02 in year \(t\) to 1.00 in year \(t+1\), for example, the growth rate of the preliminary estimates from the fourth quarter of year \(t\) to the first quarter of year \(t+1\) would be reduced by two percentage points after benchmarking.

7.35    A particular problem that arises when using the indicators (pro rata) method is that the September quarter estimates can be adversely affected by what is known as the 'step problem'. A significant step problem will arise if the relationship between the annualised indicator series and the annual benchmark estimates varies significantly between any two consecutive financial years. In effect, the difference in the annual relationship between the benchmark and the indicator series is largely reflected in the September quarter.

7.36    This problem is reduced by using the 'benchmark' procedure. Given the obvious advantage of using the 'benchmark' procedure, the pro rata method is generally only used in a limited number of cases where the step problem is not significant.

Denton difference method

7.37    The benchmarked estimates are obtained by allocating the discrepancy between the sum of four preliminary quarters and the corresponding annual national accounts estimate to the four quarters in each year, by minimizing a quadratic loss function over the whole, or overlapping lengthy spans, of the time series. Different versions of the quadratic loss function (expressed as a weight matrix) may be chosen.

7.38    The loss function is commonly defined as the sum of squares of either the first or second order differences of each preliminary quarterly estimate and the benchmarked quarterly estimate. In the first difference case, the benchmarked values are those that minimize the following

\(\large \min \sum\limits_{t = 1}^n {{{\left( {\left( {{b_t} - {p_t}} \right) - ({b_{t - 1}} - {p_{t - 1}})} \right)}^2}}\), subject to satisfying the annual constraints,

where there are \(n\) quarterly observations; \(b_t\) is the benchmarked quarterly estimate at time \(t\); and \(p_t\) is the preliminary quarterly estimate at time \(t\).

Denton proportional method

7.39    A combination of the pro rata adjustment and the Denton difference method consists of minimizing the sum of squares of the first differences of the quotient of the benchmarked quarterly estimate and the preliminary quarterly estimate; that is:

\(\large \min {\sum\limits_{t = 2}^n {\left( {\frac{{{b_t}}}{{{p_t}}} - \frac{{{b_{t - 1}}}}{{{p_{t - 1}}}}} \right)} ^2}\), subject to satisfying the annual constraints.

7.40    This method can only be performed when the values of \(b\) and \(p\) are strictly positive.

Characteristics of the two Denton methods

7.41    The Denton difference method minimises the differences of the absolute adjustments of two neighbouring quarters, whilst the Denton proportional method minimises the differences of proportional adjustments of two neighbouring quarters. Therefore, the Denton difference method results in a smooth additive distribution of the differences between the annualised indicator and the benchmark series, and the Denton proportional method results in a smooth multiplicative distribution of these differences. As a result, the Denton difference method tends to produce a smoother series, but the Denton proportional method changes the quarterly growth rates of the of the preliminary estimates least.

7.42    A characteristic of the quarterly national accounts series is that their seasonality and irregularity are generally more multiplicative than additive in nature, and better seasonal adjustments are generally obtained using a multiplicative rather than an additive model.

7.43    The Denton difference method can be applied to data that change sign, whilst the proportional method should only be applied to data that are strictly positive.

7.44    The methods described above are applicable to flow data, but there are other versions suitable for stock data and averages. For further details, refer to Chapter 6 of the IMF's Quarterly National Accounts Manual.³⁹

7.45    The ASNA uses the Denton proportional method for all flow series that are strictly positive. The Denton difference method is used when this is not the case, such as changes in inventories.

Trend interpolation

7.46    Where there are no quarterly direct data sources or indicator series available it is necessary to generate a quarterly time series by adopting the most appropriate allocation procedure. One possible method would be to divide the annual estimate by four, but this would result in steps each September quarter, and no change in the other three quarters. The method used in the ASNA is to apply a linear interpolation method to calculate quarterly time series from annual series. The procedure involves forecasting annual estimates for two extra years, using a weighted average of the movements in year \(t-1\) and year \(t\). Such forecasts are used in preference to the standard projection produced by the interpolation procedure, if information is available to provide a superior forecast for the annual estimates for those two years.

7.47    A mathematical representation of the trend interpolation procedure is given below (see Table 7.1). This method is particularly appropriate for series such as consumption of fixed capital, where only annual estimates are available, and where it is reasonable to expect that movements in the quarterly series will be relatively smooth.

7.48    This type of interpolation procedure is designed to calculate quarterly series from annual series by linear trend interpolation; the annual series are projected backwards by one period, and forwards by two periods using a weighted average of the rate of increase prior to calculation of the quarterly values (the forward projection gives quarterly estimates for the current year).

Table 7.1 Mathematical representation of the trend interpolation procedure
Let \(\large {Y_1},{Y_2},\:\:.....,{Y_n}\) represent the annual series. Then the extrapolated annual series will be:
  \(\large {Y_0},{Y_1},{Y_2},.....,{Y_n},{Y_{n + 1}},{Y_{n + 2}}\)
where \(\large{Y_1},{Y_2},{Y_3}\) are all positive
  \(\large {Y_0} = {Y_1}\left( {0.4\frac{{2 + {Y_2}}}{{2 + {Y_3}}} + 0.6\frac{{2 + {Y_1}}}{{2 + {Y_2}}}} \right)\)
otherwise if  \(\large {Y_1},{Y_2},{Y_3}\) are all negative, then
  \(\large {Y_0} = {Y_1} - 0.6({Y_2} - {Y_1}) - 0.4({Y_3} - {Y_2})\)
And if \(\large {Y_n},{Y_{n - 1}},{Y_{n - 2}}\) are all positive
  \(\large R = 0.4\frac{{2 + {Y_{n - 1}}}}{{2 + {Y_{n - 2}}}} + 0.6\frac{{2 + {Y_n}}}{{2 + {Y_{n - 1}}}}\)
  \(\large {Y_{n + 1}} = R{Y_n}\)
  \(\large {Y_{n + 2}} = R{Y_{n + 1}}\)
  where \(\large R\) is the weighted projection factor used in order to move forward two periods when the annual series are all positive.
Otherwise,
  \(\large X = 0.4({Y_{n - 1}} - {Y_{n - 2}}) + 0.6({Y_n} - {Y_{n - 1}})\)
  \(\large {Y_{n + 1}} = X + {Y_n}\)
  \(\large {Y_{n + 2}} = X + {Y_{n + 1}}\)
  where \(\large X\) is the weighted projection factor used in order to move forward two periods when the annual series contain negative values.
The interpolation procedure which gives the required quarterly series is defined below.
  For any year \(\large t\) , where \(\large t=1\) to \(\large n+1\) (same as above), the four quarterly observations are:
  \(\large {q_t},1 = \frac{1}{4}(\frac{1}{4}{Y_{t - 1}} + \frac{7}{8}{Y_t} - \frac{1}{8}{Y_{t + 1}})\)
  \(\large {q_t},2 = \frac{1}{4}(\frac{9}{8}{Y_t} + \frac{1}{8}{Y_{t + 1}})\)
  \(\large {q_t},3 = \frac{1}{4}( - \frac{1}{8}{Y_{t - 1}} + \frac{9}{8}{Y_t})\)
  \(\large {q_t},4 = \frac{1}{4}( - \frac{1}{8}{Y_{t - 1}} + \frac{7}{8}{Y_t} + \frac{1}{4}{Y_{t + 1}})\)

Seasonal adjustment and trend estimates

7.49    Quarterly time series such as those in national accounts publications are affected by three influences – calendar (mostly seasonal), trend and irregular influences – and the original series can conceptually be split into activity due to each of these components. For example, the activity in a particular December quarter can be conceptually split into:

  • systematic calendar and/or seasonal related activity (e.g. Christmas related activity; October long weekend activity, etc.);
  • trend activity, that is, the underlying level of the series; and
  • irregular activity (e.g. impact of a short-term stimulus package, short-term non-systematic and unpredictable fluctuations).

7.50    When interpreting a quarterly series, it is helpful to assess combinations of the three components, as they each highlight different attributes of the data. In particular, the original, seasonally adjusted and trend series are seen as valuable tools for interpreting time series data. The original series contains all three components and shows 'what actually happened' (according to our survey data). The seasonally adjusted series has the seasonal component removed, leaving the trend and irregular. It shows what happened once the systematic activity that happens the same way every year has been removed, revealing more information about the underlying direction of the series, and/or the impact of irregular influences that may have been overshadowed by seasonal influences in the original series. Finally, the trend series contains only the trend component, and reflects the underlying level or long-term behaviour of the series.

7.51    The seasonal adjustment process splits the original series into estimates of the three components. It first estimates and removes the seasonal and calendar-related influences, creating the seasonally adjusted series. A further statistical process — Henderson smoothing — removes the irregular influence to reveal an estimate of the trend. The estimate of the irregular influences is the difference between the seasonally adjusted and the trend. This section summarises the methods used by the ABS to decompose quarterly national accounts series into their three components and generate the published seasonally adjusted and trend series.

The seasonal adjustment process

7.52    Seasonal effects usually reflect the influence of the seasons themselves, either directly or through production series related to them (such as costs for generating farm production), or social conventions (such as the incidence of holidays) or administrative practices (such as the timing of tax payments). Other types of calendar variation occur as a result of influences such as the number and composition of days in the calendar period (trading day); accounting or recording practices adopted by businesses; the effect of regular paydays on activity levels; or the incidence of movable holidays (such as Easter).

7.53    Statistical techniques can be used to evaluate the effects of normal seasonal and other calendar influences operating on a series. If detectable seasonal or calendar variation is observed, the estimated effects may then be removed from the series to produce a seasonally adjusted series. Although calendar variation may be present in a series, factors applied in a particular period may vary significantly from year to year due to the variability in the number and composition of days in that particular period. This is especially evident in series affected by, say, the payment of salaries or pensions on a fortnightly basis. Seasonal or calendar variation can also move gradually over time in reaction to changing influences, and this is allowed for in the estimation of the seasonal factors.

7.54    Not all statistical series are significantly affected by seasonal or calendar influences which are regular enough to be described as 'reliable', so seasonal or calendar influences cannot always be removed from them. In such cases, the original series may be regarded as also being the seasonally adjusted series. Some examples in the quarterly national accounts are the rent component of farm costs, and the series related to the consumption of fixed capital.

The method of seasonal adjustment 

7.55    The ABS software for seasonal adjustment is the SEASABS (SEASonal analysis, ABS standards) package, a knowledge-based seasonal analysis and adjustment tool. The seasonal adjustment algorithm used by SEASABS is based on the X-11 Variant seasonal adjustment software from the U.S. Census Bureau.⁴⁰

7.56    The X-11 technique uses a filter-based approach to decompose the series to be analysed into estimated trend, seasonal and irregular components. The irregular component reflects the influence of unusual or transitory effects, for example, the effect of a major industrial dispute or of unseasonal weather conditions. It also reflects sampling and non-sampling errors which may be present in the original series, and other short-term fluctuations in the series that are neither systematic nor predictable.

7.57    The X-11 program includes a statistical procedure for automatically identifying and modifying unusually large or small values included in the original series, for the purposes of improving the estimate of the seasonal component only. Occasionally, modification of extreme values is undertaken directly prior to seasonal adjustment, in order to better stabilise the estimation of the seasonal component and minimise the extent to which both the estimated seasonal and trend components are affected by irregular influences.

7.58    Adjustments are also made prior to seasonal analysis to deal with abrupt discontinuities in the seasonal pattern or the trend where sufficient observations and/or supplementary information are available to estimate the magnitude of the effects. These 'break factors' have been employed retrospectively in the analysis of a number of national accounts series, and some series contain more than one such break. It is impossible, in most cases, to recognise and assess changes in seasonality or trend at the time they occur, and, until enough subsequent data are available to indicate otherwise, they may initially remain undetected, or be considered irregular effects.

7.59    Although based on the X-11 software, SEASABS also includes components of the U.S. Census Bureau X-12 ARIMA software package.⁴¹ For the national accounts, regression-ARIMA modelling techniques from X-12 ARIMA are used to compare actual original values to expected original values to detect possible extreme values and sudden discontinuities in the trend, and to assist with the estimation of prior adjustment factors to account for them. Additional information (such as unit record data) may also be used in the estimation of appropriate prior adjustment factors.

7.60    The seasonal adjustment process alone cannot indicate whether an unexpected movement appearing in current end seasonally adjusted figures denotes a variation in trend, or an unusual (irregular) effect, or whether it is due to an abrupt change in seasonality. However, the addition of subsequent data points to the series end and/or supplementary information about the reasons underlying series behaviour can assist in the identification and treatment of seasonal or trend discontinuities as soon as possible after they occur.

7.61    After extreme values and sudden discontinuities in a series have been accounted for, calendar and seasonal effects, where measurable, are estimated by X-11 using mainly filtering techniques, and occasionally regression procedures. The estimated seasonal and calendar influences, together with certain (but not all) prior adjustment factors, form the combined adjustment factors by which the original series is seasonally adjusted. It should be noted that only the estimates of seasonal and/or other types of calendar variation are removed from the original series to form the seasonally adjusted series, which contains the trend and irregular components. Since the irregular influences remain, an unexpectedly large movement in the seasonally adjusted series does not necessarily indicate a change in the underlying trend of the series.

Multiplicative, additive or pseudo-additive adjustments 

7.62    The SEASABS program allows for the original series to be decomposed into trend, seasonal and irregular components by using a multiplicative, additive, or pseudo-additive model. The choice of which of these models to use depends on whether it is more appropriate to consider the amplitudes of the trend, seasonal and irregular components to be proportional to or largely independent of each other. Specifically, the multiplicative model treats all three components as dependent on each other, the additive model treats them independently, and the pseudo-additive model treats the seasonal and irregular components as independent of each other but dependent upon the level of the trend.

7.63    Although most series in the national accounts are adjusted multiplicatively there are some exceptions. Series which include both positive and negative values cannot be directly adjusted using a multiplicative model. An additive or pseudo-additive model must be used if such series cannot be disaggregated into components having wholly positive (or negative) values. Several series relating to gross farm product (i.e. outputs and inputs) are affected by such extreme seasonal variations that the pseudo-additive model provides the best seasonally adjusted results. Other time series (especially inventories) are best adjusted using the additive model.

Direct or indirect seasonal adjustments for aggregate series

7.64    It is possible to seasonally adjust an aggregate series either directly or by seasonally adjusting a number of its components and adding the results. The latter (aggregative) method has been employed for most of the major aggregates in the national accounts. Besides retaining, as far as possible, the essential accounting relationships, the aggregative approach is needed because many of the aggregates include components having different seasonal and trend characteristics, and sometimes require different methods of adjustment. Details of the methods of adjustment used for each of the quarterly national accounts aggregates are available on request.

Concurrent adjustment

7.65    The national accounts use a concurrent adjustment methodology, under which the calendar and seasonal effects are re-estimated each quarter using all available data, including that for the most recent period. This allows for the most accurate estimate possible of the seasonal component of the series, as:

  • using the data from the most recent periods allows better estimates of the calendar effects at the current end, especially when the calendar effects for a period move over time;
  • it automatically takes into account revisions to the original data, resulting in appropriate revisions to the seasonally adjusted and trend data; and
  • the adjustment method can be more responsive to changes in the seasonal and trend components, and identify them soon after occurrence; under concurrent adjustment; for example, turning points in the trend series are usually identified within three periods of them occurring.

7.66    The improvements to the estimation of the seasonal component result in improved estimates of the seasonally adjusted and trend series, especially at the current end, and smaller revisions in subsequent periods. Note that this method results in reduced revisions compared to the previously utilised adjustment methodology, forward factor adjustment, under which a year’s worth of seasonal factors was extrapolated at the time of the annual reanalysis, and then revised a year later.

7.67    The use of concurrent methodology minimises the risk of incorrect seasonal forward factors being used in the adjustment process and an inappropriate seasonally adjusted series being published.

7.68    In the March quarter 2020 issue of Australian National Accounts: National Income, Expenditure and Product, the method used to produce seasonally adjusted estimates was temporarily changed from concurrent methodology to the forward factors method for series with significant and prolonged impacts from COVID-19. Series will return to concurrent seasonal adjustment, when economic conditions are assessed to have returned to pre COVID-19 patterns.

7.69    Temporary switch to forward factors will be used in the future where economic shocks significantly disrupt regular seasonal patterns, as occurred with the COVID-19 pandemic.

The annual seasonal reanalysis cycle and revisions

7.70    The characteristics of National Accounts time series are reviewed annually. During this reanalysis, the method and quality of the seasonal adjustment process are scrutinised for each series, for the purpose of identifying any changes required to improve the adjustment, and, subsequently, the seasonally adjusted and trend estimates. Such improvements could include:

  • changes to decomposition models, filters, etc.;
  • insertion of new prior adjustments (e.g. corrections for unusually large or small values, or adjustments for abrupt changes in the seasonal pattern or trend level); and/or
  • improvements to existing prior adjustments (e.g. updating corrections in response to new supplementary information).

7.71    Significant revisions can occur as a result of the annual reanalysis, with the more recent periods likely to be most affected. However, the impact of such revisions has generally been reduced since the introduction of concurrent seasonal adjustment.

Interpreting seasonally adjusted series

7.72    The following points need to be taken into account when using seasonally adjusted statistics:

  • seasonal adjustment is a means of removing the estimated effects of seasonal and other types of calendar variation from statistical series, so that the effects of other influences on the series may be more clearly recognised;
  • seasonal adjustment does not remove the effect of irregular influences from the statistics, so an unexpected movement in a seasonally adjusted series should not necessarily be regarded as a change in trend; and
  • seasonally adjusted statistics will be revised following revisions to the original data and as additional original data points are included each quarter.

The trend estimates

7.73    A statistical technique is used to dampen the irregular element in cases where the removal of only the seasonal element from an original series (resulting in the seasonally-adjusted series) may not be sufficient to allow identification of changes in its trend. This technique is known as smoothing, and the resultant smoothed series is known as trend series.

7.74    Smoothing to derive trend estimates is achieved by applying moving averages to seasonally adjusted series. A number of different types of moving averages may be used; for quarterly series, a seven-term Henderson moving average is applied. The use of Henderson moving averages leads to smoother data series relative to series that have been seasonally adjusted only. This average is symmetric, but asymmetric forms of the average are applied as the end of a time series is approached. The application of asymmetric weights is guided by an end-weight parameter, which is based on the calculation of a noise-to-signal ratio; that is, the average movement in the irregular component divided by the average movement in the trend component, known as the I/C ratio). While enabling trend estimates for recent periods to be produced, asymmetric weights result in revisions to the estimates when subsequent observations are available.

7.75    Revisions to the trend series may arise from:

  • the availability of subsequent data;
  • revisions to the underlying data;
  • identification of and adjustment for extreme values, seasonal breaks and/or trend breaks;
  • re-estimation of seasonal factors; and
  • changes to the end weight parameter.

7.76    For more information about ABS procedures for deriving trend estimates and an analysis of the advantage of using them over alternative techniques for monitoring trends, see Information Paper: A Guide to Interpreting Time Series – Monitoring Trends, 2003.

Further reading

For further information on time series analysis in the ABS, please refer to Time Series Analysis Frequently Asked Questions.

Endnotes

  1. Lee, K. (2018). 6. Benchmarking and Reconciliation. Quarterly National Accounts Manual (2017 Edition).
  2. Shiskin, J. (1967). The X-11 variant of the census method II seasonal adjustment program (No. 15). US Department of Commerce, Bureau of the Census.

  3. Findley, D. F., Monsell, B. C., Bell, W. R., Otto, M. C., & Chen, B. C. (1998). New capabilities and methods of the X-12-ARIMA seasonal-adjustment program. Journal of Business & Economic Statistics, 16(2), 127-152.

Chapter 8 Gross Domestic Product

Introduction

8.1    The central concept in a national accounting system is economic production. Production is the process whereby inputs of labour, materials (produced or natural), accumulated capital assets and knowledge are combined to provide outputs of goods and services. This definition of production includes:

  • production of goods that are supplied to units other than their producers, including goods used as inputs to the production of other goods;
  • production of goods that are retained for the producer's own use;
  • provision of services of all kinds which add to the value of goods (such as transport and merchandising services);
  • provision of services directly bought and sold in the market in their own right (such as the services of doctors, teachers and entertainers);
  • provision of knowledge-capturing products (the provision, storage, communication and dissemination of information, advice and entertainment) which the consuming unit can access repeatedly; and
  • illegal production, comprising the production of illegal goods and services (i.e. for which distribution or possession is banned by law), and production of legal goods and services by unauthorised producers (e.g. unlicensed medical practitioners).

8.2    Production is not only confined to goods and services that are of clear monetary value because they are bought and sold. Some produced goods and services do not enter the market but are made available free of charge by the producer (e.g. many goods and services produced by governments and non-profit organisations). They can also be for the direct use of the producer, either as final consumption or as inputs to the producer's own production or capital formation. Such non-market production can be regarded as including, in addition to the goods and services produced as the result of current work, the services which durable assets (such as cars, television sets and public parks) yield to their owners/users, and domestic services produced by households for use within the producing household. Such services are outside the market since they flow to their owners/users without any current exchange of money equivalent to the value of the services.

The production boundary

8.3    In the central accounts of the national accounts system, a more restricted view of production is taken. The national accounts are primarily constructed to assist governments and other organisations to make market-based macroeconomic policy decisions. This includes the analysis of markets and factors affecting market performance such as inflation and unemployment. In 2008 SNA (and the ASNA), the value of domestic services produced and consumed within households are excluded from production because such services are relatively isolated and independent from markets, and are difficult to value in an economically meaningful way. Examples include cleaning, decoration and maintenance of the dwelling, cleaning, servicing and repair of household durables or other goods, washing, preparing meals, and child and aged care. Although the production of such services is not part of the central framework of the national accounting system, the value of the services can be shown in satellite accounts to the main accounts.

8.4    With the exception of own-account household services, 2008 SNA recommends coverage of the production of all goods and services that legally enter the market, and also that part of production which does not enter the market, but for which a realistic value can be imputed using closely related or analogous market transactions. Because illegal goods and services, such as illicit drugs and illegal gambling, are purchased in the market, their production is included in the 2008 SNA production boundary. However, because of data limitations, illegal production is not covered in the ASNA, although the effects of some of these activities may be included by default; for example, if money obtained from such activities is laundered through legitimate institutions that are covered by the national accounts.

8.5    2008 SNA states that to satisfy the definition of production in an economic sense:

There must be an institutional unit that assumes responsibility for the process of production and owns any resulting goods or knowledge-capturing products or is entitled to be paid, or otherwise compensated, for the change-effecting or margin services provided.⁴²

8.6    Institutional units are the basic units for which flows and stocks are recorded in the national accounts. The 2008 SNA description excludes from economic production natural processes without human involvement or direction, such as the unmanaged growth of fish stocks in international waters. However, the activities of fish farming and fishing for profit are considered economic production. Activities which cannot be purchased from producers are also outside the production boundary, regardless of whether the service may be beneficial to overall economic production. Included in this category are basic human activities such as eating and sleeping.

8.7    Although consumer durable assets such as cars, washing machines, microwave ovens and dishwashers provide a stream of services to their users over many years, in 2008 SNA (and the ASNA) such services are conventionally treated as consumed as soon as the assets are bought by a household. 2008 SNA states:

The use of a durable good, such as a vehicle, by persons or households for their own personal benefit or satisfaction is intrinsically a consumption activity and should not be treated as if it were an extension, or continuation, of production.⁴³

8.8    The disadvantage of this treatment is that, in times of hardship, households may temporarily reduce their purchases of these goods to a low level without significantly reducing their consumption of the services they provide. At such times, the national accounts figure for consumption, being restricted to purchases, may give a misleading impression of the community's ongoing level of consumption. Accounting for the services of consumer durables requires treatment of the durables as capital goods providing a stream of services over a number of years. As with own-account household domestic services, such a concept would not be appropriate for most market-based analyses.

8.9    Units of the general government sector provide goods and services free of charge or at nominal prices that are below their cost of production. Such activity nevertheless meets the definition of production. Because such government-provided goods and services are not purchased by the users, the general government sector is regarded as consuming its own output. The non-market output is valued at its cost of production. Similar considerations apply to many non-profit institutions, which meet their production costs from donations provided by members and benefactors and are able to provide goods and services free or at prices that are not commercially determined. As with general government bodies, the non-market production of non-profit institutions is valued at cost.

8.10    In the ASNA, values are also imputed for production of some other goods and services that are not sold in the marketplace. Imputations are confined to a small number of cases where a reasonably satisfactory basis for the valuation of the implied transactions is available, and where their exclusion could result in significant distortions in the accounts. Imputations are made for the following:

  • services provided by owner-occupied dwellings;
  • food and other goods produced by households for their own final consumption ('backyard production');
  • services provided by financial institutions over and above explicit charges made;
  • services provided by owner-builders in the construction of dwellings and major alterations and additions to dwellings; and
  • the non-observed economy.

Endnotes

  1. SNA, 2008, para.6.24.

  2. Ibid., para.6.38.

Basic, producers' and purchasers' prices

8.11    There is more than one set of prices that can be used to value outputs and inputs depending on how taxes and subsidies on products and transport charges are recorded. ASNA uses basic prices for the valuation of industry outputs, and purchasers' prices for valuation of intermediate inputs and of final demand. This is in line with the recommendations in 2008 SNA.

8.12    It is important to note the distinction between taxes (and subsidies) on products and other taxes (and subsidies) on production when discussing alternate price measures. Taxes on products are payable per unit of the product (i.e. a flat amount dependent on the physical quantity of the product, or a percentage of the value at which the product is sold). Other taxes on production are imposed on the producer regardless of the production of any product (e.g. land taxes).

Basic prices

8.13    The basic price is the amount receivable by the producer from the purchaser for a unit of a good or service, minus any tax payable (including deductible value added taxes) plus any subsidy receivable, as a result of production or sale of the unit. Subsidies artificially reduce the sale price, so they are included in the basic price to obtain a measure of the true value of the goods or services produced. Taxes on products, if included, would artificially increase the price and so are excluded. The basic price also excludes any transport charges invoiced separately by the producer as recommended by 2008 SNA. The basic price therefore measures the amount retained by the producer in respect of the good or service that is produced as output.

8.14    Analysts who use Input-Output tables (I-O tables) have expressed a strong preference for the definition of basic prices in the 1968 version of the SNA, which excludes the transport component whether separately invoiced or not. This treatment has been implemented in the I-O tables. This results in changes to estimates of output and intermediate use by industry for series at basic prices, with no impact on gross value added, GDP or series at purchasers' prices.

Producers' prices

8.15    2008 SNA states output can also be measured using producers' prices. These are defined as the amount receivable by the producer, from the purchaser, for a unit of a good or service produced as output, minus any non-deductible GST invoiced to the purchaser and excluding any transport charges separately invoiced by the producer. This measure of output is not included within the ASNA.

Purchasers' prices

8.16    The purchaser's price is the amount paid by the purchaser in order to take delivery of goods or services. Purchasers' prices include any taxes payable (less any subsidies receivable) on production and imports, and any transport charges paid separately by the purchaser to take delivery. Value added taxes such as GST are included in purchasers' prices unless they are allowable as deductions from the purchaser's value-added tax liability. Purchasers' prices are also referred to as market prices.

8.17    In the derivation of industry value added, outputs are valued at basic prices and intermediate consumption is valued at purchasers' prices. By convention, the resulting estimates of industry value added are described as being 'at basic prices'.

Measures of GDP

8.18    The conceptual underpinning of GDP is that it measures gross value added for all resident institutional units for the whole economy. Gross value added is the difference between output and intermediate consumption for each institutional unit and thereby measures the value created by production. Value added represents the contribution of labour and capital to the production process. This measure of GDP is commonly referred to as GDP measured by the production approach (GDP(P)).

8.19    GDP can also be derived from income and expenditure flows.

  • GDP measured by the income approach (GDP(I)): GDP is the source of income for the factors of production (labour and capital). Total factor income is derived by summing factor incomes (i.e. compensation of employees, gross operating surplus, gross mixed income). Adding taxes less subsidies on production and imports to total factor income gives GDP at purchasers' prices.
  • GDP measured by the expenditure approach (GDP(E)): GDP can be derived as the sum of all final expenditures on goods and services (i.e. final consumption expenditures and GFCF), changes in inventories of finished goods, work-in-progress and raw materials, and the value of exports of goods and services less the value of imports of goods and services. Imports are deducted because, although included in final expenditures, they are not part of domestic production.

8.20    GDP is a measure of production and not a measure of economic welfare. The level of production is important because it largely determines how much a country can afford to consume, and it also affects the level of employment. The consumption of goods and services, both individually and collectively, is one of the most important factors influencing the welfare of a community, but it is only one of several factors. In addition, aggregate measures such as consumption expenditure and income do not show which sectors of the population are increasing (or decreasing) expenditure, nor the distribution of income within the economy, nor whether the income generated is the result of more or fewer hours worked. Total welfare also depends on non-economic events, such as epidemics, droughts, floods, the state of the environment, individual and community stress levels, levels of crime, and political factors such as freedom and security. As a measure of production, GDP is not intended to embrace non-economic events. The national accounts are primarily intended to provide data at different levels of aggregation to meet the needs of analysts and others interested in the behaviour of the economy and the factors responsible for major market occurrences such as inflation, employment and unemployment. While certain aggregates may indicate changes in some aspects of welfare, changes in GDP do not necessarily correspond to changes in the overall welfare of the community.

8.21    GDP less consumption of fixed capital is called net domestic product (NDP). Consumption of fixed capital is a cost of production recorded in the income and capital accounts. It may be defined in general terms as the cost, in the accounting period, of the decline in the current value of the producer's stock of fixed assets as a result of physical deterioration, foreseen obsolescence or normal accidental damage. It excludes losses associated with damage caused by war or natural disasters. Such losses are classified as capital losses and are recorded under 'Other changes in the volume of assets' as part of accumulation.

8.22    To be consistent with other entries in the accounts, consumption of fixed capital must be valued at the prices prevailing during the current accounting period. Although consumption of fixed capital is analogous to the measure of depreciation used by businesses, business depreciation measures are generally not suitable for national accounting purposes. This is because businesses generally account for depreciation according to the standards of historical cost accounting, where the original purchase cost of an asset is allocated over the estimated life span of the asset. In periods of rising prices, historical cost accounting will understate the real (current) cost of replacing the asset and will result in an overstatement of business income and saving. Therefore, in the ASNA, the book value of depreciation is not used, and estimates are substituted that reflect changes in the market value of assets. Estimates of consumption of fixed capital are derived in conjunction with estimates of capital services and net capital stock.

8.23    In most cases, when a distinction is drawn between ‘gross’ and ‘net’ recording, ‘gross’ means without deducting consumption of fixed capital and ‘net’ means after deducting consumption of fixed capital. In general, the gross figure is easier to estimate and therefore more reliable, however the net figure is usually the one that is conceptually more appropriate and relevant for analytical purposes.

8.24    The following three chapters outline the concepts, sources and methods used to compile annual and quarterly GDP by the production, expenditure and income approaches in the ASNA.

Chapter 9 Gross Domestic Product - Production approach (GDP(P))

Components of GDP(P)

9.1    GDP is the national accounting measure of production occurring in a whole economy during an accounting period (e.g. a quarter or a year). GDP is based on the concept of value added, which is the unduplicated value of goods and services produced in any given period. Gross value added at basic prices is equal to the total value of outputs at basic prices less the total intermediate consumption at purchasers' prices. GDP at purchasers' prices is equal to the sum of the gross value added at basic prices of all resident producers plus taxes on products payable less subsidies on products receivable. This measure is commonly referred to as GDP(P); that is:

GDP(P) = Gross value added
  + Taxes on products
  - Subsidies on products
  = Output
  - Intermediate consumption
  + Taxes on products
  - Subsidies on products

9.2    The following describes the components of GDP(P) and how they are valued in concept.

Output

9.3    Output consists of the value of goods and services produced within a type of activity unit (TAU). Output includes production that is completed in the accounting period as well as production in the accounting period that remains incomplete at the end of that accounting period. Goods and services produced as outputs may be:

  • sold at 'economically significant' prices (i.e. prices which have a significant influence on both the amounts producers are willing to supply and the amounts purchasers wish to buy);
  • bartered in exchange for other goods, services or assets that are provided to employees as compensation in kind, or used for other payments in kind;
  • held as unsold 'finished' goods in the producers' inventories for subsequent sale, or held as work-in-progress in producers' inventories;
  • supplied to another TAU belonging to the same enterprise as intermediate inputs into the latter's production;
  • retained by the producers for own final consumption or gross fixed capital formation; and
  • supplied free, or sold at prices that are not economically significant, to other institutional units (including households), as often occurs in the case of output of general government units and non-profit institutions.

9.4    The output of a TAU is defined as the value of total sales or other uses of goods (including capital work done on own account) and services produced as outputs plus the value of changes in the inventories of work-in-progress and finished goods produced as outputs. Three categories of output are recognised for national accounting purposes: market output, output produced for own final use and non-market output. The distinction is necessary to obtain an accurate valuation of output for each. The determining factor for market and non-market output is whether or not the unit sets economically significant prices.

Market output

9.5    Market output is output that is sold at economically significant prices or otherwise disposed of on the market, or output that is intended for sale or disposal on the market. Market output includes the value of goods or services bartered, supplied by one establishment to another in the same institutional unit for use as intermediate consumption, used for payments in kind, or margins on the supply of goods and services (including transport and financial services). Market output also includes the value of changes in inventories of finished goods and work-in-progress intended for disposal on the market.

9.6    Sales of goods are to be recorded when the ownership of the goods passes from the producer to the purchaser or when the services are provided to the purchaser. The valuation is at basic prices.

9.7    The valuation of changes in inventories poses special problems in a national accounting context. Changes in the valuation of inventories held at particular points in time can include the effects of price changes, as well as additions to and subtractions from inventories. As such, holding gains or losses are not the result of production, they are excluded from the value of output in the national accounts. Accordingly, values of inventories used in measuring changes in inventories need to be adjusted to exclude them. In the ASNA, this adjustment is known as the inventory valuation adjustment (IVA).

Output for own final use

9.8    Output for own final use includes output for own final consumption and output for own gross fixed capital formation.

  • Output for own final consumption
    • Consists of goods and services that are produced for final use by the owners of the enterprises in which they are produced. Corporations have no final consumption (only intermediate consumption used in producing their outputs), and output for own final consumption is produced only by unincorporated enterprises. Two examples of such output are agricultural goods produced and consumed by members of the same household and rent of owner-occupied dwellings.
  • Output used for own gross fixed capital formation
    • Goods or services used for own gross fixed capital formation can be produced by any kind of unit, whether incorporated or unincorporated. Examples are machinery or equipment produced by an establishment for use in the same establishment and the construction, extension, or alteration of an establishment's building by the enterprise owning the establishment. In the ASNA, imputations are made of the value added by owner-builders in the construction, alteration, or extension of their dwellings and for significant own-account construction carried out by private and public enterprises. An imputation is also made for computer software and research and development made on own account.

9.9    Output for own final use should be valued at the basic price at which the goods or services could be sold on the market; that is, the price that would prevail between a willing buyer and willing seller at the time and place the goods and services are produced. In the case of agricultural produce, the nearest equivalent price is likely to be the 'farm-gate' price; that is, the price the farmer could receive by selling the produce to a purchaser who comes to the farm to collect the produce.

9.10    When reliable market prices cannot be obtained, the value of output for own final use is the sum of costs of production; that is, the sum of intermediate consumption; compensation of employees; consumption of fixed capital; a net return to fixed capital; and other taxes (less subsidies) on production. Where the own-account production is undertaken by a non-market producer, net return to fixed capital is not included.

9.11    The ASNA also includes limited examples of output for own intermediate use in both the value of output and intermediate consumption. The two examples include the use of brown coal by electricity producers (where that coal is mined on-site and not charged for) and own-account production of electricity, where TAUs generate electricity which they use themselves. The choice to include these values was driven by a desire to fully reflect the input structure of the industries in question, and as the same values are added to both output and intermediate consumption, the inclusion does not affect gross value added.

Non-market output

9.12    Non-market output consists of goods and services produced by non-profit institutions serving households (NPISH) or general government units and supplied free, or at prices that are not economically significant, to other institutional units or to the community as a whole. For general government output, economically significant prices may not be charged to users. The reasons are that the consumption of the goods or services cannot be monitored or controlled, as is the case with public administration and defence, or that governments make policy decisions not to charge the full cost, as with education and health services. Likewise, NPISH often do not fully charge for their services because such institutions are formed to provide services to members or the needy.

9.13    The non-market output of general government units and NPISH is valued at the costs of producing the outputs, comprising compensation of employees, the cost of purchased goods and services used in production (intermediate consumption), other taxes (less subsidies) on production and consumption of fixed capital. These units therefore do not generate a net operating surplus from their non-market production.

Output of particular industries

9.14    The general rules governing the recording and valuation of output require elaboration regarding their application to the output of certain industries, mostly service industries such as transport and storage, wholesale trade and retail trade, and finance and insurance industries. Also included is a description of how to value the activities of research and development and the production of originals and copies.

Transport and storage

9.15    The output of transport services is measured by the amounts receivable for transporting goods or persons. A good in one location is considered to be a different quality from the same good in another location, so the transporting from one location to another is a process of production.

9.16    The activity of storage is important in the production process whereby goods are 're-transported' from one point-in-time to another (as opposed to locations in the instance of transport services). For example, the inventories of goods have to be physically stored until sold and may require storage in a properly controlled environment. The increase in the price of a product is due to storage; storage costs incurred represents a production process. It is important to note that this increase is clearly distinguished from holding gains and losses, which are excluded from production.

9.17    There can be an increase in the value of a product other than a simple price rise as a result of being held in storage, that is, there can be an increase in value which is construed as a further stage in production. For example:

  • the production process is sufficiently long that discounting factors should be applied to work put in place significantly long before delivery;
  • the quality of the good may improve with the passage of time (such as wine); and
  • there may be seasonal factors affecting the supply or the demand for the good that lead to regular, predictable variations in its price over the year, even though its physical qualities may not have changed.

9.18    Therefore, in principle, the values of additions to inventories include not only the values of the goods at the time they are stored but also the value of the additional output produced while the goods are held in store.

Wholesale and retail trade

9.19    The major output of the wholesale and retail trade industries is the value of the service provided in selling goods (i.e. goods purchased and resold are not treated as part of intermediate consumption). The value of the service is equal to the trade margins realised on the goods sold. The measurement of this service at basic prices is analogous to that for goods producing industries: output at basic prices is the value of the trade margins, including the value of any subsidies received by the wholesaler or retailer, and excluding taxes on production of the service.

9.20    A trade margin is the difference between the actual or imputed price realised on a good purchased for resale and the price that would have to be paid by the distributor to replace the good at the time it is sold or otherwise disposed of. Margins can be negative if prices have to be marked down or the goods are never sold because they go to waste or are stolen.

9.21    It is important to note:

  • goods sold are valued at the price they are actually sold (excluding GST);
  • goods provided to employees as remuneration in kind are valued at the current purchasers' prices payable by the traders to replace them, therefore zero margin;
  • additions to inventories of goods for resale are valued at the prices prevailing at the time of entry into inventories; and
  • goods on withdrawal from inventories are valued at the cost to the wholesaler or retailer at the time of the withdrawal of acquiring similar replacement goods for later sale, unless the goods were acquired with the intention of making a real holding gain over the storage period, in which case the value of the holding gain is excluded.

Financial intermediaries (except insurance and pension funds)

9.22    Banks and other financial intermediaries incur liabilities on financial markets by borrowing funds (for example, in the form of deposits) which they lend, on different terms and conditions, to other institutional units, such as households, governments and corporations. Such institutions intermediate between lenders and borrowers by channelling funds from one to the other, incurring risk in the process.

9.23    Although financial intermediaries make explicit charges for a number of financial services, the charges do not cover the cost of all services provided. If receipts from the charges were the only measure of output, financial intermediaries would invariably appear to be running at a loss. However, financial intermediaries are able to provide services for which they do not charge explicitly, through charging higher rates of interest to borrowers than they pay to lenders. The resulting 'interest margin' is used to defray expenses. The interest-rate differential therefore includes an implicit charge to customers for services provided and plays a part in determining the level of interest rates observed in practice.

9.24    In the ASNA, interest is treated as property income and is not recorded as either output or intermediate input. However, in effect, interest receivable by financial intermediaries excludes payments by borrowers for the services provided by the financial institutions, and interest payable by financial intermediaries is lower than it would otherwise be to cover the costs of financial services provided to depositors.

9.25    Accordingly, interest flows are adjusted to take account of the service charges that form part of the output of financial intermediaries. In effect, the interest paid by borrowers can be regarded as comprising two components, a service charge and a 'pure' interest flow. Likewise, the interest paid to depositors can be viewed as a 'pure' interest flow from which a service charge has been deducted. The 2008 SNA refers to the pure interest as 'SNA interest'. As these service charges cannot be measured directly, the imputed charges are accordingly referred to as financial intermediation services indirectly measured (FISIM).

9.26    The method for calculating FISIM has been refined in 2008 SNA. This refinement is consistent with the existing ASNA treatment. FISIM payable by both depositors and borrowers will be calculated by using the concept of a 'reference' rate of interest. The reference rate should contain no service element and reflect the risk and maturity structure of deposits and loans, and could be determined as being equal to a particular market rate of interest. The ASNA uses a practical approach to estimating the reference rate of interest as the mid-point between the average interest rate on loans and the average interest rate on deposits. The long-term bond rate is used as the reference rate for institutions that are not deposit taking institutions. For domestic transactions, the reference rates applied are in the domestic currency, whereas for exports and imports of FISIM different reference rates are applied for loans and deposits in other currencies.

9.27    In the ASNA, FISIM is an output of the following financial intermediaries: banks, other depository corporations, central borrowing authorities and securitisers. For banks and other depository corporations it is the sum of the imputed service charges for both borrowers and depositors while, for central borrowing authorities and securitisers, it is the sum of the imputed service charge for borrowers.

9.28    The FISIM calculation is based on stock levels of loans and deposits; that is:

\(\large[(Loan\:rate\:–\:reference\:rate) * Stock\:of\:loans] + [(reference\:rate\:–\:deposit\:rate)\:* \\ \large Stock\:of\:deposits]\)

9.29    As FISIM forms part of the output of financial intermediaries, it must also be recorded as part of consumption by the intermediaries' customers. FISIM is therefore shown as consumption by individual industries, government units and households, for both depositors and borrowers. Exports and imports of FISIM are also estimated.

9.30    Exports and imports of FISIM are calculated on reported income flows rather than reported asset and liability levels to ensure that calculated FISIM is consistent with reported income flows. The methodology for calculating FISIM by income flows is:

\(\large[(Loan\:rate\:–\:reference\:rate) * interest\:flow\:on\:loans/loan\:rate] + [(reference\:rate\:–\\ \large deposit\:rate) * interest\:flow\:on\:deposits/deposit\:rate]\)

9.31    Exports of FISIM are generated through two transactions:

  • interest income earned by resident financial intermediaries (providing services) on loans to non-resident non-financial entities;
  • interest income payable by resident financial intermediaries (specifically depository corporations) on deposits (providing services) to non-resident non-depository corporations. The non-resident is paying for the service component provided by the resident; therefore, it is recorded as an export of a service.

9.32    Imports of FISIM are generated through two transactions:

  • interest income receivable by resident non-depository corporations on deposits held with non-resident financial intermediaries (specifically depository corporations) providing the service. The resident is paying for the service component provided by the non-resident, therefore it is recorded as an import of a service.; and
  • interest payable by resident non-financial entities on loans from non-resident financial intermediaries (providing services).

9.33    A basket of international interest rates which are common to each major currency are monitored quarterly for deposits and loans. A mid-point between the average interest rate on loans and the average interest rates on deposits is used as the reference rate for each currency. FISIM is calculated for each currency and then aggregated to give a total figure for exports and imports of FISIM.

Insurance and pension funds

9.34    Insurance is a form of financial intermediation in which funds are paid by policyholders and invested in financial or other assets, which represent technical reserves to meet future claims arising from the events specified in insurance policies. Typically, insurance enterprises do not make a separate charge for the service of arranging the financial protection or security which insurance is intended to provide. This is known as the insurance service charge (ISC).The value of the ISC, which forms part of the output of insurance and pension funds, has to be estimated indirectly from the total receivables and payables of insurance enterprises, including the income accruing from the investment of technical reserves.

9.35    The value of output of the services is produced by:

  • non-life insurance corporations – estimated as premiums earned and investment income on the technical reserves less expected claims;
  • life insurance corporations – the sum of administrative costs incurred (including investment and labour costs) plus a profit margin; and
  • pension funds – the sum of administrative costs incurred (including investment and labour costs).

Research and development

9.36    Research and development (R&D) is creative work undertaken on a systematic basis in order to increase the stock of knowledge, including knowledge of man, culture and society, and to enable this stock of knowledge to be used to devise new applications. A major change in 2008 SNA is the recognition of expenditure on R&D as capital formation, whereas 1993 SNA treated it as intermediate consumption where purchased and ancillary production (which is not recorded) if performed in-house. The 2008 SNA treatment has been implemented in ASNA.

9.37    In principle, R&D output is valued at market prices if purchased (or outsourced) or as the sum of total production costs plus an appropriate mark-up representing the costs of fixed assets used in production if undertaken on own account. Survey data indicate that over 90 per cent of R&D activity in Australia is undertaken on own account and representative market price data for R&D products are not available. Therefore R&D output is valued by the total production costs incurred.

9.38    Own account R&D is derived from the ABS Survey of Research and Experimental Development, published in Research and Experimental Development, Businesses, Australia. This dataset collects expenditure on the production of research and experimental development classified by both sector and type of research undertaken.

9.39    Survey aggregates are adjusted during S-U balancing to ensure alignment with other datasets used in the compilation of the ASNA.

9.40    With the exception of Ownership of dwellings, all industry divisions produce own account research and development.

9.41    The current price estimates are deflated using the Wage Price Index (WPI). The resulting estimates are used to construct chain volume measures.

The production of originals and copies

9.42    The production of books, recordings, films, software, tapes, disks, etc. is a two-stage process where the first is the production of the original and the second is the production and use of the copies. 2008 SNA (and 1993 SNA) recommended the capitalisation of the production of entertainment, literary and artistic originals as well as computer software. Prior to this it was treated as intermediate consumption. The ASNA complies with the 2008 SNA treatment.

9.43    2008 SNA clarified that 'licences to use' should be treated as capital formation if they are to be used for more than one year, regardless of payment arrangements. The ABS does not have information on the duration of 'licences to use' and assumes that most software is purchased with the intention to be used beyond one year and so should be treated as capital formation.

9.44    If the original is sold when it has been produced, the value of the output of the original producer is given by the price paid. If it is not sold, its value could be estimated on the basis of its production costs with a mark-up.

9.45    An estimation for computer software (consisting of packaged software, customised software and own account software) is included in the value of output. It is valued at market prices if purchased, while software developed in-house is valued at its estimated basic price or at its cost of production if it is not possible to estimate the basic price.

9.46    Estimates from the 2002-03 Information and Communication Technology (ICT) Satellite Account were incorporated into the ASNA for financial year 2002-03. Estimates for subsequent financial years are derived as follows:

  • customised software and own account software are extrapolated using estimates from the Economic Activity Survey (EAS); and
  • packaged software is derived from the level of imports of computer software as an indicator.

9.47    Estimates for own account software are added to output where a proportion of other own account capital formation is considered computer software and allocated to industry and sector.

9.48    Current price estimates are deflated using mainly relevant Producer Price Indexes (PPIs).

Adjustments made to output

Understatement of income

9.49    Most ANZSIC divisional estimates of Australian production at basic prices have an adjustment for the estimated level of understatement of income. The calculated value for each ANZSIC subdivision's understatement of income is added to the division's total output estimate to form the final Australian production at basic prices.

9.50    The percentage adjustment for each ANZSIC subdivision's estimated understatement of income is different. The estimated understatement of income is based on industry analysis conducted by the Australian Taxation Office from their audits of business income and business expenses.

9.51    It is considered that no understatement of income adjustments is required for the following industries:

  • Electricity supply
  • Gas supply
  • Rail transport
  • Water, pipeline and other transport
  • Air and space transport
  • Finance
  • Insurance and superannuation funds
  • Ownership of dwellings
  • Government administration and regulatory services and Defence Off-June year reporting

9.52    Business units may report on a calendar year basis other than for the year ending June, so an adjustment is required to ensure all output data are on a June financial year basis before they are used in S-U compilation. This adjustment is applied by deriving off-June factors for each data item using Business Indicators: Australia (QBIS) for each ANZSIC subdivision. The appropriate off-June factors are then applied to data items reported by individual businesses in the EAS for each ANZSIC subdivision who did not respond on a June financial year basis. Hence the data reported on an off-June financial year basis is adjusted onto a June financial year basis.

9.53    Further information can be found in the ABS publication, Experimental Estimates for Australian Industry Adjusted for Off-June Year Reporting.

Own account R&D

9.54    An estimate for own account R&D is included to derive output. More information can be found in the ABS publication, Research and Experimental Development, Businesses, Australia.

Intermediate consumption

9.55    Intermediate consumption (or intermediate use) consists of the value of the goods and services consumed as inputs to the production process. The goods and services may be either transformed (e.g. flour may be transformed into bread) or completely consumed or used up (e.g. electricity and most services) in the process of producing outputs.

9.56    In addition to goods and services used directly in the production process, intermediate consumption includes the value of all goods and services used as inputs into ancillary activities. Ancillary activities are undertaken within an enterprise for the sole purpose of supporting the main and secondary activities. Ancillary activities include purchasing, sales, marketing, accounting, data processing, transportation, storage, and security. The output of an ancillary activity is not intended for use outside the enterprise.

9.57    Intermediate consumption does not include valuables consisting of works of art, precious metals and stones and articles made out of them, that are acquired as stores of value and are not used up in the process of production. However, intermediate consumption does include precious stones and metals used in the production of jewellery and similar items.

9.58    Intermediate consumption excludes the costs incurred by the gradual using up of fixed assets, which is recorded as consumption of fixed capital in the income and capital accounts. Rentals paid on fixed assets that are leased from other institutional units under operating leases are included as part of intermediate consumption, along with fees, commissions, royalties, etc., payable under licensing arrangements.

9.59    As described previously, the ASNA includes output for own intermediate use in limited cases. In these cases, the imputed value of brown coal and electricity produced by those TAUs is also included in their intermediate consumption.

Distinction between operating leases and financial leases

9.60    Operating leases are leases that provide for the renting of machinery or equipment for specified periods of time that are substantially shorter than the total expected service lives of the machinery or equipment. An operating leasing is a form of production in which the owner of the machinery or equipment (the lessor) provides a service to the user (or lessee). The lessor is usually responsible for the maintenance and repair of the equipment as part of the service provided to the lessee. Rentals are treated as payment for the total service provided, and are included in the intermediate consumption of producers. For operating leases, consumption of fixed capital is charged to the lessor.

9.61    Under a financial lease, a change of ownership from the lessor to the lessee is deemed to have taken place, even though the leased goods legally remain the property of the lessor, at least until the lease expires. Financial leasing is an alternative to lending as a method of financing the acquisition of machinery and equipment, in which the lessor effectively makes a loan to the lessee to enable the latter to finance the acquisition of the equipment. Rentals under financial leases are treated as a combination of loan repayments and interest payments and not as part of intermediate consumption. Under a financial lease, consumption of fixed capital is charged to the lessee.

Boundary between intermediate consumption and compensation of employees

9.62    Certain goods and services used up by producers do not enter directly into the production process but are consumed by employees working on that process. Where goods and services are provided to employees and are used by the employees in their own time and at their own discretion, the goods and services constitute remuneration in kind rather than intermediate consumption. Fringe benefits, such as the private use of company cars, airline lounge memberships, telephones and rent subsidies, fall into this category. This distinction is important, because the inclusion of remuneration in kind in compensation of employees, rather than in intermediate consumption, increases labour income and GDP.

Boundary between intermediate consumption and gross fixed capital formation

9.63    This boundary is not always clear cut. The following provides an explanation of the treatment of particular expenditures.

Small tools

9.64    Expenditure on large items of machinery and equipment is recorded as gross fixed capital formation while regular expenditure on small durables, such as hand tools, is normally regarded as intermediate consumption.

Repairs and maintenance

9.65    The 2008 SNA recommends that ordinary maintenance and repairs of fixed assets used in production constitute intermediate consumption and that major renovations, reconstructions or enlargements of fixed assets are to be treated as gross fixed capital formation. Ordinary maintenance and repairs are necessary to ensure effective utilisation of assets over their expected service lives. Such maintenance and repairs do not change the asset or its usual level of performance. Major renovations, reconstructions or enlargements increase the performance capacity of existing assets or significantly extend their previously expected service lives. Examples are extending or enlarging existing buildings or structures and refitting or restructuring the interior of a building or ship.

Research and development

9.66    Research and development is treated as capital formation except in any cases where it is clear that the activity does not entail any economic benefit for its owner, in which case it is treated as intermediate consumption. This is a change in treatment as recommended by 2008 SNA and has been implemented in ASNA.

Mineral and petroleum exploration

9.67    Expenditures on mineral and petroleum exploration are not treated as intermediate consumption. Whether successful or not, they are needed to acquire new reserves and so are all treated as gross fixed capital formation.

Military equipment

9.68    Expenditure on major military equipment (such as weapon delivery systems) is treated as gross fixed capital formation in the ASNA. Expenditures on durable military items such as boots, bombs and bullets, torpedoes and spare parts, are recorded as increases in inventories on acquisition and decreases in inventories on use or disposal, and therefore as intermediate consumption as they are used up.

Adjustments made to intermediate use

Overstatement of expenses

9.69    Each ANZSIC division calculation of intermediate use has a correction for the level of overstatement of expenses. The calculated value for each ANZSIC subdivision overstatement of expenses is removed from the division's final intermediate use estimate.

9.70    The percentage adjustment for each ANZSIC subdivision's estimated overstatement of expenses is different. The estimated overstatement of expenses is based on industry analysis conducted by the Australian Taxation Office from their audits of business income and business expenses.

9.71    It is considered that no overstatement of expenses adjustments is required for the following industries:

  • Electricity supply
  • Gas supply
  • Water supply, sewerage and drainage services
  • Rail transport
  • Water, pipeline and other transport
  • Air and space transport
  • Motion picture and sound recording
  • Broadcasting (except Internet)
  • Finance
  • Insurance and superannuation funds
  • Ownership of dwellings
  • Government administration and regulatory services
  • Defence
  • Education and training
  • Health care and social assistance
  • Heritage and creative and performing arts
  • Gambling, sports and recreation.

Off-June year reporting

9.72    Business units may report for a non-June financial year, so an adjustment is required to ensure all intermediate consumption data are on a June-year basis before they are used in S-U compilation. This adjustment is applied by matching responses from the annual Economic Activity Survey (EAS) with those from Business Indicators: Australia for businesses reporting on an off-June financial year.

9.73    Further information can be found in the ABS publication, Experimental Estimates for Australian Industry Adjusted for Off-June Year Reporting.

FISIM

9.74    FISIM is recorded as part of intermediate consumption by financial intermediaries' customers; that is, for all businesses, government and households. The FISIM output is estimated so that it can be allocated by final use (to household final consumption expenditure) and intermediate use directly. FISIM is produced for the following intermediate use categories initially:

  • non-financial corporations (private, national, state and local);
  • financial corporations (finance, insurance and financial auxiliaries);
  • general government (national, state and local);
  • unincorporated enterprises; and
  • ownership of dwellings.

9.75    Estimates for FISIM produced by non-resident units and consumed by resident units (i.e. an import of goods and services) and FISIM produced by resident units and consumed by non-resident units (i.e. an export of goods and services) are obtained from Balance of Payments (BoP) data. Imports are allocated to intermediate use of private non-financial and financial corporations.

9.76    Intermediate use is allocated to sectors and industries as follows:

  • non-financial corporations (private, national, state and local) – FISIM is allocated to industries in proportion to the sum of interest income and interest expenses from the Economic Activity Survey;
  • general government – industry allocation is undertaken in proportion to non-market output of general government;
  • financial corporations – allocated entirely to the Financial and Insurance Services industry;
  • unincorporated enterprises – FISIM is allocated to industries in proportion to the sum of interest income and interest expenses from the Economic Activity Survey; and
  • ownership of dwellings industry – allocated entirely to ownership of dwellings.

Insurance service charge (ISC)

9.77    ISC is recorded as part of consumption by non-life insurance corporations' customers; that is, for all businesses, governments and households. The ISC output is estimated so that it can be allocated by final use (to household final consumption expenditure) and intermediate use directly. The ISC is estimated for the following intermediate use categories:

  • non-financial corporations (private and public);
  • financial corporations (finance, insurance and auxiliaries);
  • general government;
  • unincorporated enterprises; and
  • ownership of dwellings.

9.78    Estimates for ISC produced by non-resident units and consumed by resident units (i.e. an import of goods and services) and ISC produced by resident units and consumed by non-resident units (i.e. an export of goods and services) are obtained from BoP data. Imports are allocated to intermediate use of private non-financial and financial corporations.

9.79    Intermediate use is allocated to sectors and industries as follows:

  • general government – industry allocation is undertaken in proportion to non-market output of general government;
  • financial corporations – allocated entirely to the Financial and insurance services industry;
  • unincorporated enterprises and public / private non-financial corporations – the ISC is allocated in proportion to insurance premiums obtained from the Economic Activity Survey; and
  • ownership of dwellings industry – allocated entirely to ownership of dwellings.

Taxes and subsidies on products

9.80    Taxes on products are taxes that are payable per unit of a good or service. They are payable when they are produced, delivered, sold, transferred or otherwise disposed of by their producers (e.g. GST, sales tax and excise tax).

9.81    Subsidies on products are subsidies that are payable per unit of a good or service. A subsidy usually becomes payable when the good or service is produced, sold or imported, but may also be payable in other circumstances such as when a good is transferred, leased, delivered or used for own consumption or own capital formation.

Sources and methods - Annual

Benchmark years

9.82    The current price estimates of gross value added by industry are produced from 1994-95 up to the year previous to the latest year using S-U tables and are in balance with the expenditure estimates.

9.83    The main data source for non-financial corporations and NPISH in the annual benchmarks is the Economic Activity Survey (EAS), published in Australian Industry. The EAS consists of a core component and a rolling component. The core component produces broad financial data and broad demographic data. The rolling component produces detailed financial data and some combination of product data, detailed demographic and activity data.

9.84    The outputs of the core and rolling components can be directly or indirectly constructed via the following streams of work:

  • the survey program – consists of questionnaires to directly collect data via the Economic Activity Survey, and includes irregular annual industry surveys such as the Wholesale Industry Survey (WIS);
  • the complementary program – uses data substitution and data modelling/synthetic estimation to fulfil some of the national accounts compilation needs not specifically met by the survey program;
  • the case study program – centres around the use of case studies to satisfy I-O data requirements of product level detail; and
  • the feasibility and research program – addresses known quality, conceptual and methodological issues. In most cases, it does not directly deliver new products or services, instead helps in the clarification and resolution of issues impacting on the quality of existing outputs or on the design and delivery of new outputs.

9.85    The tables below outline the data sources and methods used in the estimation of annual gross value added at current price estimates and volume measures by industry. They also include an outline of the data sources used to estimate the product level detail required to populate the S-U tables. References to the Economic Activity Survey as a data source encompasses the Annual Industry Statistics program as described above.

9.86    Market output is derived for all non-financial and financial corporations and household units covering all industries. Non-market output is derived for general government and NPISH units. General government activity is not allocated to all industries. NPISH units are concentrated in a small number of industries (i.e. Information media and telecommunications; Professional, scientific and technical services; Administrative and support services; Education and training; Health care and social assistance; Arts and recreation services; and Other services). Little, if any, NPISH activity is present in the other industries; if there is any NPISH activity (as reported in the Economic Activity Survey) in these industries then this small amount of non-market output would be included in gross value added estimates.

Table 9.1 Annual gross value added by industry - Agricultural (ANZSIC Subdivision 01)
Item Comment
Current prices
  Output
   

The Economic Activity Survey is the main data source used to derive output.

Market output is measured as sales of goods and services plus changes in inventories of finished goods and work-in-progress. It is derived for non-financial corporations and household institutional units.

The following adjustments are also included to obtain output:

  • understatement of income;
  • off-June year reporting;
  • Output for own final use in the form of own-account computer software and R&D;
  • output of electricity produced for own intermediate use; and
  • output for own final use in the form of gross fixed capital formation for cultivated biological resources (including livestock used for breeding, vineyards and fruit orchard growth).
  Output – product level
   

Industry product estimates for primary and secondary production are modelled using the estimates calculated from the ABS publication, Value of Agricultural Commodities Produced, Australia.

Product movements are then confronted with the available product information found in the ABARES publication, Agricultural Commodities, and the ABS publication, Value of Agricultural Commodities Produced, Australia. S-U estimates at product level are published in the ABS publication, Australian National Accounts: Supply Use Tables. They also form the basis for the product dimension that is used in the Input-Output tables.

  Intermediate use
   

The Economic Activity Survey is the main data source used to derive intermediate use.

Intermediate use consists of the value of goods and services consumed as inputs in the production of output. It is derived for non-financial corporations, households and NPISH units.

The following adjustments are also included to obtain intermediate use:

  • overstatement of expenses;
  • output of electricity produced for own intermediate use;
  • off-June year reporting;
  • FISIM; and
  • insurance service charge.
  Gross value added
    Output less intermediate use.
  Volume measures
   

Derived using the double deflation method for value added.

The annual volume is confronted with the sum of the four quarters volume estimate published in Australian National Accounts:  National Income, Expenditure and Product, as well as information obtained from the media and industry associations.

For this industry, volume data are also obtained from Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) statistics, and the ABS publication, Value of Agricultural Commodities Produced, Australia.

Table 9.2 Annual gross value added by industry - Aquaculture (ANZSIC Subdivision 02), Forestry and logging (ANZSIC Subdivision 03), Fishing, hunting, and trapping (ANZSIC Subdivision 04) and Agriculture, forestry and fishing support services (ANZSIC Subdivision 05)
Item Comment
Current prices
  Output
   

The Economic Activity Survey and Government Finance Statistics (GFS) are the main data sources used to derive output.

Market output is measured as sales of goods and services plus changes in inventories of finished goods and work-in-progress. It is derived for non-financial corporations and household institutional units.

Government Finance Statistics data relating to gross expenditure by government classified according to purpose are used to derive government output by industry. Purpose categories are used as a proxy for both product and industry, with ratios derived from historical input and output data used to allocate each purpose category to product. Primary products are aggregated to derive industry data.

The following adjustments are also included to obtain output:

  • understatement of income;
  • output for own final use in the form of own-account computer software and R&D;
  • output of electricity produced for own intermediate use; and
  • off-June year reporting;
  Output – product level
   

Industry ANZSIC subdivision product estimates for primary and secondary production are modelled using weights from the Input-Output tables.

Secondary production estimates are derived directly from Economic Activity Survey data corresponding to the related input and output product.

Product movements are confronted according to available product information in the ABARES publication, Agriculture and Resource Quarterly.  

  Intermediate use
   

The Economic Activity Survey is the main data source used to derive intermediate use. General government intermediate use is derived residually with the components coming from various sources; namely, the Survey of Employment and Earnings, Government Finance Statistics and the Perpetual Inventory Method.

Intermediate use consists of the value of goods and services consumed as inputs in the production of output. It is derived for non-financial corporations, households and NPISH units.

General government intermediate use is included and is derived as the general government estimates for gross output less compensation of employees less consumption of fixed capital.

The following adjustments are also included to obtain intermediate use:

  • overstatement of expenses;
  • off-June year reporting;
  • output of electricity produced for own intermediate use;
  • FISIM; and
  • insurance service charge.
  Gross value added
    Output less intermediate use.
  Volume measures
   

Derived using the double deflation method for value added.

The first preliminary estimate is confronted with the sum of the four quarters volume estimate published in Australian National Accounts:  National Income, Expenditure and Product.

Table 9.3 Annual gross value added by industry - Coal mining (ANZSIC Subdivision 06), Oil and gas extraction (ANZSIC Subdivision 07), Metal ore mining (ANZSIC Subdivision 08) and Non-metallic mineral mining and quarrying (ANZSIC Subdivision 09)
Item Comment
Current prices
  Output
   

The Economic Activity Survey is the main data source used to derive output. Market output is measured as sales of goods and services plus changes in inventories of finished goods and work-in-progress. It is derived for non-financial corporations and household institutional units.

The following adjustments are also included to obtain output:

  • understatement of income;
  • output for own final use in the form of own-account computer software and R&D;
  • output of electricity produced for own intermediate use; and
  • off-June year reporting.
  Output – product level
    Product-level estimates for mining for the five commodity producing groups (060 Coal mining, 070 Oil and gas extraction, 080 Metal ore, 0801 iron ore and 090 Non-metallic mineral mining and quarrying)  are compiled from detailed commodity-level information contained in the ABS publication, Australian Industry and Energy Account, Australia.
  Intermediate use
   

The Economic Activity Survey and the Energy Account are the main data sources used to derive intermediate use.

Intermediate use consists of the value of goods and services consumed as inputs in the production of output. It is derived for non-financial corporations, households and NPISH units.

The following adjustments are also included to obtain intermediate use:

  • overstatement of expenses;
  • output of electricity produced for own intermediate use;
  • off-June year reporting;
  • FISIM; and
  • insurance service charge.
  Gross value added
    Output less intermediate use.
  Volume measures
   

Derived using the double deflation method for value added.

The annual volume is confronted with the sum of the four quarters volume estimate published in Australian National Accounts:  National Income, Expenditure and Product; quantity information is obtained from the ABS publications, Australian Industry and Energy Account, Australia, as well as media and industry associations.

Table 9.4 Annual gross value added by industry - Exploration and other mining support services (ANZSIC Subdivision 10)
Item Comment
Current prices
  Output
   

The Economic Activity Survey and Government Finance Statistics are the main data sources used to derive output.

Market output is measured as sales of goods and services plus changes in inventories of finished goods and work-in-progress. It is derived for non-financial corporations and household institutional units.

Government Finance Statistics data relating to gross expenditure by government classified according to purpose are used to derive government output by industry. Purpose categories are used as a proxy for both product and industry, with ratios derived from historical input and output data used to allocate each purpose category to product. Primary products are aggregated to derive industry data.

The following adjustments are also included to obtain output:

  • understatement of income;
  • output for own final use in the form of own-account computer software and R&D;
  • output of electricity produced for own intermediate use; and
  • off-June year reporting.

Industry estimates for primary and secondary production are calculated from Economic Activity Survey data.

  Output – product level
    Product level information is determined from detailed source data contained in the Mineral and Petroleum Exploration Survey and Economic Activity Survey.
  Intermediate use
   

The Economic Activity Survey is the main data source used to derive intermediate use. General government intermediate use is derived residually with the components coming from various sources; namely, the Survey of Employment and Earnings, Government Finance Statistics and the Perpetual Inventory Method.

Intermediate use consists of the value of goods and services consumed as inputs in the production of output. It is derived for non-financial corporations, households and NPISH units.

General government intermediate use is included and is derived as the general government estimates for gross output less compensation of employees less consumption of fixed capital.

The following adjustments are also included to obtain intermediate use:

  • overstatement of expenses;
  • output of electricity produced for own intermediate use;
  • off-June year reporting;
  • FISIM; and
  • insurance service charge.
  Gross value added
    Output less intermediate use.
  Volume measures
 

 

Derived using the double deflation method for value added.

The annual volume is confronted with the sum of the four quarters volume estimate published in Australian National Accounts:  National Income, Expenditure and Product, as well as information obtained from the media and industry associations.

Table 9.5 Annual gross value added by industry - Manufacturing (Division C) except ANZSIC Subdivisions 16 (Printing), 17 (Petroleum, coal, chemical and rubber products manufacturing) and 18 (Basic chemical and chemical manufacturing)
Item Comment
Current prices
  Output
   

The Economic Activity Survey is the main data sources used to derive output.

Market output is measured as sales of goods and services plus changes in inventories of finished goods and work-in-progress. It is derived for non-financial corporations and household institutional units.

The following adjustments are also included to obtain output:

  • understatement of income;
  • output for own final use in the form of own-account computer software and R&D;
  • output of electricity produced for own intermediate use; and
  • off-June year reporting.
  Output – product level
    Product estimates for both primary and secondary production at the industry level are modelled based on a variety of sources. These sources include, but are not restricted to, the complementary estimates program, extrapolated estimates based on the previous year’s estimates, case study information, the distribution from the latest Input-Output tables and the assumption that the products produced are primary to activities of the ANZSIC class reporting the activity.
  Intermediate use
   

The Economic Activity Survey is the main data source used to derive intermediate use.

Intermediate use consists of the value of goods and services consumed as inputs in the production of output. It is derived for non-financial corporations, households and NPISH units.

The following adjustments are also included to obtain intermediate use:

  • overstatement of expenses;
  • output of electricity produced for own intermediate use;
  • off-June year reporting;
  • FISIM; and
  • insurance service charge.
  Gross value added
    Output less intermediate use.
  Volume measures
   

Derived using the double deflation method for value added.

The first preliminary estimate is confronted with the sum of the four quarters volume estimate published in Australian National Accounts:  National Income, Expenditure and Product.

Table 9.6 Annual gross value added by industry - Printing and recording media (ANZSIC Subdivision 16)
Item Comment
Current prices
  Output
   

The Economic Activity Survey and Government Finance Statistics are the main data sources used to derive output.

Market output is measured as sales of goods and services plus changes in inventories of finished goods and work-in-progress. It is derived for non-financial corporations and household institutional units.

Government Finance Statistics data relating to gross expenditure by government classified according to purpose are used to derive government output by industry. Purpose categories are used as a proxy for both product and industry, with ratios derived from historical input and output data used to allocate each purpose category to product. Primary products are aggregated to derive industry data.

The following adjustments are also included to obtain output:

  • understatement of income;
  • output for own final use in the form of own-account computer software and R&D;
  • output of electricity produced for own intermediate use; and
  • off-June year reporting.
  Output – product level
    Product estimates for both primary and secondary production at the industry level are modelled based on a variety of sources. These sources include, but are not restricted to, extrapolated estimates based on the previous year's estimates, case study information, the distribution from the latest Input-Output tables and the assumption that the products produced are primary to activities of the ANZSIC class reporting the activity.
  Intermediate use
   

The Economic Activity Survey is the main data source used to derive intermediate use. General government intermediate use is derived residually with the components coming from various sources; namely, the Survey of Employment and Earnings, Government Finance Statistics and the Perpetual Inventory Method.

Intermediate use consists of the value of goods and services consumed as inputs in the production of output. It is derived for non-financial corporations, households and NPISH units.

General government intermediate use is included and is derived as the general government estimates for gross output less compensation of employees less consumption of fixed capital.

The following adjustments are also included to obtain intermediate use:

  • overstatement of expenses;
  • output of electricity produced for own intermediate use;
  • off-June year reporting;
  • FISIM; and
  • insurance service charge.
  Gross value added
    Output less intermediate use.
  Volume measures
   

Derived using the double deflation method for value added.

The first preliminary estimate is confronted with the sum of the four quarters volume estimate published in Australian National Accounts:  National Income, Expenditure and Product.

Table 9.7 Annual gross value added by industry - Petroleum, coal, chemical and rubber products manufacturing (ANZSIC Subdivision 17)
Item Comment
Current prices
  Output
   

The Economic Activity Survey and the Energy Account are the main data sources used to derive output.

Market output is measured as sales of goods and services plus changes in inventories of finished goods and work-in-progress. It is derived for non-financial corporations and household institutional units.

The following adjustments are also included to obtain output:

  • understatement of income;
  • output for own final use in the form of own-account computer software and R&D;
  • output of electricity produced for own intermediate use; and
  • off-June year reporting.
  Output – product level
    Product estimates for both primary and secondary production at the industry level are modelled based on a variety of sources. These sources include, but are not restricted to, extrapolated estimates based on the previous year's estimates, case study information, the distribution from the latest Input-Output tables and the assumption that the products produced are primary to activities of the ANZSIC class reporting the activity.
  Intermediate use
 

 

The Economic Activity Survey and the Energy Account are the main data sources used to derive intermediate use.

Intermediate use consists of the value of goods and services consumed as inputs in the production of output. It is derived for non-financial corporations, households and NPISH units.

The following adjustments are also included to obtain intermediate use:

  • overstatement of expenses;
  • output of electricity produced for own intermediate use;
  • off-June year reporting;
  • FISIM; and
  • insurance service charge.
  Gross value added
    Output less intermediate use.
  Volume measures
   

Derived using the double deflation method for value added.

The annual volume is confronted with the sum of the four quarters volume estimate published in Australian National Accounts:  National Income, Expenditure and Product, as well as information obtained from the media and industry associations.

For this industry, volume data are also obtained from the Department of Industry, Science, Energy and Resources.

Table 9.8 Annual gross value added by industry - Basic chemical and chemical manufacturing (ANZSIC Subdivision 18)
Item Comment
Output
 

The Economic Activity Survey and Government Finance Statistics are the main data sources used to derive output.

Market output is measured as sales of goods and services plus changes in inventories of finished goods and work-in-progress. It is derived for non-financial corporations and household institutional units.

Government Finance Statistics data relating to gross expenditure by government classified according to purpose are used to derive government output by industry. Purpose categories are used as a proxy for both product and industry, with ratios derived from historical input and output data used to allocate each purpose category to product. Primary products are aggregated to derive industry data.

The following adjustments are also included to obtain output:

  • understatement of income;
  • output for own final use in the form of own-account computer software and R&D;
  • output of electricity produced for own intermediate use; and
  • off-June year reporting.
Output – product level
  Product estimates for both primary and secondary production at the industry level are modelled based on a variety of sources. These sources include, but are not restricted to, extrapolated estimates based on the previous year's estimates, the distribution from the latest Input-Output tables and the assumption that the products produced are primary to activities of the ANZSIC class reporting the activity.
Intermediate use
 

The Economic Activity Survey is the main data source used to derive intermediate use. General government intermediate use is derived residually with the components coming from various sources; namely, the Survey of Employment and Earnings, Government Finance Statistics and the Perpetual Inventory Method.

Intermediate use consists of the value of goods and services consumed as inputs in the production of output. It is derived for non-financial corporations, households and NPISH units.

General government intermediate use is included and is derived as the general government estimates for gross output less compensation of employees less consumption of fixed capital.

The following adjustments are also included to obtain intermediate use:

  • overstatement of expenses;
  • off-June year reporting;
  • output of electricity produced for own intermediate use; and
  • FISIM; and
  • insurance service charge.
Gross value added
  Output less intermediate use.
Volume measures
 

Derived using the double deflation method for value added.

The annual volume is confronted with the sum of the four quarters volume estimate published in Australian National Accounts:  National Income, Expenditure and Product, as well as information obtained from the media and industry associations.

For this industry, volume data are also obtained from the Department of Industry and Australian Institute of Petroleum (AIP).

Table 9.9 Annual gross value added by industry - Electricity supply (ANZSIC Subdivision 26)
Item Comment
Current prices
  Output
   

The Economic Activity Survey and the Energy Account are the main data sources used to derive output.

Market output is measured as sales of goods and services plus changes in inventories of finished goods and work-in-progress. It is derived for non-financial corporations and household institutional units.

Estimates are added for brown coal produced and used by electricity generators imputed from the ABS Energy, Water and Environment Management Survey.

The following adjustments are also included to obtain output:

  • understatement of income;
  • output for own final use in the form of own-account computer software and R&D;
  • output of electricity produced for own intermediate use; and
  • off-June year reporting.
  Output – product level
    Product estimates for both primary and secondary production at the industry level are modelled based on a variety of sources. These sources include, but are not restricted to, extrapolated estimates based on the previous year's estimates, case study information, the distribution from the latest Input-Output tables and the assumption that the products produced are primary to activities of the ANZSIC class reporting the activity.
  Intermediate use
   

The Economic Activity Survey and the Energy Account are the main data sources used to derive intermediate use.

Intermediate use consists of the value of goods and services consumed as inputs in the production of output. It is derived for non-financial corporations, households and NPISH units.

Estimates are added for brown coal produced and used by electricity generators imputed from the ABS Energy, Water and Environment Management Survey.

The following adjustments are also included to obtain intermediate use:

  • overstatement of expenses;
  • output of electricity produced for own intermediate use;
  • off-June year reporting;
  • FISIM; and
  • insurance service charge.
  Gross value added
    Output less intermediate use.
  Volume measures
   

Derived using the double deflation method for value added.

The annual volume is confronted with the sum of the four quarters volume estimate published in Australian National Accounts:  National Income, Expenditure and Product, as well as information obtained from the media and industry associations.

For this industry, volume data are also obtained from the Energy Supply Association of Australia and the Bureau of Resources and Energy Economics.

Table 9.10 Annual gross value added by industry - Gas supply (ANZSIC Subdivision 27)
Item Comment
Current prices
  Output
   

The Economic Activity Survey is the main data source used to derive output.

Market output is measured as sales of goods and services plus changes in inventories of finished goods and work-in-progress. It is derived for non-financial corporations and household institutional units.

The following adjustments are also included to obtain output:

  • understatement of income;
  • output for own final use in the form of own-account computer software and R&D;
  • output of electricity produced for own intermediate use; and
  • off-June year reporting.
  Output – product level
    Product estimates for both primary and secondary production at the industry level are modelled based on a variety of sources. These sources include, but are not restricted to, extrapolated estimates based on the previous year's estimates, case study information, the distribution from the latest Input-Output tables and the assumption that the products produced are primary to activities of the ANZSIC class reporting the activity.
  Intermediate use
 

 

The Economic Activity Survey is the main data source used to derive intermediate use.

Intermediate use consists of the value of goods and services consumed as inputs in the production of output. It is derived for non-financial corporations, households and NPISH units.

The following adjustments are also included to obtain intermediate use:

  • overstatement of expenses;
  • output of electricity produced for own intermediate use;
  • off-June year reporting;
  • FISIM; and
  • insurance service charge.
  Gross value added
    Output less intermediate use.
  Volume measures
   

Derived using the double deflation method for value added.

The annual volume is confronted with the sum of the four quarters volume estimate published in Australian National Accounts:  National Income, Expenditure and Product, as well as information obtained from the media and industry associations.

Table 9.11 Annual gross value added by industry - Water supply, sewerage and drainages services (ANZSIC Subdivision 28)
Item Comment
Output
 

The Water Supply and Sewage Services Survey and the Economic Activity Survey are the main data sources used to derive output for both the private and public sectors.

Market output is measured as sales of goods and services plus changes in inventories of finished goods and work-in-progress. It is derived for non-financial corporations and household institutional units.

The following adjustments are also included to obtain output:

  • understatement of income;
  • output for own final use in the form of own-account computer software and R&D;
  • output of electricity produced for own intermediate use; and
  • off-June year reporting.
Output – product level
 

Product estimates for both primary and secondary production at the industry level are modelled based on a variety of sources. These sources include, but are not restricted to, extrapolated estimates based on the previous year's estimates, the distribution from the latest Input-Output tables and the assumption that the products produced are primary to activities of the ANZSIC class reporting the activity.

Government Finance Statistics data is also used to allocate a share of the output to the general government consumption of fixed capital.

Intermediate use
 

The Economic Activity Survey is the main data source used to derive intermediate use. In this industry, General government units are in scope of the Economic activity survey and therefore Government finance statistics data is not required. However, due to the secondary activities of these general government units, data on expenses from the Water Supply and Sewage Services Survey is examined to assess Supply-Use balancing process.

Intermediate use consists of the value of goods and services consumed as inputs in the production of output. It is derived for non-financial corporations, general government, households and NPISH units.

The following adjustments are also included to obtain intermediate use:

  • overstatement of expenses;
  • output of electricity produced for own intermediate use;
  • off-June year reporting;
  • FISIM; and
  • insurance service charge.
Gross value added
  Output less intermediate use.
Volume measures
 

Derived using the double deflation method for value added.

The annual volume is confronted with the sum of the four quarters volume estimate published in Australian National Accounts:  National Income, Expenditure and Product, as well as information obtained from media and industry associations.

Volume data for this industry are also Water Supply and Sewage Services Survey, and from the National Water Commission for confrontation and analysis purposes. Noting the concept of crown water, this industry is treated as a Service-producing industry, a deviation from SNA 2008 recommendations as a result of Australia’s water laws, so industry volumes will not always align with physical consumption rates.

Table 9.12 Annual gross value added by industry - Waste collection, treatment and disposal services (ANZSIC Subdivision 29)
Item Comment
Output
 

The Economic Activity Survey and Government Finance Statistics and the main data sources used to derive output.

Market output is measured as sales of goods and services plus changes in inventories of finished goods and work-in-progress. It is derived for non-financial corporations and household institutional units.

Government Finance Statistics data relating to gross expenditure by government classified according to purpose are used to derive government output by industry. Purpose categories are used as a proxy for both product and industry, with ratios derived from historical input and output data used to allocate each purpose category to product. Primary products are aggregated to derive industry data.

The following adjustments are also included to obtain output:

  • understatement of income;
  • output for own final use in the form of own-account computer software and R&D;
  • output of electricity produced for own intermediate use; and
  • off-June year reporting.
Output – product level
  Product estimates for both primary and secondary production at the industry level are modelled based on a variety of sources. These sources include, but are not restricted to, extrapolated estimates based on the previous year's estimates, the distribution from the latest Input-Output tables and the assumption that the products produced are primary to activities of the ANZSIC class reporting the activity.
Intermediate use
 

The Economic Activity Survey is the main data source used to derive intermediate use. In this industry, General government intermediate use is derived residually with the components coming from Government Finance Statistics, the Survey of Employment and Earnings and the Perpetual Inventory Method.

Intermediate use consists of the value of goods and services consumed as inputs in the production of output. It is derived for non-financial corporations, general government, households and NPISH units.

General government intermediate use is included and is derived as the general government estimates for gross output less compensation of employees less consumption of fixed capital.

The following adjustments are also included to obtain intermediate use:

  • overstatement of expenses;
  • output of electricity produced for own intermediate use;
  • off-June year reporting;
  • FISIM; and
  • insurance service charge.
Gross value added
  Output less intermediate use.
Volume measures

 

Derived using the double deflation method for value added.

The annual volume is confronted with the sum of the four quarters volume estimate published in Australian National Accounts:  National Income, Expenditure and Product, as well as information obtained from media and industry associations.

Table 9.13 Annual gross value by industry - Construction (ANZSIC Division E)

Item

Comment

Current prices
  Output
   

The Economic Activity Survey is the main data source used to derive output for the Construction industry.

Market output is measured as sales of goods and services plus changes in inventories of finished goods and work-in-progress. It is derived for non-financial corporations and household institutional units.

In addition to this, output for construction activity that is out of scope of the Economic Activity Survey is included. This additional output relates to owner builders of new houses, alterations and additions and general government construction activity.

The output for owner-builders of new houses is calculated by using the proportion of owner-builder activity to construction activity derived from the ABS publication, Private Sector Construction Industry, Australia, and applying this to the construction of new houses from the ABS publication, Building Activity, Australia.

In order to calculate the output for owner builder alterations and additions, two components of alterations and additions are derived:

  • Alterations and additions undertaken by enterprises within the construction industry – the estimate from the publication, Private Sector Construction Industry, Australia is rolled forward using indicators from another ABS publication, Building Activity, Australia.
  • Alterations and additions undertaken by owner builders – an estimate derived using an independent non-ABS estimate of the value of alterations and additions, as well as ratios from the publication, Private Sector Construction Industry, Australia, are is rolled forward using indicators from the ABS publication, Building Activity, Australia. This is confronted with the ABS publication, Household Expenditure Survey, Australia: Summary of Results.

An adjustment to the output of residential construction is made to remove the value of land from sales of house and land packages. This adjustment is the percentage of land value to sales of residential construction derived from the ABS publication, Private Sector Construction Industry, Australia and is applied to residential construction.

The construction output for the general government sector is estimated using the ABS publication, Engineering Construction Activity, Australia. Total engineering construction by the public sector for the public sector (less engineering construction for the telecommunications and electricity industries) is added to total construction output.

General government consumption of fixed capital is also included in output sourced from the Perpetual Inventory Method.

The following adjustments are also included to obtain output:

  • understatement of income;
  • output for own final use in the form of own-account computer software and R&D;
  • output of electricity produced for own intermediate use; and
  • off-June year reporting.
  Output – product level
    Industry ANZSIC subdivision product estimates for primary and secondary product production are modelled by using the following ABS publications:  Building Activity, Australia; Engineering Construction Activity, Australia; and Private Sector Construction Industry, Australia.
  Intermediate use
 

 

The Economic Activity Survey is the main data source used to derive intermediate use. General government intermediate use is derived residually with the components coming from various sources; namely, the Survey of Employment and Earnings, Government Finance Statistics and the Perpetual Inventory Method.

Intermediate use consists of the value of goods and services consumed as inputs in the production of output. It is derived for non-financial corporations, households and NPISH units.

General government intermediate use is included and is derived as the general government estimates for gross output less compensation of employees less consumption of fixed capital.

The following adjustments are also included to obtain intermediate use:

  • overstatement of expenses;
  • output of electricity produced for own intermediate use;
  • off-June year reporting;
  • FISIM; and
  • insurance service charge.
  Gross value added
    Output less intermediate use.
  Volume measures
 

 

Derived using the double deflation method for value added.

The first preliminary estimate is confronted with the sum of the four quarters volume estimate published in Australian National Accounts:  National Income, Expenditure and Product.

Table 9.14 Annual gross value added by industry - Wholesale trade (ANZSIC Division F)
Item Comment
Current prices
  Output
   

The Economic Activity Survey is the main data source used to derive output.

The output of wholesale trade services is equal to the trade margin realised on the goods sold. The margin is the value of sales less the value of the goods purchased for resale.

The following adjustments are also included to obtain output:

  • understatement of income;
  • output for own final use in the form of own-account computer software and R&D;
  • output of electricity produced for own intermediate use; and
  • off-June year reporting.
  Output – product level
    Industry ANZSIC subdivision product estimates for primary and secondary product production are modelled based on product level data from the Economic Activity Survey, and periodic industry surveys, such as the Retail and Wholesale Industries Surveys.
  Intermediate use
   

The Economic Activity Survey is the main data source used to derive intermediate use.

Intermediate use consists of the value of goods and services consumed as inputs in the production of output. It is derived from the Economic Activity Survey for non-financial corporations, households and NPISH units.

The following adjustments are also included to obtain intermediate use:

  • overstatement of expenses;
  • output of electricity produced for own intermediate use;
  • off-June year reporting;
  • FISIM; and
  • insurance service charge.
  Gross value added
    Output less intermediate use.
  Volume measures
   

Derived using the double deflation method for value added.

The first preliminary estimate is confronted with the sum of the four quarters volume estimate published in Australian National Accounts:  National Income, Expenditure and Product.

Table 9.15 Annual gross value added by industry - Retail trade (ANZSIC Division G)
Item Comment
Current prices
  Output
   

The Economic Activity Survey is the main data source used to derive output.

The output of retail trade services is equal to the trade margin realised on the goods sold. The margin is the value of sales less the value of the goods purchased for resale.

The following adjustments are also included to obtain output:

  • understatement of income;
  • output for own final use in the form of own-account computer software and R&D;
  • output of electricity produced for own intermediate use; and
  • off-June year reporting.
  Output – product level
    Industry ANZSIC subdivision product estimates for primary and secondary product production are modelled based on product level data from the Economic Activity Survey, and periodic industry surveys, such as the Retail and Wholesale Industries Surveys.
  Intermediate use
   

The Economic Activity Survey is the main data source used to derive intermediate use.

Intermediate use consists of the value of goods and services consumed as inputs in the production of output. It is derived for non-financial corporations, households and NPISH units.

The following adjustments are also included to obtain intermediate use:

  • overstatement of expenses;
  • output of electricity produced for own intermediate use;
  • off-June year reporting;
  • FISIM; and
  • insurance service charge.
  Gross value added
    Output less intermediate use.
  Volume measures
   

Derived using the double deflation method for value added.

The first preliminary estimate is confronted with the sum of the four quarters volume estimate published in Australian National Accounts:  National Income, Expenditure and Product.

Table 9.16 Annual gross value added by industry - Accommodation and food services (ANZSIC Division H)
Item Comment
Current prices
  Output
   

The Economic Activity Survey and Government Finance Statistics (for Accommodation services) are the main data sources used to derive output.

Market output is measured as sales of goods and services plus changes in inventories of finished goods and work-in-progress. It is derived for non-financial corporations and household institutional units classified to Accommodation services (ANZSIC Subdivision 44).

Government Finance Statistics data relating to gross expenditure by government classified according to purpose are used to derive government output by industry. Purpose categories are used as a proxy for both product and industry, with ratios derived from historical input and output data used to allocate each purpose category to product. Primary products are aggregated to derive industry data.

The following adjustments are also included to obtain output:

  • understatement of income;
  • output for own final use in the form of own-account computer software and R&D;
  • output of electricity produced for own intermediate use; and
  • off-June year reporting.
  Output – product level
    Industry ANZSIC subdivision product estimates for primary and secondary product production are modelled based on product level data from Economic Activity Survey, and periodic industry surveys, published as Clubs, Pubs, Taverns and Bars, Australia; Cafes, Restaurants and Catering Services, Australia; and Accommodation Services, Australia.
  Intermediate use
   

The Economic Activity Survey is the main data source used to derive intermediate use. General government intermediate use is derived residually with the components coming from various sources; namely, the Survey of Employment and Earnings, Government Finance Statistics and the Perpetual Inventory Method.

Intermediate use consists of the value of goods and services consumed as inputs in the production of output. It is derived for non-financial corporations, households and NPISH units.

General government intermediate use is included and is derived as the general government estimates for gross output less compensation of employees less consumption of fixed capital.

The following adjustments are also included to obtain intermediate use:

  • overstatement of expenses;
  • output of electricity produced for own intermediate use;
  • off-June year reporting;
  • FISIM; and
  • insurance service charge.
  Gross value added
    Output less intermediate use.
  Volume measures
   

Derived using the double deflation method for value added.

The first preliminary estimate is confronted with the sum of the four quarters volume estimate published in Australian National Accounts:  National Income, Expenditure and Product.

Table 9.17 Annual gross value added by industry - Road transport (ANZSIC Subdivision 46)
Item Comment
Current prices
  Output
   

The Economic Activity Survey and Government Finance Statistics are the main data sources used to derive output.

Market output is measured as sales of goods and services plus changes in inventories of finished goods and work-in-progress. It is derived for non-financial corporations and household institutional units.

Government Finance Statistics data relating to gross expenditure by government classified according to purpose are used to derive government output by industry. Purpose categories are used as a proxy for both product and industry, with ratios derived from historical input and output data used to allocate each purpose category to product. Primary products are aggregated to derive industry data.

The following adjustments are also included to obtain output:

  • understatement of income;
  • output for own final use in the form of own-account computer software and R&D;
  • output of electricity produced for own intermediate use; and
  • off-June year reporting.
  Output – product level
    Product estimates for both primary and secondary production at the industry level are modelled based on a variety of sources. These sources include, but are not restricted to, extrapolated estimates based on the previous year's estimates, the distribution from the latest Input-Output tables and the assumption that the products produced are primary to activities of the ANZSIC class reporting the activity.
  Intermediate use
   

The Economic Activity Survey is the main data source used to derive intermediate use. General government intermediate use is derived residually with the components coming from various sources; namely, the Survey of Employment and Earnings, Government Finance Statistics and the Perpetual Inventory Method.

Intermediate use consists of the value of goods and services consumed as inputs in the production of output. It is derived for non-financial corporations, households and NPISH units.

General government intermediate use is included and is derived as the general government estimates for gross output less compensation of employees less consumption of fixed capital.

The following adjustments are also included to obtain intermediate use:

  • overstatement of expenses;
  • output of electricity produced for own intermediate use;
  • off-June year reporting;
  • FISIM; and
  • insurance service charge.
  Gross value added
    Output less intermediate use.
  Volume measures
   

Derived using the double deflation method for value added.

The first preliminary estimate is confronted with the sum of the four quarters volume estimate published in Australian National Accounts:  National Income, Expenditure and Product.

Table 9.18 Annual gross value added by industry in current prices - Air and space transport (ANZSIC Subdivision 49)
Item Comment
Current prices
  Output
   

The Economic Activity Survey is the main data source used to derive output.

Market output is measured as sales of goods and services plus changes in inventories of finished goods and work-in-progress. It is derived for non-financial corporations and household institutional units.

The following adjustments are also included to obtain output:

  • understatement of income;
  • output for own final use in the form of own-account computer software and R&D;
  • output of electricity produced for own intermediate use; and
  • off-June year reporting.
  Output – product level
    Product estimates for both primary and secondary production at the industry level are modelled based on a variety of sources. These sources include, but are not restricted to, extrapolated estimates based on the previous year's estimates, case study information, the distribution from the latest Input-Output tables and the assumption that the products produced are primary to activities of the ANZSIC class reporting the activity.
  Intermediate use
   

The Economic Activity Survey is the main data source used to derive intermediate use.

Intermediate use consists of the value of goods and services consumed as inputs in the production of output. It is derived for non-financial corporations, households and NPISH units.

The following adjustments are also included to obtain intermediate use:

  • overstatement of expenses;
  • output of electricity produced for own intermediate use;
  • off-June year reporting;
  • FISIM; and
  • insurance service charge.
  Gross value added
    Output less intermediate use.
  Volume measures
   

Derived using the double deflation method for value added.

The first preliminary estimate is confronted with the sum of the four quarters volume estimate published in Australian National Accounts:  National Income, Expenditure and Product.

Table 9.19 Annual gross value added by industry - Rail transport (ANZSIC Subdivision 47), Water transport (ANZSIC Subdivision 48), and Other transport (ANZSIC Subdivision 50)
Item Comment
Current prices
  Output
   

The Economic Activity Survey and Government Finance Statistics (for Other transport services) are the main data sources used to derive output.

Market output is measured as sales of goods and services plus changes in inventories of finished goods and work-in-progress. It is derived for non-financial corporations and household institutional units.

Government Finance Statistics data relating to gross expenditure by government classified according to purpose are used to derive government output by industry. Purpose categories are used as a proxy for both product and industry, with ratios derived from historical input and output data used to allocate each purpose category to product and primary products are aggregated to derive industry data.

The following adjustments are also included to obtain output:

  • understatement of income;
  • output for own final use in the form of own-account computer software and R&D;
  • output of electricity produced for own intermediate use; and
  • off-June year reporting.
  Output – product level
    Product estimates for both primary and secondary production at the industry level are modelled based on a variety of sources. These sources include, but are not restricted to, extrapolated estimates based on the previous year's estimates, the distribution from the latest Input-Output tables and the assumption that the products produced are primary to activities of the ANZSIC class reporting the activity.
  Intermediate use
   

The Economic Activity Survey is the main data source used to derive intermediate use. General government intermediate use is derived residually with the components coming from various sources; namely, the Survey of Employment and Earnings, Government Finance Statistics and the Perpetual Inventory Method.

Intermediate use consists of the value of goods and services consumed as inputs in the production of output. It is derived for non-financial corporations, households and NPISH units.

General government intermediate use is included and is derived as the general government estimates for gross output less compensation of employees less consumption of fixed capital.

The following adjustments are also included to obtain intermediate use:

  • overstatement of expenses;
  • output of electricity produced for own intermediate use;
  • off-June year reporting;
  • FISIM; and
  • insurance service charge.
  Gross value added
    Output less intermediate use.
  Volume measures
   

Derived using the double deflation method for value added.

The first preliminary estimate is confronted with the sum of the four quarters volume estimate published in Australian National Accounts:  National Income, Expenditure and Product.

Table 9.20 Annual gross value added by industry - Postal and courier pick-up and delivery services (ANZSIC Subdivision 51), Transport support services (ANZSIC Subdivision 52), and Warehousing and storage services (ANZSIC Subdivision 53)
Item Comment
Current prices
  Output
   

The Economic Activity Survey and Government Finance Statistics (for Transport support services) are the main data sources used to derive output.

Market output is measured as sales of goods and services plus changes in inventories of finished goods and work-in-progress. It is derived for non-financial corporations and household institutional units.

Government Finance Statistics data relating to gross expenditure by government classified according to purpose are used to derive government output by industry. Purpose categories are used as a proxy for both product and industry, with ratios derived from historical input and output data used to allocate each purpose category to product. Primary products are aggregated to derive industry data.

The following adjustments are also included to obtain output:

  • understatement of income;
  • output for own final use in the form of own-account computer software and R&D;
  • output of electricity produced for own intermediate use; and
  • off-June year reporting.
  Output – product level
    Product estimates for both primary and secondary production at the industry level are modelled based on a variety of sources. These sources include, but are not restricted to, extrapolated estimates based on the previous year's estimates, the distribution from the latest Input-Output tables and the assumption that the products produced are primary to activities of the ANZSIC class reporting the activity.
  Intermediate use
   

The Economic Activity Survey is the main data source used to derive intermediate use. General government intermediate use is derived residually with the components coming from various sources; namely, the Survey of Employment and Earnings, Government Finance Statistics and the Perpetual Inventory Method.

Intermediate use consists of the value of goods and services consumed as inputs in the production of output. It is derived for non-financial corporations, households and NPISH units.

General government intermediate use is included and is derived as the general government estimates for gross output less compensation of employees less consumption of fixed capital.

The following adjustments are also included to obtain intermediate use:

  • overstatement of expenses;
  • output of electricity produced for own intermediate use;
  • off-June year reporting;
  • FISIM; and
  • insurance service charge.
  Gross value added
    Output less intermediate use.
  Volume measures
   

Derived using the double deflation method for value added.

The first preliminary estimate is confronted with the sum of the four quarters volume estimate published in Australian National Accounts:  National Income, Expenditure and Product.

Table 9.21 Annual gross value added by industry - Information media and telecommunications (ANZSIC Division J)
Item Comment
Current prices
  Output
   

The Economic Activity Survey and Government Finance Statistics are the main data sources used to derive output for motion picture and video production including postproduction, free to air broadcasting services, wired and mobile telecommunications networks, library and archive services.

Market output is measured as sales of goods and services plus changes in inventories of finished goods and work-in-progress. It is derived for non-financial corporations and household institutional units.

Non-market output is measured as the costs of producing outputs including compensation of employees, the cost of purchased goods and services used in production, other taxes (less subsidies) on production and consumption of fixed capital. It is derived for general government and NPISH units.

GFS data relating to gross expenditure by government classified according to purpose are used to derive government output by industry. Purpose categories are used as a proxy for both product and industry, with ratios derived from historical input and output data used to allocate each purpose category to product. Primary products are aggregated to derive industry data.

The following adjustments are also included to obtain output:

  • understatement of income;
  • output for own final use in the form of own-account computer software and R&D;
  • output of electricity produced for own intermediate use; and
  • off-June year reporting.
  Output – product level
    Product estimates for both primary and secondary production at the industry level are modelled based on a variety of sources. These sources include, but are not restricted to, extrapolated estimates based on the previous year's estimates, case study information, the distribution from the latest Input-Output tables and the assumption that the products produced are primary to activities of the ANZSIC class reporting the activity.
  Intermediate use
   

The Economic Activity Survey is the main data source used to derive intermediate use. General government intermediate use is derived residually with the components coming from various sources; namely, the Survey of Employment and Earnings, Government Finance Statistics and the Perpetual Inventory Method.

Intermediate use consists of the value of goods and services consumed as inputs in the production of output. It is derived for non-financial corporations, households and NPISH units.

General government intermediate use is included and is derived as the general government estimates for gross output less compensation of employees less consumption of fixed capital.

The following adjustments are also included to obtain intermediate use:

  • overstatement of expenses;
  • output of electricity produced for own intermediate use;
  • off-June year reporting;
  • FISIM; and
  • insurance service charge.
  Gross value added
    Output less intermediate use.
  Volume measures
   

Derived using the double deflation method for value added.

The first preliminary estimate is confronted with the sum of the four quarters volume estimate published in Australian National Accounts:  National Income, Expenditure and Product.

Table 9.22 Annual gross value added by industry - Finance (ANZSIC Subdivision 62)
Item Comment
Current prices
  Output
   

Balance sheet, income and expenditure and interest rate information are used to compile the output for the following financial intermediaries – the Reserve Bank of Australia (RBA); banks; other depository corporations (credit unions, building societies, cash management trusts, registered financial corporations); central borrowing authorities; securitisers and financial intermediaries not elsewhere classified (e.g. public unit trusts excluding property trusts; public development authorities; investment companies; common funds; co-operative housing societies; public housing schemes; and other financial corporations).

The following outlines the data sources used to estimate the various components of output:

Balance sheets:

  • ABS publications: Australian National Accounts:  Finance and Wealth; Assets and Liabilities of Australian Securitisers; Managed Funds, Australia; and the Australian System of National Accounts for capital stock estimates;
  • RBA: Statistical Bulletin; and
  • Australian Prudential Regulatory Authority (APRA) Monthly Bank Statement of Financial Position for detailed breakdown for bank loans and deposits;

Income and expenditure:

  • ABS publications: Balance of Payments and International Investment Position; Annual Statistics on Financial Institutions has ceased but the data in this publication still underpins estimates);
  • ABS collections: Economic Activity Survey; Quarterly Survey of Financial Information; and Government Finance Statistics;
  • RBA: Annual Report; Financial Stability Report (6 monthly); and Statement of Monetary Policy (quarterly);
  • Suite of Australian Prudential Regulatory Authority (APRA) forms - Quarterly Bank Statement of Financial Performance and Quarterly Registered Financial Corporations Statement of Financial Performance;
  • APRA publications: Quarterly Bank Performance Statistics; Quarterly Credit Unions; and Building Societies Performance Statistics; and
  • ad hoc reports: annual reports for small subsectors such as listed investment companies, bank annual reports and private consultant banking reports.

Interest rates:

  • RBA Statistical Bulletin.

Output is calculated as:

    FISIM imputation
    plus imputed output of financial intermediaries not elsewhere classified
    plus imputed output of RBA
    plus explicit charges
    plus gross non-land rent and other service income (excludes property income).

The following adjustment is also included to obtain output:

  • own-account computer software and R&D.
  FISIM imputation
 

 

To compile the FISIM imputed estimate for all financial intermediaries (except the RBA and financial intermediaries n.e.c.), total interest receivable and payable estimates by financial instruments (i.e. deposits, bills of exchange, one-name paper, bonds and loans) and counterparty sector and subsector flows for the following six sectors and subsectors are compiled:

  • Rest of the world;
  • Reserve Bank Of Australia;
  • Banks;
  • Other depository corporations;
  • Central borrowing authorities; and
  • Securitisers.

Three datasets are required to compile the interest flows; namely:

  1. total interest payable and receivable;
  2. interest rates for relevant financial instruments of various sectors and subsectors; and
  3. balance sheets for the six sectors and subsectors.

The next step is to calculate FISIM for loans and deposits (banks and other depository corporations) and for loans (securitisers and central borrowing authorities); that is:

  • for banks and other depository corporations, FISIM is derived as follows:
[(counterparty loan rate – reference rate) * counterparty stock of loans] + [(reference rate – counterparty deposit rate) * counterparty stock of deposits]

where the reference rate is mid-point between the average interest rate on loans and the average interest rate on deposits.

  • for securitisers and central borrowing authorities, FISIM is derived as follows:
[(counterparty loan rate – reference rate) * counterparty stock of loans]

where the reference rate is weighted average bond yield.

The above calculations are undertaken in separate loan and deposit FISIM tables for each of the four groups of FISIM generating institutions (banks, other depository corporations, central borrowing authorities and securitisers). Each table captures the counterparty sector and subsector loan and deposit balances, their respective interest flows and interest margins (i.e. reference rate – deposit rate, or loan rate – reference rate) and the subsequent FISIM estimates.

  Imputed output of financial intermediaries not elsewhere classified
    Described in Table 11.6
  Imputed output of the RBA
    Described in Table 11.6
  Explicit charges
    Described in Table 11.6
  Gross non-land rent and other service income (excludes property income)
    Described in Table 11.6
  Output – product level
    Product level estimates for finance services are obtained directly or modelled using the source data outlined above.
  Intermediate use
    Is derived residually from output at basic prices minus industry value added.
  Gross value added
    Sum of gross operating surplus, compensation of employees and other taxes less subsidies on production for the Finance Industry.
  Volume measures
   

The detailed information from the current price FISIM loan and deposit tables for the four groups of financial intermediaries (i.e. banks, other depository corporations, central borrowing authorities and securitisers) are used to construct chain volume measures.

Chain volume FISIM measures are produced for the total, household final consumption expenditure, intermediate use (e.g. ownership of dwellings; general government, etc.), as follows:

  • Constant price estimates of balances (loans and deposits) by counterparty sectors and subsectors are calculated by deflating the current price estimates using the All groups CPI.
  • The deflated loans and deposits are multiplied by the associated interest margin (i.e. reference rate – deposit rate, or loan rate – reference rate) for the previous year to produce estimates of FISIM in prices of the previous year. The estimates in the previous step are summed across the four financial intermediaries to produce Laspeyres chain volume estimates

Volume estimates for exports are derived using the total HFCE implicit price deflator.

Volume estimates for the rest of the Finance and insurance services industry are derived using the double deflation method. The first preliminary estimate is confronted with the sum of the four quarters volume estimate published in Australian National Accounts:  National Income, Expenditure and Product.

Table 9.23 Annual gross value added by industry - Insurance and superannuation funds (ANZSIC Subdivision 63)

Item

Comment

Current prices
  Output
   

Balance sheet, income and expenditure and interest rate information are used to compile the output for pension funds (superannuation), life insurance corporations (including friendly societies) and non-life (general) insurance corporations.

The following outlines the data sources used to estimate the various components of output:

Balance sheets:

  • ABS publications:  Australian National Accounts:  Finance and Wealth; Managed Funds; and Australian System of National Accounts for capital stock estimates;

Income and expenditure:

  • ABS collections:  Quarterly Survey of Financial Information;
  • ABS publications: Balance of Payments and International Investment Position;
  • Australian Prudential Regulatory Authority (APRA) form - Quarterly Superannuation Statement of Financial Performance;
  • APRA publications: Quarterly Superannuation Performance Statistics; Quarterly Life Insurance Performance Statistics; Quarterly General Insurance Performance Statistics; Annual Superannuation Bulletin; Annual Friendly Society Bulletin; Half-Yearly General Insurance Bulletin; and Selected Statistics on General Insurance; General Insurance Supplementary Statistical Tables;
  • Australian Taxation Office (ATO): Self-managed superannuation funds taxation data and website releases; and
  • ad hoc private consultant reports: superannuation actuarial reports and real estate statistics.

Output is calculated as:

Insurance service charge (ISC)
plus explicit charges
plus gross non-land rent
plus non-life insurance business income
plus subsidies.

The following adjustment is also included to obtain output:

  • own-account computer software and R&D.
  Insurance service charge
   

Non-life insurance corporations – estimated as premiums earned plus investment income on the technical reserves less expected claims:

  • premiums earned include direct premiums earned plus inward reinsurance premiums less outward insurance premiums and statutory charges paid;
  • premium supplements represent income earned on the technical reserves of non-life insurance corporations, which consist of unearned premiums (most premiums are paid for a full year in advance) and claims incurred but not yet paid (which arise because of delays in claims being lodged and assessed, and in finalising the payment of claims);
  • premium supplements do not include any income from the investment of insurance corporations' own funds. The proportion of policyholder funds to total assets of non-life insurance corporations is applied to total investment income to derive premium supplements. The interest share of investment income is net of FISIM.

Life insurance corporations – the sum of administrative costs incurred (including investment and labour costs) plus a profit margin; the profit margins is calculated by estimating a proxy return on equity.

Pension funds ­– the sum of administrative costs incurred (including investment and labour costs).

  Explicit charges
    Described in Table 11.7
  Gross non-land rent
    Described in Table 11.7. It is assumed to be applicable only to commercial buildings and infrastructure.
  Output – product level
    Product level estimates for insurance services are obtained directly or modelled using the source data outlined above.
  Intermediate use
    Is derived residually from output at basic prices minus industry value added.
  Gross value added
    Sum of gross operating surplus, compensation of employees and other taxes less subsidies on production for the Insurance Industry.
  Volume measures
   

Derived using the double deflation method for value added.

The first preliminary estimate is confronted with the sum of the four quarters volume estimate published in Australian National Accounts:  National Income, Expenditure and Product.

9.24 Annual gross value added by industry - Auxiliary finance and insurance services (ANZSIC Subdivision 64)
Item Comment
Current prices
  Output
   

The Economic Activity Survey is the main data source used to derive output.

Market output is measured as sales of goods and services plus changes in inventories of finished goods and work-in-progress. It is derived for non-financial corporations and household institutional units.

The following adjustments are also included to obtain output:

  • understatement of income;
  • output for own final use in the form of own-account computer software and R&D;
  • output of electricity produced for own intermediate use; and
  Output – product level
    Industry ANZSIC subdivision product estimates for primary and secondary product production are modelled by using directly measured product levels from Economic Activity Survey, and periodic industry surveys.
  Intermediate use
   

The Economic Activity Survey is the main data source used to derive intermediate use.

Intermediate use consists of the value of goods and services consumed as inputs in the production of output. It is derived for non-financial corporations, households and NPISH units.

The following adjustments are also included to obtain intermediate use:

  • overstatement of expenses;
  • output of electricity produced for own intermediate use;
  • off-June year reporting;
  • FISIM; and
  • insurance service charge.
  Gross value added
    Output less intermediate use.
  Volume measures
   

Derived using the double deflation method for value added.

The first preliminary estimate is confronted with the sum of the four quarters volume estimate published in Australian National Accounts:  National Income, Expenditure and Product.

Table 9.25 Annual gross value added by industry - Rental, hiring and real estate services (ANZSIC Division L)
Item Comment
Current prices
  Output
   

The Economic Activity Survey and Government Finance Statistics are the main data sources used to derive output.

Market output is measured as sales of goods and services plus changes in inventories of finished goods and work-in-progress. It is derived for non-financial corporations and household institutional units.

Government Finance Statistics data relating to gross expenditure by government classified according to purpose are used to derive government output by industry. Purpose categories are used as a proxy for both product and industry, with ratios derived from historical input and output data used to allocate each purpose category to product. Primary products are aggregated to derive industry data.

The following adjustments are also included to obtain output:

  • understatement of income;
  • output for own final use in the form of own-account computer software and R&D;
  • output of electricity produced for own intermediate use; and
  • off-June year reporting.
  Output – product level
    Product estimates for both primary and secondary production at the industry level are modelled based on a variety of sources. These sources include, but are not restricted to, extrapolated estimates based on the previous year's estimates, the distribution from the latest Input-Output tables and the assumption that the products produced are primary to activities of the ANZSIC class reporting the activity.
  Intermediate use
   

The Economic Activity Survey is the main data source used to derive intermediate use. General government intermediate use is derived residually with the components coming from various sources; namely, the Survey of Employment and Earnings, Government Finance Statistics and the Perpetual Inventory Method.

Intermediate use consists of the value of goods and services consumed as inputs in the production of output. It is derived for non-financial corporations, households and NPISH units.

General government intermediate use is included and is derived as the general government estimates for gross output less compensation of employees less consumption of fixed capital.

The following adjustments are also included to obtain intermediate use:

  • overstatement of expenses;
  • output of electricity produced for own intermediate use;
  • off-June year reporting;
  • FISIM; and
  • insurance service charge.
  Gross value added
    Output less intermediate use.
  Volume measures
   

Derived using the double deflation method for value added.

The first preliminary estimate is confronted with the sum of the four quarters volume estimate published in Australian National Accounts:  National Income, Expenditure and Product.

Table 9.26 Annual gross value added by industry - Professional, scientific and technical services (ANZSIC Division M)
Item Comment
Current prices
  Output
   

The Economic Activity Survey and Government Finance Statistics are the main data sources used to derive output.

Market output is measured as sales of goods and services plus changes in inventories of finished goods and work-in-progress. It is derived for non-financial corporations and household institutional units.

Non-market output is measured as the costs of producing outputs including compensation of employees, the cost of purchased goods and services used in production, other taxes (less subsidies) on production and consumption of fixed capital. It is derived for general government and NPISH units.

Government Finance Statistics data relating to gross expenditure by government classified according to purpose are used to derive government output by industry. Purpose categories are used as a proxy for both product and industry, with ratios derived from historical input and output data used to allocate each purpose category to product. Primary products are aggregated to derive industry data.

The following adjustments are also included to obtain output:

  • understatement of income;
  • output for own final use in the form of own-account computer software and R&D;
  • output of electricity produced for own intermediate use; and
  • off-June year reporting.
  Output – product level
    Product estimates for both primary and secondary production at the industry level are modelled based on a variety of sources. These sources include, but are not restricted to, extrapolated estimates based on the previous year's estimates, case study information, the distribution from the latest Input-Output tables and the assumption that the products produced are primary to activities of the ANZSIC class reporting the activity.
  Intermediate use
   

The Economic Activity Survey is the main data source used to derive intermediate use. General government intermediate use is derived residually with the components coming from various sources; namely, the Survey of Employment and Earnings, Government Finance Statistics and the Perpetual Inventory Method.

Intermediate use consists of the value of goods and services consumed as inputs in the production of output. It is derived for non-financial corporations, households and NPISH units.

General government intermediate use is included and is derived as the general government estimates for gross output less compensation of employees less consumption of fixed capital.

The following adjustments are also included to obtain intermediate use:

  • overstatement of expenses;
  • output of electricity produced for own intermediate use;
  • off-June year reporting;
  • FISIM; and
  • insurance service charge.
  Gross value added
    Output less intermediate use.
  Volume measures
   

Derived using the double deflation method for value added.

The first preliminary estimate is confronted with the sum of the four quarters volume estimate published in Australian National Accounts:  National Income, Expenditure and Product.

Table 9.27 Annual gross value added by industry - Administration and support services (ANZSIC Division N)
Item Comment
Current prices
  Output
   

The Economic Activity Survey and Government Finance Statistics are the main data sources used to derive output.

Market output is measured as sales of goods and services plus changes in inventories of finished goods and work-in-progress. It is derived for non-financial corporations and household institutional units.

Non-market output is measured as the costs of producing outputs including compensation of employees, the cost of purchased goods and services used in production, other taxes (less subsidies) on production and consumption of fixed capital. It is derived for general government and NPISH units.

Government Finance Statistics data relating to gross expenditure by government classified according to purpose are used to derive government output by industry. Purpose categories are used as a proxy for both product and industry, with ratios derived from historical input and output data used to allocate each purpose category to product. Primary products are aggregated to derive industry data.

The following adjustments are also included to obtain output:

  • understatement of income, only for Building cleaning, pest control and other support services (ANZSIC Subdivision 73);
  • output for own final use in the form of own-account computer software and R&D;
  • output of electricity produced for own intermediate use; and
  • off-June year reporting.
  Output – product level
    Product estimates for both primary and secondary production at the industry level are modelled based on a variety of sources. These sources include, but are not restricted to, extrapolated estimates based on the previous year's estimates, the distribution from the latest Input-Output tables and the assumption that the products produced are primary to activities of the ANZSIC class reporting the activity.
  Intermediate use
   

The Economic Activity Survey is the main data source used to derive intermediate use. General government intermediate use is derived residually with the components coming from various sources; namely, the Survey of Employment and Earnings, Government Finance Statistics and the Perpetual Inventory Method.

Intermediate use consists of the value of goods and services consumed as inputs in the production of output. It is derived for non-financial corporations, households and NPISH units.

General government intermediate use is included and is derived as the general government estimates for gross output less compensation of employees less consumption of fixed capital.

The following adjustments are also included to obtain intermediate use:

  • overstatement of expenses;
  • output of electricity produced for own intermediate use;
  • off-June year reporting;
  • FISIM; and
  • insurance service charge.
  Gross value added
    Output less intermediate use.
  Volume measures
   

Derived using the double deflation method for value added.

The first preliminary estimate is confronted with the sum of the four quarters volume estimate published in Australian National Accounts:  National Income, Expenditure and Product.

Table 9.28 Annual gross value added by industry - Public administration and safety (ANZSIC Division O)
Item Comment
Current prices
  Output
   

The Economic Activity Survey and Government Finance Statistics are the main data sources used to derive output.

Gross expenditure data taken from Government Finance Statistics, from which industry based data, are derived using a set of proportions derived from historical input and output data and with no secondary production assumed. Government Finance Statistics data are also adjusted to include national accounts data for FISIM, artistic originals and consumption of fixed capital. A consolidation adjustment for payroll tax is also included.

Market output is measured as sales of goods and services plus changes in inventories of finished goods and work-in-progress. It is derived for output of Investigation and security services (ANZSIC Class 7712).

The following adjustments are also included to obtain output:

  • output for own final use in the form of own-account computer software and R&D;
  • output of electricity produced for own intermediate use; and
  • off-June year reporting.
  Output – product level
    Product estimates for both primary and secondary production at the industry level are modelled based on a variety of sources. These sources include, but are not restricted to, extrapolated estimates based on the previous year's estimates, the distribution from the latest Input-Output tables and the assumption that the products produced are primary to activities of the ANZSIC class reporting the activity.
  Intermediate use
   

Output minus total primary inputs (i.e. compensation of employees, gross operating surplus and other taxes less subsidies on production).

Intermediate use consists of the value of goods and services consumed as inputs in the production of output. It is derived for units classified to Investigation and security services (ANZSIC Class 7712).

  Gross value added
    Output less intermediate use.
  Volume measures
   

Derived using the double deflation method for value added.

The first preliminary estimate is confronted with the sum of the four quarters volume estimate published in Australian National Accounts:  National Income, Expenditure and Product.

Table 9.29 Annual gross value added by industry - Education and training (ANZSIC Division P)
Item Comment
Current prices
  Output
   

The Economic Activity Survey and Government Finance Statistics are the main data sources used to derive output.

General government output is the most significant component of output for this industry. Government Finance Statistics data relating to gross expenditure by government classified according to purpose are used to derive government output by industry. Purpose categories are used as a proxy for both product and industry, with ratios derived from historical input and output data used to allocate each purpose category to product. Primary products are aggregated to derive industry data.

Market output is measured as sales of goods and services plus changes in inventories of finished goods and work-in-progress. It is derived for non-financial corporations and household institutional units.

Non-market output is measured as the costs of producing outputs including compensation of employees, the cost of purchased goods and services used in production, other taxes (less subsidies) on production and consumption of fixed capital. It is derived for general government and NPISH units.

The following adjustments are also included to obtain output:

  • understatement of income, only for Building cleaning, pest control and other support services (ANZSIC Subdivision 73);
  • output for own final use in the form of own-account computer software and R&D;
  • output of electricity produced for own intermediate use; and
  • off-June year reporting.
  Output – product level
    Product estimates for both primary and secondary production at the industry level are modelled based on a variety of sources. These sources include, but are not restricted to, extrapolated estimates based on the previous year's estimates, the distribution from the latest Input-Output tables and the assumption that the products produced are primary to activities of the ANZSIC class reporting the activity.
  Intermediate use
   

The Economic Activity Survey is the main data source used to derive intermediate use. General government intermediate use is derived residually with the components coming from various sources; namely, the Survey of Employment and Earnings, Government Finance Statistics and the Perpetual Inventory Method.

Intermediate use consists of the value of goods and services consumed as inputs in the production of output. It is derived for non-financial corporations, households and NPISH units.

General government intermediate use is included and is derived as the general government estimates for gross output less compensation of employees less consumption of fixed capital.

The following adjustments are also included to obtain intermediate use:

  • overstatement of expenses;
  • output of electricity produced for own intermediate use;
  • off-June year reporting;
  • FISIM; and
  • insurance service charge.
  Gross value added
    Output less intermediate use.
  Volume measures
   

Derived using the output volume method for non-market producers.

The output volume method is based on total numbers of students at both private and government schools, student load of universities, course hours for TAFE and other vocational education providers stratified at various levels of education and weighted together by their respective current price value of output.

Student numbers are sourced from the ABS publication, Schools, Australia; annual reports from the departments of Education and Employment for school and university students; and data from the National Centre for Vocational Education Research (NCVER) for vocational students.

Table 9.30 Annual gross value added by industry - Health care and social assistance (ANZSIC Division Q)
Item Comment
Current prices
  Output
   

The industry output consists of significant amounts of both private and public output. The industry output is measured by the demand side approach which sums the intermediate consumption of health and social assistance related products and final demand (i.e. final consumption expenditure, and exports less imports). These are sourced from the Economic Activity Survey; Government Finance Statistics; Household Expenditure Survey; and Pharmaceutical Benefits Scheme (PBS) data from the Commonwealth Department of Health.

The private sector output estimates are based on household final consumption expenditure, intermediate consumption and exports and imports of health care and social assistance related products.

The public sector output estimates are based on the costs of production recorded for government final consumption expenditure on health care and social assistance related products, but before any receipts from sales are netted off.

The following adjustment is also included to obtain output:

  • output for own final use in the form of own-account computer software and R&D; and
  • output of electricity produced for own intermediate use.
  Output – product level
    Product estimates for both primary and secondary production at the industry level are modelled based on a variety of sources. These sources include, but are not restricted to, extrapolated estimates based on the previous year's estimates, case study information, the distribution from the latest Input-Output tables and the assumption that the products produced are primary to activities of the ANZSIC class reporting the activity.
  Intermediate use
    Output minus total primary inputs (i.e. compensation of employees, gross operating surplus and other taxes less subsidies on production).
  Gross value added
    Output less intermediate use.
  Volume measures
   

Derived using the output volume method for non-market producers.

The output volume method is based on private and public hospital separations and number of non-hospital services provided, stratified at various levels of procedure type, and weighted together by their respective current price value of expenditures.

Public and Private Hospital separations by procedure type and average separation costs are sourced from the Australian Institute of Health and Welfare (AIHW) hospital publication. The number of non-hospital services provided and costs are sourced from Medicare, the Private Health Insurance Administration Council and the Productivity Commission (PC) Report on Government Services.

Table 9.31 Annual gross value added by industry - Arts and recreation services (ANZSIC Division R)
Item Comment
Current prices
  Output
   

The Economic Activity Survey, Government Finance Statistics and components of total use are the main data sources used to derive output.

Market output is measured as sales of goods and services plus changes in inventories of finished goods and work-in-progress. It is derived for non-financial corporations and household institutional units.

Non-market output is measured as the costs of producing outputs including compensation of employees, the cost of purchased goods and services used in production, other taxes (less subsidies) on production and consumption of fixed capital. It is derived for general government and NPISH units.

Gambling activity output is calculated by adding household final consumption expenditure, government final consumption expenditure and exports and subtracting imports and taxes on products.

Government Finance Statistics data relating to gross expenditure by government classified according to purpose are used to derive government output by industry. Purpose categories are used as a proxy for both product and industry, with ratios derived from historical input and output data used to allocate each purpose category to product. Primary products are aggregated to derive industry data.

The following adjustments are also included to obtain output:

  • understatement of income;
  • output for own final use in the form of own-account computer software and R&D;
  • output of electricity produced for own intermediate use; and
  • off-June year reporting.
  Output – product level
    Product estimates for both primary and secondary production at the industry level are modelled based on a variety of sources. These sources include, but are not restricted to, extrapolated estimates based on the previous year's estimates, the distribution from the latest Input-Output tables and the assumption that the products produced are primary to activities of the ANZSIC class reporting the activity.
  Intermediate use
   

The Economic Activity Survey is the main data source used to derive intermediate use. General government intermediate use is derived residually with the components coming from various sources; namely, the Survey of Employment and Earnings, Government Finance Statistics and the Perpetual Inventory Method.

Intermediate use consists of the value of goods and services consumed as inputs in the production of output. It is derived for non-financial corporations, households and NPISH units.

Intermediate use for gambling services, however, is derived as output minus total primary inputs (i.e. compensation of employees, gross operating surplus and other taxes less subsidies on production).

General government intermediate use is included and is derived as the general government estimates for gross output less compensation of employees less consumption of fixed capital.

The following adjustments are also included to obtain intermediate use:

  • overstatement of expenses;
  • output of electricity produced for own intermediate use;
  • off-June year reporting;
  • FISIM; and
  • insurance service charge.
  Gross value added
    Output less intermediate use.
  Volume measures
   

Derived using the double deflation method for value added.

The first preliminary estimate is confronted with the sum of the four quarters volume estimate published in Australian National Accounts:  National Income, Expenditure and Product.

Table 9.32 Annual gross value added by industry - Other services (Division S)
Item Comment
Current prices
  Output
   

The Economic Activity Survey, Government Finance Statistics and components of total use are the main data sources used to derive output.

Output for personal and other services is derived using the demand side compilation method as opposed to supply side. Output is estimated as the sum of intermediate use and final use (i.e. household and government final consumption expenditures, exports less imports) less taxes on those products primary to the industry.

Market output for repairs and maintenance services is measured as sales of goods and services plus changes in inventories of finished goods and work-in-progress. It is derived for non-financial corporations and household institutional units.

The following adjustments are also included to obtain output:

  • understatement of income;
  • output for own final use in the form of own-account computer software and R&D;
  • output of electricity produced for own intermediate use; and
  • off-June year reporting.
  Output – product level
    Product estimates for both primary and secondary production at the industry level are modelled based on a variety of sources. These sources include, but are not restricted to, extrapolated estimates based on the previous year's estimates, the distribution from the latest Input-Output tables and the assumption that the products produced are primary to activities of the ANZSIC class reporting the activity.
  Intermediate use
   

The Economic Activity Survey and Government Finance Statistics are the main data sources used to derive intermediate use.

Intermediate use consists of the value of goods and services consumed as inputs in the production of output. It is derived for non-financial corporations, households and NPISH units.

General government intermediate use is included for funeral and parking services and is derived as the general government estimates for gross output less compensation of employees less consumption of fixed capital.

The following adjustments are also included to obtain intermediate use:

  • overstatement of expenses;
  • output of electricity produced for own intermediate use;
  • off-June year reporting;
  • FISIM; and
  • insurance service charge.
  Gross value added
    Output less intermediate use.
  Volume measures
   

Derived using the double deflation method for value added.

The first preliminary estimate is confronted with the sum of the four quarters volume estimate published in Australian National Accounts:  National Income, Expenditure and Product.

Table 9.33 Annual gross value added by industry - Ownership of dwellings
Item Comment
Current prices
  Output
   

The components of final use are the main data sources used to derive output.

Estimates of the output are derived using a demand side method. The household final consumption expenditure as derived from the actual rents model is combined with government final consumption expenditure, minus imports, plus exports, minus taxes less subsidies on products to form total industry output.

  Output – product level
    Product estimates for primary production at the industry level are modelled based on a variety of sources. These sources include, but are not restricted to, the distribution from the latest Input-Output tables and the ABS publication, Tourist Accommodation, Australia (for long-term caravan parks); and the assumption that the products produced are primary to activities of the ownership of dwellings industry.
  Intermediate use
   

Intermediate use for the ownership of dwellings industry includes the following components:

  • repairs and maintenance;
  • building insurance service charge;
  • FISIM; and
  • real estate agent commissions charged for the management of rental properties;
  • loan application fees; and
  • miscellaneous expenses

Repairs and maintenance are benchmarked using data from the ABS Household Expenditure Survey. The benchmarks are extrapolated using a combined indicator based on the estimated number of dwellings (the same estimate as used to estimate total dwelling rent) and movements in appropriate component price indexes from the Consumer Price Index (CPI) and the series on Metropolitan and municipal improvement rates from the Government Finance Statistics.

In this context repairs and maintenance cover the actual repairs to the dwelling and preventative maintenance such as painting internal and external surfaces. However, purchases of goods and services associated with cleaning a dwelling are not included (they are recorded as part of household final consumption expenditure).

Estimates for building insurance service charges (premiums plus premium supplements less expected claims) are derived from annual data published by the Australian Prudential Regulatory Authority (APRA).

FISIM is the imputed financial service charge component of interest payable on loans used to finance the purchase of dwellings owned by persons. Estimates are derived from data published by APRA. The derivation of FISIM estimates is described in Table 9.21 ANNUAL GROSS VALUE ADDED BY INDUSTRY— Finance (ANZSIC Subdivision 62).

Estimates for real estate agents' management fees are derived using data from the 2016  Census of population and housing to estimate the proportion of actual rent controlled by real estate agents, extrapolated by number of dwellings for non-census years. This proportion is applied to actual rent and multiplied by the average commission rate for each state.

Estimates for loan application fees for loans from financial corporations to purchase dwellings are derived from sum of direct charges associated with dwellings which are obtained from Australian Prudential Regulatory Authority.

  Gross value added
    Output less intermediate use.
  Volume measures
   

Derived using the double deflation method for value added.

The first preliminary estimate is confronted with the sum of the four quarters volume estimate published in Australian National Accounts:  National Income, Expenditure and Product.

Latest year

9.87    For all industries, except agriculture, finance services and insurance services, annual GDP(P) for the latest year (i.e. the year beyond the S-U period) is derived by aggregating the quarterly data previously derived, using largely the same set of sources and methods as those used to derive quarterly gross value added estimates.

9.88    For the latest year, volume estimates for the Agriculture industry (ANZSIC Subdivision 01) are obtained by double deflation.

9.89    For the latest year, chain volume estimates of FISIM for Finance (ANZSIC Subdivision 62) are produced using data sources and methodology as described for the annual benchmarks and used as an annual indicator series to move forward the benchmark volume estimate for gross value added for Finance.

9.90    For the latest year, current price estimates of total output for Insurance (ANZSIC Subdivision 63) are produced using data sources and methodology as described for the annual benchmarks. The current price annual insurance output is deflated by the all groups consumer price index (CPI) to produce an annual chain volume indicator series for insurance which is then used to move forward the benchmark for gross value added for Insurance.

Sources and methods - Quarterly

9.91    Gross value added in chain volume measures are derived by interpolating and extrapolating annual benchmarks using quarterly indicator series. Both the annual benchmarks and the quarterly indicators are calculated as chain volume measures.

9.92    Quarterly chain volume indicators of gross value added in the ASNA are derived using three different methods:

  • the output indicator method;
  • double deflation; and
  • the input indicator method.

9.93    The method selected to obtain chain volume measures for a particular industry depends on the data available in respect of that industry. The most commonly used method is the output indicator method. However, Agriculture uses the double deflation method. The input indicator method involves extrapolation using a measure of labour input such as hours worked and is used to obtain estimates for the Public administration and safety industry.

9.94    The use of output or input indicator methods is based on the implicit assumption that movements in output and intermediate use are consistent with each other. Whilst this is almost certainly not the case in practice, the assumption is made owing to limitations of quarterly source data as well as the time available for compilation and editing. Double deflation is applied to Agriculture as prices and volumes for both agricultural inputs and outputs can be highly volatile. This level of volatility does not exist for other industries and, while it is arguable that quarterly double deflation would improve the estimates of GDP(P) for other selected industries, it is not clear the improvement would be significant.

9.95    The output indicator method is the most commonly used by the ABS. It involves extrapolating reference year estimates of current price gross value-added using movements in a volume indicator of output. It assumes that the ratio of gross output volumes to intermediate input volumes remains constant over time. In a few cases the output indicator is just a single statistic, but in most cases, it is a combination of several statistics. In no cases do these output statistics precisely meet the national accounts definition of output, but in most cases, they approximate the national accounts definition reasonably closely. In some cases, the output statistics are merely highly correlated with the national accounts definition of output, as when turnover data are used as the output indicator for wholesale and retail trade. The principal output of these industries is their margin on the goods they sell (the margin is the difference between the price at which goods are sold and the price at which those goods are bought by the wholesaler or retailer). When a margin volume is estimated using a turnover volume as the indicator, the underlying assumption is that the ratio of the margin to the turnover volume is fixed over time.

9.96    Most industries produce many different commodities, and the ratio of output to value added can differ appreciably between industries and over time. Hence, in constructing a composite output indicator to be used as an indicator of growth in real value added, it is best for the constituent output statistics to be weighted together using current price value added data, and for re-weighting to occur as frequently as possible. The availability of current price value added data varies considerably between industries.

9.97    The volume estimates of gross value added for each industry are derived in the prices of the previous year. Chaining takes place after aggregation.

9.98    Quarterly current price sales data reported by survey respondents are aligned to concepts embedded in the Australian equivalents to International Financial Reporting Standards (AIFRS), net of the Goods and Services Tax (GST), and net of any discounts provided. In addition to income from sales of physical goods, sales estimates include sales of services, including consulting services, income from exports, income from leasing and hiring, income from contracts and commissions, sponsorship income, management fees and charges, income from operating leases, delivery charges, income from royalties pertaining to original artistic works, and billed progress payments from long-term contractual arrangements. They exclude items such as interest income, sales of assets, income from finance leases, payments under hire purchase arrangements, and royalties received in respect of natural resource ownership.

9.99    Inventories are also recorded according to AIFRS, and are closing book values, exclusive of GST, measured before deduction of provisions for losses. These also cover domestic activity only, and are collected according to three categories:

  1. Inventories of raw materials – this includes materials and fuels designed to be consumed in productive activities, non-capitalised spare parts designated for use in fixed assets, and containers and packaging materials. Inventories of fuels for sale are excluded (these are classified as inventories of finished goods).
  2. Inventories of work-in-progress – this includes partially processed or fabricated goods which will be further processed prior to sale, and general work-in-progress less payments billed. Prepayments are excluded.
  3. Inventories of finished goods – this includes goods manufactured or processed which are ready for sale, goods purchased from other businesses which are ready for resale without further processing, and fuels for sale. Hired goods, inventories of land, and rented or leased buildings are excluded.

9.100    For many industries, quarterly industry gross value added is estimated in the latest year by making two assumptions: firstly, that sales growth is a proxy for output growth (in the case of manufacturing, growth in sales plus change in inventories (excluding raw materials) is a proxy for output growth), and that, if we assume movements in output and intermediate consumption are consistent with each other, that output growth is a proxy for growth in gross value added. This is the essence of the output indicator method.

9.101    Ideally, output growth would be better approximated by sales growth plus change in inventories (excluding raw materials) for all industries relying on QBIS data. However, change in inventories is only included for the derivation of estimates for manufacturing. See Table 9.44 for the rationale.

9.102    The tables below outline the data sources and methods used in the extrapolation of quarterly gross value added chain volume estimates by industry from the balanced annual supply and use data, as well as the quarterly distribution of annual supply and use estimates.

Table 9.34 Quarterly data sources of gross value added by industry - Agriculture (ANZSIC Subdivision 01)
Item Comment
General
   

Updating of source data: Annual data from the ABARES publication, Agricultural Commodities are revised during the March quarter with the release of the ABS publication, Value of Agricultural Commodities Produced, Australia. During this process, the new farm forecast for the current year provided by the Australian Bureau of Agricultural and Resource Economics and Sciences is incorporated into the time series.

Quarterly apportionment of annual data: Annual data are split across the four quarters using weights that reflect the estimated production of that commodity throughout the year; for example, wheat is harvested in December and March quarters, not in June or September quarters. For some commodities quarterly data sources are available, including: sheep, lambs, cattle, calves, pigs, poultry, goats, milk, and wool.

Gross Output
  Livestock
    Sheep, lambs, cattle & calves
      Gross value of production for sheep, lambs, cattle and calves is estimated using price and quantity data from the ABS publication, Value of Agricultural Commodities Produced, Australia, supplemented by annual data from the ABARES publication, Agricultural Commodities publication, and quarterly data from the ABS publication, Livestock Products, Australia.
    Pigs, deer, poultry for slaughtering and egg laying hens
      Gross value of production for pigs, deer, poultry for slaughtering and egg laying hens is estimated using price and quantity data from the ABS publication, Value of Agricultural Commodities Produced, Australia, supplemented by annual data from the ABARES publication, Agricultural Commodities and quarterly data from the ABS publication, Livestock Products, Australia.
    Pets and live animals n.e.c.
      Gross value of production for pets and live animals n.e.c. is estimated using price and quantity data from the ABS publication, Value of Agricultural Commodities Produced, Australia, supplemented by annual data from the ABARES publication, Agricultural Commodities, and quarterly data from the ABS publication, Livestock Products, Australia.
  Milk, eggs and honey
    Milk
      Gross value of production for milk is estimated using price and quantity data from the ABS publication, Value of Agricultural Commodities Produced, Australia, supplemented by annual data from the ABARES publication, Agricultural Commodities and monthly quantity data from Dairy Australia, Milk Production Reports.
    Eggs and honey
      Gross value of production for eggs is estimated using price and quantity data from the ABS publication, Value of Agricultural Commodities Produced, Australia, supplemented by annual data from the ABARES publication, Agricultural Commodities. Data for honey is no longer available in ABS cited above; ABARES estimates are used instead.
  Grains
    Wheat
      Gross value of production for wheat is estimated using price and quantity data from the ABS publication, Value of Agricultural Commodities Produced, Australia, supplemented by annual data from the ABARES publication, Agricultural Commodities.
    Barley, oats, rice, sorghum & cereal grains n.e.c.
      Gross value of production for barley, oats, rice, sorghum and cereal grains n.e.c. is estimated using price and quantity data from the ABS publication, Value of Agricultural Commodities Produced, Australia, supplemented by annual data from the ABARES publication, Agricultural Commodities.
    Other grains n.e.c.
      Gross value of production for other grains n.e.c. is estimated using price and quantity data from the ABS publication, Value of Agricultural Commodities Produced, Australia, supplemented by annual data from the ABARES publication, Agricultural Commodities.
  Total other crops
    Fodder & grass
      Gross value of production for fodder and grass is estimated using price and quantity data from the ABS publication, Value of Agricultural Commodities Produced, Australia, supplemented by annual data from the ABARES publication, Agricultural Commodities.
    Plants & flowers
      Gross value of production for plants and flowers is estimated using price and quantity data from the ABS publication, Value of Agricultural Commodities Produced, Australia, supplemented by annual data from the ABARES publication, Agricultural Commodities.
    Fruit, nuts & vegetables
      Gross value of production for fruits, nuts and vegetables is estimated using price and quantity data from the ABS publication, Value of Agricultural Commodities Produced, Australia, supplemented by annual data from the ABARES publication, Agricultural Commodities.
    Sugar cane
     

Gross value of production for sugar cane is estimated using price and quantity data from the ABS publication, Value of Agricultural Commodities Produced, Australia, supplemented by annual data from the ABARES publication, Agricultural Commodities.

    Other agriculture (includes cotton, wine grapes, hops and tobacco output (Note: tobacco production ceased in Australia in 2006-07))
   

 

Gross value of production for other agriculture is estimated using price and quantity data from the ABS publication, Value of Agricultural Commodities Produced, Australia, supplemented by annual data from the ABARES publication, Agricultural Commodities.
  Miscellaneous agriculture
    Sheep & beef cattle agistment services
     

Gross value of production for sheep and beef cattle agistment services is derived using the gross value of production of sheep, lambs, cattle and calves.

    Livestock products n.e.c., horse agistment services
     

Gross value of production for livestock products n.e.c. and horse agistment services is estimated using price and quantity data published in the ABARES publication, Agricultural Commodities.

    Non-agricultural products (production which is secondary to agriculture)
      Gross value of Agriculture industry production for non-agricultural products (e.g. maintenance of farm infrastructure such as barns and fences, on-farm meat processing, road freight transport etc.) is derived from the growth in the value of total agricultural production.
Intermediate use
  Marketing costs
    Wheat
      Marketing costs are derived from the ABS publication, Value of Agricultural Commodities Produced, Australia supplemented by annual data from ABARES publication, Agricultural Commodities. They are calculated by taking the local value of production of wheat from the gross value of production.
    All other
     

Marketing costs are derived from the ABS publication, Value of Agricultural Commodities Produced, Australia supplemented by annual data from ABARES publication, Agricultural Commodities. They are calculated by taking the local value of production for a commodity from the gross value of production.

  Seed & fodder
    Seed costs are derived using data from ABARES publication, Agricultural Commodities, for area sown multiplied by corresponding seeding rates multiplied by the price per tonne. Fodder costs are derived as a residual after deducting the value of exports and non-fodder uses for these products from the gross value of production.
  Other input costs
    Historical data for farm costs such as chemicals, electricity, fuel and maintenance are moved forward using data from the ABARES publication, Agricultural Commodities. These data were originally collected in the ABS Agricultural Finance Survey (AFS), but this collection ceased in 2001.
Table 9.35 Quarterly chain volume measures of gross value added by industry - Agriculture (ANZSIC Subdivision 01)
Item Comment
Gross value added
  The double deflation method is used. Prior to chaining, volume measures of output and intermediate use in the prices of the previous year are derived, as described below, with the difference between the two components being the gross value-added volume.
Gross output
  Volume measures of output in the prices of the previous year for most commodities are derived by quantity revaluation. Volume measures of output in the prices of the previous year for the remaining commodities are derived by deflation using implicit price deflators obtained for similar commodities.
Intermediate use
  The sum of marketing costs, fodder, seed, fertiliser and other intermediate inputs (fuel, maintenance of plant and structures, chemicals, insurance, etc.), as described below.
  Marketing costs
    Volume estimates in the prices of the previous year are derived for 13 commodity groups by using chain volume measures of the output of each group to extrapolate the previous year's current price value and then summing the results.
  Fodder & seed
    Components are re-valued using price indexes derived from unit price data which have been adjusted in some cases to allow for timing differences between production of the commodities and their use as fodder or seed.
  Other intermediate inputs
    Fertiliser volume estimates in the prices of the previous year are derived by quantity revaluation. For other components, current price estimates are re-valued using the relevant component indexes from Index of Prices Paid by Farmers in the ABARES publication, Agricultural Commodities.
Table 9.36 Quarterly chain volume measures of gross value added by industry - Aquaculture (ANZSIC Subdivision 02) and Fishing, hunting and trapping (ANZSIC Subdivision 04)
Item Comment
Gross value added
 

Quarterly volume measures are derived by linear trend interpolation of annual estimates.

Annual volume estimates are obtained by quantity revaluation of the major commodities using quantity data from Agricultural Commodities published by the Australian Bureau of Agricultural and Resource Economics and Sciences.

Note that commercial fishing activities reflect only part of ANZSIC Subdivision 04. There is no quarterly data source to reflect the remainder of this ANZSIC subdivision; that is, hunting and trapping.

Table 9.37 Quarterly chair volume measures of gross value added by industry - Forestry and logging (ANZSIC Subdivision 03)
Item Comment
Gross value added
 

Quarterly volume measures are derived by linear trend interpolation of annual estimates.

Annual volume estimates in the prices of the previous year are derived by quantity revaluation using current price gross value of production and production quantities for total softwood and hardwood logs as published in ABARE's Agricultural Commodities.

Table 9.38 Quarterly chain volume measures of ross value added by industry - Agriculture, forestry and fishing support services (ANZSIC Subdivision 05)
Item Comment
Gross value added
 

Quarterly volume measures are derived by price deflation of current price values for cotton ginning, shearing and other services.

Shearing current price values are estimated using quarterly estimates of the value of shorn wool production. Cotton ginning and other services are estimated using annual production values for cotton and total farm production, respectively, from the ABARES publication, Agricultural Commodities. These are then averaged across the four quarters of the year to derive the quarterly current price values. Cotton ginning and shearing price indexes are based on the hourly wage rates while the other services price deflator is the All groups CPI.

Table 9.39 Quarterly chain volume measures of gross value added by industry - Coal mining (ANZSIC Subdivision 06)
Item Comment
Gross value added
 

Quarterly volume measures are derived by the output indicator method.

A quarterly output indicator is production tonnage collected on the ABS Supplementary Survey of Mining Inventories and Production Volumes. Prior to September quarter 2019, coal volume measures were estimated using production values from the Department of Industry, Science, Energy and Resources.

Table 9.40 Quarterly chain volume measures of gross value added by industry - Oil and gas extraction (ANZSIC Subdivision 07)
Item Comment
Gross value added
 

Quarterly volume measures are derived by the output indicator method.

The primary data source is monthly production volumes of oil and gas, published by the Department of Industry, Science, Energy and Resources. in the publication, Australian Petroleum Statistics. The specific output indicators used are (a) total crude oil and condensate, in megalitres; (b) ethane, in millions of cubic metres; and (c) natural gas, in millions of cubic metres.

Table 9.41 Quarterly chain volume measures of gross value added by industry - Metal ore mining, except iron ore mining, (ANZSIC Subdivision 08) and Non-metallic mineral mining and quarrying (ANZSIC Subdivision 09)
Item Comment
Gross value added
 

Quarterly volume measures are derived by the output indicator method.

The Department of Industry, Science, Energy and Resources provides quarterly production estimates of copper (kilotonnes), nickel (kilotonnes), zinc (kilotonnes) and gold (tonnes) produced. These estimates are preliminary and unpublished at the time the quarterly national accounts are compiled, but are subsequently published by the department in Resources and Energy Statistics. Revisions to the published data are subsequently incorporated into the quarterly national accounts.

The Department of Industry, Science, Energy and Resources publication, Resources and Energy Statistics provides the output indicator data for other commodities such as bauxite, alumina, tin, silver, uranium and manganese, as well as mineral sands such as ilmenite, rutile and zircon. Data relating to these commodities are generally not available for the most recent quarter. A preliminary estimate for the current quarter is generated for each of these commodities using a simple average of production for the same quarter in the recent past. These preliminary estimates are then replaced by data published by the department in the subsequent quarter. Revisions in the published data are also incorporated.

Weights applied to each commodity within this industry are derived from the ABS publication, Australian Industry.

ANZSIC classes not covered by an output indicator as described above are assumed to have the same quarterly growth rate as the classes that are measured.

Table 9.42 Quarterly chain volume measures of gross value added by industry - Iron ore mining (ANZSIC Class 0801)
Item Comment
Gross value added
 

Quarterly volume measures are derived by the output indicator method.

A quarterly output indicator is production tonnage collected on the ABS Supplementary Survey of Mining Inventories and Production Volumes. Prior to September quarter 2019, iron ore volume measures were estimated using production values from the Department of Industry, Science, Energy and Resources.

Table 9.43 Quarterly chain volume measures of gross value added by industry - Exploration and other mining support services (ANZSIC Subdivision 10)
Item Comment
Gross value added
 

Quarterly volume measures are derived by the output indicator method.

This involves extrapolating the quarterly series by taking a chain volume measure of sales growth from Business Indicators: Australia, and applying the same level of growth to industry gross value added. This assumes that sales growth is a reliable proxy for output growth, and that growth in output and intermediate consumption occur at identical rates.

Table 9.44 Quarterly chain volume measures of gross value added by industry - Manufacturing (ANZSIC Subdivisions (11-25), except Subdivision 17 Petroleum and coal product manufacturing)
Item Comment
Gross value added
 

Quarterly volume measures are derived by the output indicator method.

This involves extrapolating the quarterly series by taking a chain volume measure of sales plus change in inventories (work-in-progress and finished goods) from Business Indicators: Australia and applying the same level of growth. This assumes that sales growth is a reliable proxy of output growth, and that growth in output and intermediate consumption occur at identical rates.

The inclusion of change in inventories generates a more conceptually correct measure of output growth than just growth in sales. Change in inventories is only included in the quarterly output indicator for manufacturing because, for all other industries relying on Business Indicators: Australia, change in inventories is small when compared with sales volumes (and for most service industries, inventories of work-in-progress and finished goods are so insignificant they are not measured).

Table 9.45 Quarterly chain volume measures of gross value added by industry - Petroleum and coal product manufacturing (ANZSIC Subdivision 17)
Item Comment
Gross value added
 

Quarterly volume measures are derived by the output indicator method.

Volume measures, in the prices of the previous year, are obtained by revaluing quantity data for a range of petroleum and coal products, published by Department of Industry, Science, Energy and Resources in Australian Petroleum Statistics.

Table 9.46 Quarterly chain volume measures of gross value added by industry - Electricity supply (ANZSIC Subdivision 26)
Item Comment
Gross value added
 

Quarterly volume measures are derived by the output indicator method.

Electricity produced in New South Wales, Victoria, Queensland, Tasmania, South Australia and Western Australia is obtained from the Australian Energy Market Operator (AEMO). Electricity produced in the ACT and NT is excluded from the indicator series, and therefore not reflected in the quarterly growth rates. These two jurisdictions comprise less than one per cent of national output, so that the extra effort to incorporate them would not result in materially improved statistical output.

Table 9.47 Quarterly chain volume measures of gross value added by industry - Gas supply (ANZSIC Subdivision 27)
Item Comment
Gross value added
 

Quarterly volume measures are derived by the output indicator method.

This involves extrapolating the quarterly series by taking a chain volume measure of sales growth from the Business Indicators: Australia, and applying the same level of growth to industry gross value added. This assumes that sales growth is a reliable proxy for output growth, and that growth in output and intermediate consumption occur at identical rates.

Table 9.48 Quarterly chain volume measures of gross value added by industry - Water supply, sewerage and drainage services (ANZSIC Subdivision 28)
Item Comment
Gross value added
 

Quarterly volume measures are derived by the output indicator method.

The current price indicator series is quarterly sales revenue data for public authorities classified to the water services industry, sourced from the Government Finance Statistics collection. The indicator series is not published in its own right. The volume data are derived by deflating this current price data with the same deflator applied to Business Indicators: Australia sales for water services which is then chained.

The reason QBIS data is not used to measure water services on a quarterly basis is that most water services units are classified to the public sector, and are therefore out of scope of Business Indicators: Australia. The choice to use Government Finance Statistics instead of Business Indicators: Australia means that any privately-owned water services units, such as regional irrigators, are not reflected in the quarterly growth rates.

Table 9.49 Quarterly chain volume measures of gross value added by industry - Waste collection, treatment and disposal services (ANZSIC Subdivision 29)
Item Comment
Gross value added
 

Quarterly volume measures are derived by the output indicator method.

This involves extrapolating the quarterly series by taking a chain volume measure of sales growth from Business Indicators: Australia, and applying the same level of growth to industry gross value added. This assumes that sales growth is a reliable proxy for output growth, and that growth in output and intermediate consumption occur at identical rates.

Table 9.50 Quarterly chain volume measures of gross value added by industry - Building construction (ANZSIC Subdivision 30) and Heavy and civil engineering construction (ANZSIC Subdivision 31)
Item Comment
Gross value added
 

Quarterly volume measures are derived by the output indicator method.

Volume measures of the value of work done for non-residential building construction and heavy and civil engineering construction are compiled using volume indicators sourced from ABS publications, Building Activity, Australia and Engineering Construction Activity, Australia, whereas residential building construction volume measures are compiled using volume indicators derived from private gross fixed capital formation.

Table 9.51 Quarterly chain volume measures of gross value added by industry - Construction services (ANZSIC Subdivision 32)
Item Comment
Gross value added
 

Quarterly volume measures are derived by the output indicator method.

This involves extrapolating the quarterly series by taking a chain volume measure of sales growth from Business Indicators: Australia, and applying the same level of growth to industry gross value added. This assumes that sales growth is a reliable proxy for output growth, and that growth in output and intermediate consumption occur at identical rates.

Table 9.52 Quarterly chain volume measures of gross value asses by industry - Wholesale trade (ANZSIC Division F)
Item Comment
Gross value added
 

Quarterly volume measures are derived by the output indicator method.

This involves extrapolating the quarterly series by taking a chain volume measure of sales growth from Business Indicators: Australia and applying the same level of growth. This assumes that sales growth is a reliable proxy of output growth, and that growth in output and intermediate consumption occur at identical rates.

Measuring gross value added for the wholesale trade industry is problematic on a quarterly basis. Conceptually, output for the wholesale trade industry is equal to the margin between the value at which goods are acquired and at which goods are on-sold, after allowing for inventory valuation adjustments. However, there are no appropriate data sources for measuring wholesale trade margins on a quarterly basis. Additionally, to derive volumes of margins, price indexes which are directly applicable to measurement of change in margins would be required, but these also do not exist. In using Business Indicators: Australia, sales chain volume growth rates as an indicator of growth in gross value added, the additional assumption is made that margins volumes move in line with sales volumes.

Table 9.53 Quarterly chain volume measures of gross value added by industry - Motor vehicle and motor vehicle parts retailing (ANZSIC Subdivision 39) and Fuel retailing (ANZSIC Subdivision 40)
Item Comment
Gross value added
 

Quarterly volume measures are derived by the output indicator method.

Estimates of growth in gross value added for motor vehicle retailing and fuel retailing are based on growth in current price expenditure data for purchase of vehicles, and operation of vehicles, by households. These are deflated and chained to create a chain volume indicator series. This assumes that growth in these household expenditure categories is a reliable proxy for output growth, and that growth in output and intermediate consumption occur at identical rates.

Measuring gross value added for the Retail trade industry is problematic on a quarterly basis. Conceptually, output for the Retail trade industry is equal to the margin between the value at which goods are acquired and at which goods are on-sold, after allowing for inventory valuation adjustments. However, there are no appropriate data sources for measuring retail trade margins on a quarterly basis.

Additionally, to derive volumes of margins, price indexes which are directly applicable to measurement of change in margins would be required, but these also do not exist. In using the household expenditure chain volume growth rates as an indicator of growth in gross value added for retail trade in motor vehicles, the additional assumption is made that margins volumes move in line with expenditure volumes.

Table 9.54 Quarterly chain volume measures of gross value added by industry - Food retailing (ANZSIC Subdivision 41), Other store-based retailing (ANZSIC Subdivision 42) and Non-store retailing and retail commission-based buying and/or selling (ANZSIC Subdivision 43)
Item Comment
Gross value added
 

Quarterly volume measures are derived by the output indicator method.

Estimates of growth in gross value added for these ANZSIC subdivisions are based on quarterly volume turnover growth rates published quarterly in the ABS publication, Retail Trade, Australia. This assumes that growth in these retail turnover categories is a reliable proxy for output growth, and that growth in output and intermediate consumption occur at identical rates.

Measuring gross value added for the Retail trade industry is problematic on a quarterly basis. Conceptually, output for the Retail trade industry is equal to the margin between the value at which goods are acquired and at which goods are on-sold, after allowing for inventory valuation adjustments. However, there are no appropriate data sources for measuring retail trade margins on a quarterly basis.

Additionally, to derive volumes of margins, price indexes which are directly applicable to measurement of change in margins would be required, but these also do not exist. In using the Retail Trade chain volume turnover growth rates as an indicator of growth in gross value added, the additional assumption is made that margins volumes move in line with turnover volumes.

Table 9.55 Quarterly chain volume measures of gross value added by industry - Accommodation and food services (ANZSIC Division H)
Item Comment
Gross value added
 

Quarterly volume measures are derived by the output indicator method.

This involves extrapolating the quarterly series by taking a chain volume measure of sales growth from Business Indicators: Australia and applying the same level of growth to industry gross value added. This assumes that sales growth is a reliable proxy of output growth, and that growth in output and intermediate consumption occur at identical rates.

Table 9.56 Quarterly chain volume measures of gross value added by industry - Road transport (ANZSIC Subdivision 46)
Item Comment
Gross value added
 

Quarterly volume measures are derived by the output indicator method.

This involves extrapolating the quarterly series by taking a chain volume measure of sales growth from Business Indicators: Australia, and applying the same level of growth to industry gross value added. This assumes that sales growth is a reliable proxy of output growth, and that growth in output and intermediate consumption occur at identical rates.

Table 9.57 Quarterly chain volume measures of gross value added by industry - Rail transport (ANZSIC Subdivision 47)
Item Comment
Gross value added
 

Quarterly volume measures are derived by the output indicator method.

Private sector activity is measured using sales data, in current and constant prices, from the Quarterly Business Indicators Survey. Public sector activity is measured using expenditure on rail fares as reflected in household final consumption expenditure, in current and constant prices. The current and constant price values for public and private are aggregated to form total current and constant price values for rail transport. These are then chained to form the indicator for the whole ANZSIC subdivision.

Table 9.58 Quarterly chain volume measures of gross value added by industry - Air and space transport (ANZSIC Subdivision 49)
Item Comment
Gross value added
 

Quarterly volume measures are derived by the output indicator method.

A quarterly output indicator is compiled in-house, based on data from a survey of revenue passenger kilometres and freight tonne kilometres from the major domestic and Australian-based international airlines.

The term revenue passenger kilometres is a measure of traffic and is derived by multiplying the number of revenue-paying passengers by distances travelled. Calculations are made by the providers. Revenue passenger kilometres is considered to be a more accurate volume estimator for output given it is a combined measure of distances travelled as well as passengers carried. The same measurement principle applies for deriving freight tonne kilometres.

Table 9.59 Quarterly chain volume measures of gross value added by industry - Water transport (ANZSIC Subdivision 48) and Other transport (ANZSIC Subdivision 50)
Item Comment
Gross value added
 

Quarterly volume measures are derived by the output indicator method.

This involves extrapolating the quarterly series by taking a chain volume measure of sales growth from Business Indicators: Australia and applying the same level of growth to industry gross value added. This assumes that sales growth is a reliable proxy of output growth, and that growth in output and intermediate consumption occur at identical rates.

Table 9.60 Quarterly chain volume measures of gross value added by industry - Postal and courier pickup and delivery services (ANZSIC Subdivision 51)
Item Comment
Gross value added
 

Quarterly volume measures are derived by the output indicator method.

Private sector activity (reflecting private courier services, etc.) is measured using the sales data from Business Indicators: Australia, in current and constant prices. Public sector activity is measured using a variety of indicator data from providers on sales revenue in current prices, as well as quantities of letters and parcels carried. The current and constant price values for public and private are aggregated to form total current and constant price values for this ANZSIC subdivision. These are then chained to form the indicator for the whole subdivision.

Table 9.61 Quarterly chain volume measures of gross value added by industry - Transport support services (ANZSIC Subdivision 52) and Warehousing and storage services (ANZSIC Subdivision 53)
Item Comment
Gross value added
 

Quarterly volume measures are derived by the output indicator method.

This involves extrapolating the quarterly series by taking a chain volume measure of sales growth from Business Indicators: Australia, and applying the same level of growth to industry gross value added. This assumes that sales growth is a reliable proxy of output growth, and that growth in output and intermediate consumption occur at identical rates.

Table 9.62 Quarterly chain volume measures of gross value added by industry - Information media and telecommunications (ANZSIC Division J)
Item Comment
Gross value added
 

Quarterly volume measures are derived by the output indicator method.

This involves extrapolating the quarterly series by taking a chain volume measure of sales growth from Business Indicators: Australia, and applying the same level of growth to industry gross value added. This assumes that sales growth is a reliable proxy of output growth, and that growth in output and intermediate consumption occur at identical rates.

Telecommunications Services also includes quarterly sales revenue data from Government Finance Statistics. The volume data are derived by deflating the sales revenue data using price deflators.

Table 9.63 Quarterly chain volume measures of gross value added by industry - Finance (ANZSIC Subdivision 62)
Item Comment
Gross value added
 

Quarterly volume measures are derived by the output indicator method.

Chain volume measures for quarterly bank financial intermediation services indirectly measured (FISIM) are compiled using bank balance sheets; detailed breakdown for bank loans and deposits (Australian Prudential Regulatory Authority (APRA) Monthly Banking Statistics); income and expenditure (Suite of APRA forms - Quarterly Bank Performance Statistics); and indicator interest rates (RBA Statistical Bulletin). The methodology is the same as described for the annual benchmarks for FISIM.

Chain volume estimates of bank FISIM are the quarterly indicator series for gross value added.

Table 9.64 Quarterly chain volume measures of gross value added by industry - Insurance and superannuation funds (ANZSIC Subdivision 63)
Item Comment
Gross value added
 

Quarterly volume measures are derived by the output indicator method.

Current price estimates of the Insurance service charge (ISC) are compiled as follows:

  • Life insurance - The quarterly source data indicator is the operating expenses for total life insurance businesses sourced from the Quarterly Life Insurance Performance Statistics published by the Australian Prudential Regulatory Authority. The quarterly life insurance ISC indicator is then calculated by using the quarterly movement of the indicator source data to extrapolate the previous quarter's life insurance ISC indicator level.
  • Pension funds - There are two quarterly source data indicators used for pension funds. Total investment expenses and total operating expenses of pension funds are sourced from the Quarterly Superannuation Performance Statistics report published by the Australian Prudential Regulatory Authority. The quarterly pension fund ISC indicator is then calculated by using the quarterly movement of the indicator source data to extrapolate the previous quarter's pension fund ISC indicator level.
  • Non-life insurance - The non-life insurance ISC indicator is estimated via a linear trend interpolation of the annual estimates.

A weighted sum of the three components is derived to produce a quarterly current price indicator of the ISC. This is deflated using the All groups CPI index and chained to produce a chain volume series.

Table 9.65 Quarterly chain volume measures of gross value added industry - Auxiliary finance and insurance services (ANZSIC Subdivision 64)
Item Comment
Gross value added
 

Quarterly volume measures are derived by the output indicator method.

This involves extrapolating the quarterly series by taking a chain volume measure of sales growth from Business Indicators: Australia, and applying the same level of growth to industry gross value added. This assumes that sales growth is a reliable proxy of output growth, and that growth in output and intermediate consumption occur at identical rates.

Table 9.66 Quarterly chain volume measures of gross value added by industry - Rental, hiring and real estate services (ANZSIC Division L)
Item Comment
Gross value added
 

Quarterly volume measures are derived by the output indicator method.

This involves extrapolating the quarterly series by taking a chain volume measure of sales growth from Business Indicators: Australia, and applying the same level of growth to industry gross value added. This assumes that sales growth is a reliable proxy of output growth, and that growth in output and intermediate consumption occur at identical rates.

Table 9.67 Quarterly chain volume measures of gross value added by industry - Professional, scientific and technical services (ANZSIC Division M)
Item Comment
Gross value added
 

Quarterly volume measures are derived by the output indicator method.

This involves extrapolating the quarterly series by taking a chain volume measure of sales growth from Business Indicators: Australia, and applying the same level of growth to industry gross value added. This assumes that sales growth is a reliable proxy of output growth, and that growth in output and intermediate consumption occur at identical rates.

Table 9.68 Quarterly chain volume measures of gross value added by industry - Administrative and support services (ANZSIC Division N)
Item Comment
Gross value added
 

Quarterly volume measures are derived by the output indicator method.

This involves extrapolating the quarterly series by taking a chain volume measure of sales growth from Business Indicators: Australia, and applying the same level of growth to industry gross value added. This assumes that sales growth is a reliable proxy of output growth, and that growth in output and intermediate consumption occur at identical rates.

Table 9.69 Quarterly chain volume measures of gross value added by industry - Public administration and safety (ANZSIC Division O)
Item Comment
Gross value added
 

Quarterly volume measures are derived by the input indicator method.

The sales data from Business Indicators: Australia are not appropriate for measuring gross value added for division O because of the large proportion of non-market activity in this division. Aggregate hours worked in Division O, is the main data source.

Defence is out of scope of the LFS so additional hours worked estimates for Defence are added to the LFS estimates to obtain total hours worked.

Table 9.70 Quarterly chain volume measures of gross value added by industry - Education and training (ANZSIC Division P)
Item Comment
Gross value added
  No appropriate quarterly indicator currently exists. Quarterly growth is estimated via linear trend interpolation of the annual estimates.
Table 9.71 Quarterly chain volume measures of gross value added by industry - Health care and social assistance (ANZSIC Division Q)
Item Comment
Gross value added
 

Quarterly volume measures are derived by the output indicator method.

Private sector activity is expenditure by households on private health services, excluding pharmaceuticals, sourced from the household final consumption expenditure dataset, re-expressed as a volume index. Public sector activity is captured through data received from Medicare Australia, which reflects health services classified by broad type of service. The number of the various services provided are weighted together to produce a total volume index.

Public and private outputs are expressed as volume indexes because the units of measurement in the original source data are not consistent. The public sector data are derived from numbers of services performed whereas the private sector data uses dollar values of household expenditures as the starting point.

These resulting volume indexes are re-weighted (approximately two-thirds public, one-third private) to derive a weighted volume index for the industry. This is then chained to create output in chain volume terms for the whole industry.

Table 9.72 Quarterly chain volume measures of gross value added by industry - Arts and recreation services (ANZSIC Division R)
Item Comment
Gross value added
 

Quarterly volume measures are derived by the output indicator method.

Private sector activity is measured via the sales data from Business Indicators: Australia, in current and constant prices. Annual current price estimates for public sector expenditure on recreation and culture are obtained from Government Finance Statistics and re-valued by the implicit price deflator for non-defence government final consumption expenditure. Quarterly estimates are obtained by linear trend interpolation of the annual estimates. An adjustment was made for the one-off impact of the Sydney Olympic Games in 2000.

Current and constant price estimates for the public and private sectors and for the Sydney Olympic Games are summed to form total current and constant price values for this division. These are then chained, with the resulting chain volume being the indicator for the whole industry.

Table 9.73 Quarterly chain volume measures of gross value added by industry - Other services (ANZSIC Division S)
Item Comment
Gross value added
 

Quarterly volume measures are derived by the output indicator method.

This involves extrapolating the quarterly series by taking a chain volume measure of sales growth from Business Indicators: Australia and applying the same level of growth to industry gross value added. This assumes that sales growth is a reliable proxy of output growth, and that growth in output and intermediate consumption occur at identical rates.

Table 9.74 Quarterly chain volume measures of gross value added by industry - Ownership of Dwellings
Item Comment
Gross value added
 

Quarterly volume measures are derived by the output indicator method.

The chain volume of the 'Rent and other dwelling services' component of household final consumption expenditure is the output indicator for Ownership of dwellings.

Table 9.75 Quarterly chain volume measures of taxes less subsidies on products
Item Comment
Gross value added
 

Quarterly volume measures are derived by the output indicator method.

A range of individual taxes and subsidies on products is used to extrapolate supply and use benchmarks for taxes on products and subsidies on products. Taxes include the Goods and Services Tax (GST), gambling taxes, insurance taxes, excises on petroleum, import duties and tobacco and alcohol taxes. Subsidies include those payable under the Fuel Tax Credits scheme, as well as subsidies payable to bus, tram and rail operators.

Current price estimates are sourced from the annual Government Finance Statistics dataset and are smoothed evenly across the four quarters of the year to which they relate. Constant price estimates are obtained from the quarterly household final consumption expenditure dataset, with the exception of import duties, which are mainly sourced from the International Trade in Goods and Services dataset. When calculating GST in constant prices, consumption categories which are exempt from GST (e.g. raw food) are excluded from the calculation. GST relating to the purchase of dwellings is included.

Each individual type of tax and subsidy is quantity re-valued. The constant price measures for each tax and subsidy are aggregated allowing the creation of separate chain volume measures of taxes and subsidies. The constant price value for net taxes is derived by subtracting the constant price measure of subsidies from the constant price measure of taxes, and the result is chained to create the chained volume indicator series.

9.103    Backcast quarterly gross value added chain volume estimates – prior to the period covered by annual S-U benchmarks (i.e. June quarter 1994 and earlier) on an ANZSIC06 basis – are compiled by backcasting growth from the most applicable series under the previous ANZSIC93 industry classification.

Chapter 10 Gross Domestic Product – Expenditure approach (GDP(E))

10.1    GDP can be derived as the sum of all final expenditures, changes in inventories of finished goods, work-in-progress and raw materials, and the value of exports of goods and services less the value of imports of goods and services. In this context, final expenditures comprise final consumption expenditure and gross fixed capital formation (GFCF). These expenditures are equivalent to final demand and the measure is commonly referred to as GDP(E).

GDP(E) = Final consumption expenditure
  + Gross fixed capital formation
  + Changes in inventories
  + Net acquisitions of valuables (a)
  + Exports
  Imports

(a) net acquisitions of valuables are not separately identified in the ASNA

Final consumption expenditure

10.2    Final consumption expenditure is expenditure on goods and services that are used for the direct satisfaction of individual or collective needs or wants. It excludes expenditure on fixed assets (including dwellings), valuables and other non-financial assets. In the ASNA it is defined as:

  • the total value of all expenditures on individual and collective consumption goods and services incurred by resident households, resident non-profit institutions serving households (NPISHs) and general government units.

10.3    The main expenditure aggregates are:

  • Household final consumption expenditure – consists of the expenditure, including imputed expenditure, incurred by households on individual consumption goods and services, including those sold at prices that are not economically significant;
  • Final consumption expenditure of NPISHs – consists of expenditure, including imputed expenditure, incurred by resident NPISHs on individual and collective consumption goods and services (however, as NPISHs are not yet treated as a separate sector in the ASNA, their final consumption expenditure is included with that of households in household final consumption expenditure in the ASNA); and
  • Government final consumption expenditure – consists of expenditure, including imputed expenditure, incurred by general government on both individual consumption goods and services and collective consumption services. This expenditure may be divided into:
    • government expenditure on individual consumption goods and services; and
    • government expenditure on collective consumption services.

10.4    The distinction between collective and individual consumption expenditure is of considerable importance in the SNA. Consumption expenditures by general government and NPISHs on behalf of households (their individual consumption expenditures) are undertaken for the purpose of making social transfers in kind. They cover the non-market output of both general government and NPISHs, which is delivered to households free or at prices that are not economically significant, as well as goods and services bought from market producers and provided to households free or at prices that are not economically significant. Social transfers in kind are recorded differently from other transfers in kind.

Individual goods or services

10.5    Individual goods and services are essentially 'private', as distinct from 'public' goods and services. They have the following characteristics:

  • it must be possible to observe and record the acquisition of the good or service by an individual household or member thereof and also the time at which it took place;
  • the household must have agreed to the provision of the good or service and taken whatever action is necessary to make it possible; for example, by attending a school or clinic; and
  • the good or service must be such that its acquisition by one household or person, or possibly by a small, restricted group of persons, precludes its acquisition by other households or persons.

10.6    The reference to a small, restricted group of persons is needed because certain services are provided to small groups of people simultaneously; for example, several persons may travel in the same bus, train, ship or plane or attend the same class, lecture, concert or live theatre performance. However, these are still essentially individual services if there is a restriction on the number of individuals who can consume them. Other members of the community are excluded and derive no benefit from them.

10.7    From a welfare point-of-view, the important characteristic of an individual good or service is that its acquisition by one household, person or group of persons brings no (or very little) benefit to the rest of the community. While the provision of certain individual health or education services (for example, vaccination or immunisation) may bring some external benefits to the rest of the community, in general the individuals concerned derive the main benefit. Thus, when a government unit incurs expenditures on the provision of individual goods or services, it must decide not only how much to spend in total but how to allocate, or distribute, the goods or services among individual members of the community. From the point of view of economic and social policy, the way in which they are distributed may be as important as the total amount spent.

Collective services

10.8    Most goods can be privately owned and are individual in the sense used here. On the other hand, certain kinds of services can be provided collectively to the community as a whole. The characteristics of these collective services may be summarised as follows:

  • collective services are delivered simultaneously to every member of the community or of particular sections of the community, such as those in a particular region of a locality (but not small, restricted groups);
  • the use of such services is usually passive and does not require the explicit agreement or active participation of all the individuals concerned; and
  • the provision of a collective service to one individual does not reduce the amount available to others in the same community or section of the community. There is no rivalry in acquisition

10.9    The collective services provided by government consist mostly of the provision of security and defence, the maintenance of law and order, legislation and regulation, the maintenance of public health, the protection of the environment, research and development, etc. All members of the community can benefit from such services. As the individual use of collective services cannot be recorded, individuals cannot be charged according to their use or the benefits they derive. There is no market to allocate collective services, and these services must be financed collectively, for example, out of taxation or other government revenues.

The borderline between individual and collective services

10.10    Expenditures incurred by governments at a national level in connection with individual services such as health and education are treated as collective when they are concerned with the formulation and administration of government policy, the setting and enforcement of public standards, the regulation, licensing or supervision of producers, etc. For example, the expenditures incurred by Departments of Health or Education at a national level are included in collective consumption expenditures as they are concerned with general matters of policy, standards and regulation. On the other hand, any overhead expenses connected with the administration or functioning of a group of hospitals, schools, colleges or similar institutions are included in individual expenditures. For example, if a group of private hospitals has a central unit which provides certain common services such as purchasing, laboratories, ambulances, or other facilities, the costs of these common services would be taken into account in the prices charged to patients. The same principle is followed when the hospitals are non-market producers: all the costs which are associated with the provision of services to particular individuals, including those of any central units providing common services, are to be included in the value of expenditures on individual services.

Non-market services to enterprises

10.11    Many government expenditures benefit enterprises as much as households; examples are expenditures on the cleaning, maintenance and repair of public roads, bridges, tunnels, etc. including the provision of street lighting. These are individual services for which consumption can be monitored, and for this reason they are frequently provided on a market basis by charging tolls on road usage. However, it would be difficult to separate the services provided free to households from those provided free to enterprises and, by convention, all these expenditures are treated as collective final expenditure.

10.12    Enterprises also benefit from a number of genuinely collective services such as the provision of security by the police, fire services, etc. The use of such collective services by individual enterprises cannot be recorded, so that expenditures on such services have to be treated as government final consumption expenditure.

Household final consumption expenditure

Concept

10.13    In the ASNA, household final consumption expenditure (HFCE) consists of expenditure by resident households on goods and services, whether the expenditure is made within the domestic territory or by Australian residents abroad, and expenditure by NPISHs.

10.14    Specific transactions in household final consumption expenditure include:

  • the value of income received in kind by employees which is treated as simultaneously spent by the employees on final consumption expenditure;
  • the value of goods produced by households for their own consumption, such as agricultural goods produced and consumed on the same farm, and 'backyard' production;
  • FISIM, the service charge component of households' interest payments and receipts (however, FISIM attributed to unincorporated enterprises owned by households is classified as intermediate consumption of the unincorporated business);
  • the service charge component of premiums paid for insurance and pension fund services; and
  • the imputed value of the services of owner-occupied dwellings. The imputation of rent to owner-occupied dwellings enables the services provided by dwellings to their owner-occupiers to be treated consistently with the marketed services provided by rented dwellings to their tenants. This treatment is considered necessary because, if a large number of rented houses were sold to their occupiers and if estimates of imputed rent were not calculated for owner-occupied dwellings, there would be an apparent decrease in gross domestic product without any decrease in the provision of housing services. In effect, owner-occupiers (like other owners of dwellings) are regarded as operating businesses; they receive rents (from themselves as consumers), pay expenses, and make a net contribution to the value of production which accrues to them as owners.

10.15    Any expenditure undertaken for business purposes by unincorporated enterprises (which are part of the household sector) is treated as intermediate consumption expenditure of the unincorporated enterprise, and not part of household final consumption expenditure.

10.16    Expenditures on the purchase of dwellings are explicitly excluded from household final consumption expenditure because dwellings are goods used by owners to produce housing services for those owners. Purchases of dwellings therefore constitute gross fixed capital formation. Similarly, valuables should be excluded from household final consumption expenditure because they are not used up in consumption or production, nor do they deteriorate over time. Valuables are a store of value, and are classified as part of gross capital formation. In the ASNA, however, some expenditure on valuables may be included in HFCE as a separate estimate for valuables is not compiled.

10.17    Expenditures on licences to use or own vehicles, boats and aircraft, and fees for shooting, fishing and hunting permits are also excluded. These are treated as taxes rather than as payments for services. All other kinds of licences, permits, certificates, passports etc., are treated as purchases of services and included in household final consumption expenditure.

10.18    HFCE is a large aggregate covering a wide range of goods and services. It is therefore desirable to further dissect this item. The 2008 SNA (and 1993 SNA) proposes a 'functional' classification to identify the 'functions' – in the sense of 'purposes' or 'objectives' – for which households engage in these transactions. The Classification of Individual Consumption by Purpose (COICOP) is used to classify HFCE by purpose or function. The outlays covered include:

  • expenditure on consumer durables such as cars, furniture and high-value, long-lasting household appliances (but excluding dwellings, which are regarded as the fixed assets of an 'industry');
  • consumer semi-durables such as clothing and footwear, other appliances, and crockery and cutlery;
  • single-use goods such as food, cigarettes and tobacco, and alcoholic drinks; and
  • services of all kinds such as hairdressing, dry cleaning and public transport.

10.19    COICOP provides for HFCE to be classified into the following major categories:

01 Food and non-alcoholic beverages
02 Alcoholic beverages, tobacco and narcotics
03 Clothing and footwear
04 Housing, water, electricity, gas and other fuels
05 Furnishings, household equipment and routine maintenance of the house
06 Health
07 Transport
08 Communications
09 Recreation and culture
10 Education
11 Hotels, cafes and restaurants
12   Miscellaneous goods and services

10.20    These major categories are further split into subcategories, with the following 17 headline COICOP categories published in original, seasonally adjusted, and trend terms:

01 Food
02.1 Alcoholic beverages 
02.2 Cigarettes and tobacco
03 Clothing and footwear
04.1 Rent and other dwelling services
04.2 Electricity, gas and other fuel
05 Furnishings and household equipment
06 Health
07.1 Purchase of vehicles
07.2 Operation of vehicles
07.3 Transport services
08 Communications
09 Recreation and culture
10 Education
11 Hotels, cafes and restaurants
12.1 Insurance and other financial services
12.2 Other goods and services

10.21    In the ASNA the classification of HFCE is aligned, as far as possible, with COICOP. However, there are some instances where it is not yet possible for Australia to follow COICOP's recommendations. For example:

  • ASNA does not include an estimate of HFCE on narcotics in COICOP Division 02 Alcoholic beverages, tobacco and narcotics, as reliable data on narcotics expenditure are not available.
  • Expenditure on COICOP Group 09.6 (Package holidays) is not specifically identified in Australia's HFCE, but the components of package holidays (airfares, accommodation and food) are included in the corresponding major categories of HFCE.
  • ASNA does not include an explicit estimate of HFCE on prostitution services in COICOP Group 12.1 (Personal care) as reliable data on such expenditure are not available.

10.22    The COICOP category for Maintenance and repair of the dwelling (Group 04.3) includes minor maintenance and repair of dwellings (e.g. interior decoration and repair to fittings which are commonly carried out by both tenants and owners) but excludes maintenance and repair which is major, such as replastering walls or repairing roofs, which are typically carried out by owners only. Such a distinction is consistent with 2008 SNA.⁴⁴ The ASNA deviates from the 2008 SNA recommendation and has excluded all maintenance and repair of dwellings from HFCE. Expenses associated with these activities are included as intermediate consumption of the Ownership of Dwellings industry and COICOP Group 04.3 is not included in HFCE in the ASNA.

10.23    The final consumption expenditure of NPISHs is included with that of households in the ASNA. 2008 SNA recommends that the final consumption of NPISHs should be classified according to the Classification of the Purposes of Non-Profit Institutions Serving Households (COPNI). The major divisions of COPNI are as follows:

01 Housing
02 Health
03 Recreation and culture
04 Education
05 Social protection
06 Religion
07 Political parties, labour and professional organisations
08 Environmental protection
09 Services n.e.c.

10.24    Consequently, in the ASNA, the final consumption expenditure of NPISHs is classified, as far as possible, to the corresponding category of HFCE. Specifically, expenditure by NPISHs on Health, Recreation and culture, and Education are classified to the corresponding categories of HFCE, while final consumption expenditure for the other divisions is classified to Other goods and services in HFCE. As data sources for estimating the final consumption expenditure of NPISHs are very limited, indirect means are generally employed to compile these estimates. It is often necessary to assume that the final consumption expenditure for NPISHs can be estimated as the sum of income transferred by households, corporations and general government in a period, less an allowance for net property income payments and capital formation.

Endnotes

  1. See SNA, 2008, paras.9.66 and 9.67.

Adjustments made to HFCE

10.25    The following outlines the adjustments that are made to some or all HFCE categories.

Net expenditure overseas

10.26    This item is included in HFCE COICOP categories 01-12 (excluding 04 Housing, water, electricity, gas and other fuels) as an adjustment so that total HFCE reflects the expenditure of resident households (in Australia and overseas) only. This adjustment is necessary because a number of the data sources for HFCE come from sales reported by Australian businesses. These sales include the expenditure by overseas visitors (treated as an export) and do not include expenditure of Australian overseas (recorded as an import).  Expenditures by overseas visitors on fares, meals, accommodation, entertainment, recreation and other goods and services in Australia are deducted from the appropriate HFCE categories while expenditures by Australian residents abroad are added.  

10.27    HFCE net expenditure overseas (NEO) is derived using Services Debits and Credits data obtained from Tables 8 and 9 in Balance of Payments and International Investments Position, Australia

10.28    Calculation of NEO is a two-stage process. The first stage estimates the total value of NEO while the second allocates expenditure to the appropriate HFCE category. The total value of NEO is calculated by offsetting two items against each other; namely, the expenditure of Australian residents abroad (debits) and the expenditure of non-residents in Australia (credits).

10.29    It should be noted that NEO does not include online purchases by Australian households from international websites. These are encompassed in the annual HFCE benchmarks, chiefly through alignment with data obtained from the Household Expenditure Survey (HES).

10.30    The expenditure of residents overseas is calculated as the sum of two items:

  • Personal travel debits; and
  • Expenditure of Australian Government employees.

10.31    Personal travel debits, as adjusted for national accounting purposes, record the acquisition of goods and services abroad by residents travelling at their own expense, including students. Business travellers are not included as their expenditure is largely intermediate consumption of the employing business. Examples are purchases of accommodation, meals, ground transportation and tours.

10.32    The estimate for personal travel debits is calculated as the sum of two original current price Balance of Payments series: Services Debits - Travel - Personal - Education-related and Services Debits - Travel - Personal - Other services. State/Territory splits are derived using proportions from the ABS publication, Overseas Arrivals and Departures, Australia.

10.33    Expenditure of Australian Government employees records the personal expenditure on goods and services by Australian diplomats and their dependants stationed abroad. It is also based on an original current price Balance of Payments series: an unpublished lower level component of Services Debits – Government goods and services n.i.e. State/Territory estimates are derived using figures on the number of Australian government employees abroad.

10.34    The expenditure of non-residents in Australia is derived by aggregating three items:

  • Business travel credits;
  • Personal travel credits; and
  • Expenditure of foreign government employees.

10.35    Business travel credits cover expenditures on goods and services by seasonal and non-resident workers employed in Australia, and by travellers who visit, for business purposes, on behalf of an enterprise resident in another economy. The Balance of Payments series for Business travel credits is Services Credits – Travel – Business. State/Territory splits are derived using proportions from the ABS publication, Overseas Arrivals and Departures, Australia.

10.36    Personal travel credits record expenditures on goods and services in Australia by non-residents travelling at their own expense, for purposes other than business. The estimate for personal travel credits is calculated as the sum of two original current price Balance of Payments series: Services Credits – Travel – Personal – Education-related and Services Credits – Travel – Personal – Other services. State and Territory estimates are again calculated using proportions from Overseas Arrivals and Departures, Australia.

10.37    Expenditure of foreign government employees records the personal expenditure in Australia on goods and services by foreign diplomats and their dependants stationed in Australia. It is based on the unpublished lower level component of the Balance of Payments series Services Credits – Government goods and services i.e. State/Territory estimates of the expenditure of foreign government employees in Australia are derived using information on the number of foreign diplomats.

10.38    Total NEO is calculated by subtracting the expenditure of non-residents in Australia from the expenditure of Australia residents overseas. This is then allocated to various categories of HFCE using information from the International Visitor Survey, published by Tourism Research Australia. Data on expenditure from this survey is used to derive weights for the HFCE categories, which are then applied to the total NEO estimate.

10.39    Quarterly and annual estimates of total NEO in current price terms are published as a memorandum item in Australian National Accounts: National Income, Expenditure and Product and Australian System of National Accounts.

Tourist refund scheme

10.40    An adjustment is made to applicable HFCE categories for the Tourist Refund Scheme (TRS), whereby individuals are able to claim back, under certain conditions, the goods and services tax (GST) and wine equalisation tax (WET) on goods purchased in Australia.

10.41    Information regarding the value of refunds from this scheme, broken down by type of good, is obtained quarterly from the Australian Border Force. These data are then allocated to the appropriate HFCE categories.

10.42    Adjustments for the TRS are made to the following COICOP categories:

2.1 Alcoholic beverages;
03 Clothing and footwear;
05 Furnishings and household equipment;
09 Recreation and culture; and
12 Miscellaneous goods and services.

Low value threshold

10.43    An adjustment is made to applicable HFCE categories for goods imported into Australia that fall below the Low Value Threshold (LVT) of $1,000. This adjustment covers purchases by Australian households from international websites.

10.44    Information regarding the value of goods imported that fall below the LVT are provided by Australian Customs. Various scope and coverage adjustments are applied to this data. These data are then allocated to the appropriate HFCE categories.

10.45    Adjustments for the LVT are made to the following COICOP categories:

01 Food and non-alcoholic beverages
02 Clothing and footwear
05 Furnishings and household equipment
06 Health
07 Transport
09 Miscellaneous goods and services
12 Recreation and culture

Underground economy

10.46    This adjustment attempts to capture the understatement in HFCE due to activities occurring in the underground economy. Measuring the Non-Observed Economy: A Handbook, a publication jointly authored by the OECD, the IMF, the International Labour Organization (ILO) and the Interstate Statistical Committee of the Commonwealth of Independent States, defined the underground economy as covering "those activities that are productive and legal but are deliberately concealed from the public authorities to avoid payment of taxes or complying with regulations".

10.47    In HFCE, the understatement is most likely to result from businesses under-reporting retail turnover in the source data used for the compilation of household expenditure estimates.

10.48    Annual estimates of home production are incorporated into S-U benchmarks. The annual value of self-supplied food is based on estimates of the amount of food produced for home consumption from the ABS publication, Home Production of Selected Foodstuffs, Australia. The value of homemade alcohol is based on estimates of the amount of alcohol produced for home consumption from the publication cited above.

10.49    Estimates for the underground activity occurring in the various HFCE categories are calculated as proportions of the expenditure estimates. The factors used have been compiled based on analysis by the ABS. These are not varied from year-to-year but are subject to periodic review. For more information, refer to Information Paper: The Non-Observed Economy and Australia’s GDP, 2012.

10.50    In ASNA, adjustments for the underground economy are made to the following COICOP categories:

01 Food;
03 Clothing and footwear;
05 Furnishings, household equipment and routine household maintenance;
07 Transport;
09 Recreation and culture;
11 Restaurants and hotels; and
12 Miscellaneous goods and services.

Repair and maintenance

10.51    This adjustment represents the expenditure by households on the repair and maintenance of various HFCE products, other than those captured in the Repair and maintenance not identified elsewhere component of HFCE Other Services (COICOP Group 12.5).

10.52    The sources used to derive estimates of household expenditure such as retail sales do not include spending on repairs and maintenance, therefore making it necessary to adjust for this expenditure separately.

10.53    Data on the total repair and maintenance expenditure by households is benchmarked irregularly to the Household Expenditure Survey, Australia: Summary of Results. Quarterly estimates are obtained by interpolating and extrapolating these benchmarks. Total repair and maintenance expenditure is broken down into HFCE product categories by applying weights, also obtained from the Household Expenditure Survey.

10.54    Adjustments for repairs and maintenance expenditure are applied to the following COICOP categories:

03 Clothing and footwear;
05 Furnishings, household equipment and routine household maintenance;
09 Recreation and culture; and
12 Miscellaneous goods and services.

Sources and methods - Annual

Benchmark years

10.55    Final consumption expenditure by resident households is calculated as:

Final consumption expenditure in the domestic market
+ Expenditure overseas by Australian residents
- Expenditure in Australian by foreign residents
= Household final consumption expenditure

10.56    When the annual compilation method is the sum of the quarters then reconciliation to the annual value is not necessary. When the quarterly series is estimated using an indicator then reconciliation to the annual value is required.

10.57    When the method for quarterly chain volume series is derived as extrapolation by a quarterly indicator the quarterly series is extrapolated from the latest annual estimate available. As each new annual value becomes available, the quarterly estimates are obtained by interpolating between the latest annual values using the quarterly indicator.

10.58    Unlike the quarterly production approach series, which draws most of its annual benchmarks from the balanced industry accounts, there are additional benchmarks for household final consumption expenditure. These include the ABS Economic Activity Survey and the Retail Trade Survey. The information on commodity expenditure from these sources is used to confront the industry production data. All benchmarks are therefore subject to revision. All quarterly current price estimates are reconciled to annual values based on the S-U confrontation. In cases where data are not available for every year, interpolation techniques are used for the intervening time span. Suitable indicators are used to obtain annual estimates for the span of the non-benchmark years. Once produced, these estimates are used in the supply and use framework to allow data confrontation.

10.59    A large proportion of household final consumption expenditure (HFCE) comprises sales by retail stores. Benchmarks are a combination of margin activity data (sales less cost of goods sold) in the Retail Trade and Wholesale Trade industries from the annual Economic Activity Survey, point of sale commodity data from the Retail Industry Survey and Wholesale Industry Survey (conducted every seven years) plus purchasing information from the Household Expenditure Survey which is held each 5 to 6 years. Latest data from these surveys are released in the publications: Retail and Wholesale Industries, Australia, Household Expenditure Survey, Australia: Summary of Results and Household Expenditure Survey, Australia: Detailed Expenditure Items. These surveys contain a product dimension which is classified to COICOP, for HFCE, with annual values being calculated via linear interpolation. For provisional years (that is, not yet balanced within the supply and use framework) and for the quarterly indicator series which are reconciled to these annual values, estimates are derived using movements in sales by outlet type from the Retail Trade Survey. This method is used for all commodities purchased from retail trade outlets except for motor vehicles and tobacco products where alternative information is available. For alcohol, the method is used for purchases from retail outlets and the Quarterly Business Indicator Survey (QBIS) is used for the portion purchased from non-retail outlets such as hotels, clubs and taverns. Quarterly chain volume series are derived by price deflation of commodities using sub-indexes of the Consumer Price Index and Retail Trade Survey outlet type deflators.

10.60    The Alcoholic beverages COICOP category includes only purchases of packaged alcohol which are consumed away from licensed premises. This excludes alcohol consumed on-premises such as pubs, bars, clubs or restaurants, which is considered a consumption of a service and is included under Hotels, cafes and restaurants. For the portion of alcohol purchased from non-retail outlets (QBIS), this captures packaged alcohol purchased on-premises and then consumed off-premise (i.e. a liquor store attached to a pub).

10.61    Retail expenditure estimates by consumption product are derived from retail trade data, which does not distinguish between resident and non-resident sales. Subsequently, estimates are made for expenditure by non-resident households in Australian (as these are recorded as exports) and alternatively expenditure by resident household’s overseas (imports). This ensures no double counting.

10.62    The tables below outline the data sources and methods used in the estimation of annual household final consumption expenditure by COICOP category. They include both the current price estimates and volume estimates.

Table 10.1 Annual household expenditure — Food and non-alcoholic beverages
Item Comment
Current price estimates
 

The periodic Retail and Wholesale Industry Surveys (RIS/WIS) provides the primary benchmark estimates for this series.

The value of self-supplied food is included and is based on estimates of the amount of food produced for home consumption from the ABS publication, Home Production of Selected Foodstuffs, Australia.

The following scope and coverage adjustments are made:

For the years where RIS/WIS data are not available the annual estimate is the sum of the four quarters.

When the next RIS/WIS benchmark becomes available a linear interpolation technique is used to align the current estimates to best fit the linear model between the two benchmarks.

The initial data is compiled according to the COICOP classification. This is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The HFCE estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial HFCE estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

Volume estimates
  Current price estimates for purchases of food by Australian residents are re-valued using relevant price deflator from the Consumer Price Index.
Table 10.2 Annual household final consumption expenditure—Alcoholic beverages
Item Comment
Current price estimates

 

The periodic Retail and Wholesale Industry Surveys (RIS/WIS) provides the primary benchmarks for this series.

The value of home-made alcohol is included and is based on estimates of the amount of alcohol produced for home consumption from the ABS publication, Home Production of Selected Foodstuffs, Australia.

The following scope and coverage adjustments are made:

For the years where RIS/WIS data are not available the annual estimate is the sum of the four quarters.

When the next RIS/WIS benchmark becomes available a linear interpolation technique is used to align the current estimates to best fit the linear model between the two benchmarks.

The initial data is compiled according to the COICOP classification. This is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The HFCE estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial HFCE estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

Volume estimates
  Volume estimates for alcoholic beverages are based on the sum of the quarterly volumes.
Table 10.3 Annual household consumption expenditure — Cigarettes and Tobacco
Item Comment
Current price estimates

 

The value of tobacco products consumed by households is estimated using the formula:

Domestic production

                     + imports

                     –  exports

                     –  re-exports

                     + taxes on products

                     + margin estimate

                     = Total consumption.

The value of domestic production is estimated using the estimates of income for sale of goods from the Economic Activity Survey. Exports and re-exports data are obtained from trade data as sourced from the ABS Balance of Payments. Taxes on products are sourced from Government Finance Statistics. Margins data are obtained from the RIS/WIS.

The initial data is compiled according to the COICOP classification. This is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The HFCE estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial HFCE estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

Volume estimates
  Volume estimates for cigarettes and tobacco are based on the sum of the quarterly volumes.
Table 10.4 Annual household final consumption expenditure — Clothing and footwear
Item Comment
Current price estimates

 

The periodic Retail and Wholesale Industry Survey (RIS/WIS) provides the primary benchmarks for this series.

The following scope and coverage adjustments are made:

  • sales that are out of scope of the RIS/WIS survey, which are:
    • manufacturing units selling directly to households; and
    • flea market sales.
  • net expenditure overseas.

For the years where RIS/WIS data are not available the annual estimate is the sum of the four quarters.

When the next RIS/WIS benchmark becomes available a linear interpolation technique is used to align the current estimates to best fit the linear model between the two benchmarks.

The initial data is compiled according to the COICOP classification. This is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The HFCE estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial HFCE estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

Volume estimates
  Current price estimates for purchases of clothing and footwear by Australian residents are re-valued using the relevant price deflator from the CPI.
Table 10.5 Annual household final consumption expenditure — Housing, water, electricity, gas and other fuels
Item Comment
Imputed rentals for housing
  Current price estimates

 

 

The Census of Population and Housing is the benchmark data source for the number of owner-occupied and rented dwellings and information about rents paid for rented dwellings.

The imputed rent for owner-occupied dwellings is calculated by multiplying average rents (adjusted to exclude rents at less than market value) reported in the census for privately rented dwellings in various categories.

Estimates of imputed rent of owner occupiers for intercensal and post-census periods are obtained by multiplying an estimate of the stock of dwellings by an estimate of the average rent of rented dwellings.

The stock of dwellings is estimated by extrapolating the benchmark estimate. The benchmark stock of dwellings includes all occupied private dwellings and a proportion of unoccupied private dwellings but excludes short-term caravans in caravan parks.

Private dwellings include separate houses, duplexes, town houses, flats including those which are part of a building that is used for commercial purposes (e.g. a retail shop) and caravans used for long-term accommodation. Additions to the stock are calculated from the number of dwelling completions sourced from the ABS publication, Building Activity, Australia. This is then modified by a factor to take into account other changes to the stock of dwellings (demolitions, net conversions from commercial uses and dwelling completions not in the scope of the survey).

For intercensal periods, this factor is calculated by dividing the change in the stock between the census benchmarks by the total number of dwelling completions in the period. For the post-census period, the factor is assumed to be the same as for the latest intercensal period.

After the latest applied benchmarks from the Census of Population and Housing, the total and owner occupied rent prices have been obtained from a combination of the Survey of Income and Housing (SIH), the CPI and real estate bulletins (Australian Property Monitors and Real Estate Institute of Australia).

  Volume estimates
    Volume estimate for imputed rentals for housing is based on the sum of the quarterly volumes compiled using a productive capital stock series which represents the volume of services provided by imputed rent on private dwellings.
Actual rentals for housing
  Current price estimates

 

 

These estimates are produced using the same sources as for the estimates of imputed rentals for housing.

The benchmark calculation gives a direct measure of the dwelling rent paid by households to the owners of dwellings.

  Volume estimates
    Volume estimate for actual rentals for housing is based on the sum of the quarterly volumes compiled using a productive capital stock series which represents the number of private dwellings.
Other services related to the dwelling
  Current price estimates

 

 

Data is sourced from the ABS publication, Household Expenditure Survey, Australia: Summary of Results. HES provides the benchmark estimates for this series which includes water and sewerage and waste services.

The following scope and coverage adjustments are made:

  • household expenses on water and sewerage service charges for rental and investment properties, which are out of scope of HES - based on HFCE estimates of actual rent for housing and imputed rent for owner occupiers;
  • coverage for remote and non-private dwellings which are not in scope of the HES; and
  • to capture final consumption expenditure of NPISH units using waste collection and disposal services, based on current grants information sourced from the Government Finance Statistics.

For the years where HES data are not available, the annual estimate is the sum of the four quarters.

When the next HES benchmark becomes available a linear interpolation technique is used to align the current estimates to best fit the linear model between the two benchmarks.

The initial data is compiled according to the COICOP classification. This is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The HFCE estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial HFCE estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

  Volume estimates
   

Volume estimates for water and sewerage services are based on the sum of the quarterly volumes.

Annual current price estimates in relation to waste collection and disposal services are re-valued using relevant price deflators from the Consumer Price Index to derive the annual volume estimates.

Electricity, gas and other fuels
  Current price estimates

 

 

The Household Expenditure Survey provides the benchmark estimates for this series.

The following scope and coverage adjustments are made:

  • coverage for remote and non-private dwellings which are not in scope of the HES.

For the years where HES data are not available, the annual estimate is the sum of the four quarters.

When the next HES benchmark becomes available a linear interpolation technique is used to align the current estimates to best fit the linear model between the two benchmarks.

The initial data is compiled according to the COICOP classification. This is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The HFCE estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial HFCE estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

  Volume estimates
    Current price estimates of purchases of electricity, gas and other fuels are re-valued using relevant price deflators from the Consumer Price Index.
Table 10.6 Annual household final consumption expenditure — Furnishings and household equipment
Item Comment
Furniture and furnishings, carpets and other floor coverings
  Current price estimates

 

 

The periodic Retail and Wholesale Industry Survey (RIS/WIS) provides the primary benchmarks for this series.

The following scope and coverage adjustments are made:

  • sales that are out of scope of the RIS/WIS survey, which are:
    • manufacturing units selling directly to households;
    • dealers’ margins associated with second-hand goods; and
    • flea market sales and sales by NPISH units.
  • net expenditure overseas.

For the years where RIS/WIS data are not available the annual estimate is the sum of the four quarters.

When the next RIS/WIS benchmark becomes available a linear interpolation technique is used to align the current estimates to best fit the linear model between the two benchmarks.

The initial data is compiled according to the COICOP classification. This is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The HFCE estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial HFCE estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

  Volume estimates

 

 

Current price estimates of purchases of furnishings and floor coverings in Australia are re-valued using relevant price deflators from the Consumer Price Index.

Household textiles
  Current price estimates

 

 

The periodic Retail and Wholesale Industry Survey (RIS/WIS) provides the primary benchmarks for this series.

The following scope and coverage adjustments are made:

  • sales that are out of scope of the RIS/WIS survey, which are:
    • flea market sales and sales by NPISH units.
  • net expenditure overseas.

For the years where RIS/WIS data are not available the annual estimate is the sum of the four quarters.

When the next RIS/WIS benchmark becomes available a linear interpolation technique is used to align the current estimates to best fit the linear model between the two benchmarks.

The initial data is compiled according to the COICOP classification. This is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The HFCE estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial HFCE estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

  Volume estimates

 

 

Current price estimates of purchases of household textiles in Australia are re-valued using relevant price deflators from the Consumer Price Index.

Household appliances
  Current price estimates

 

 

The periodic Retail and Wholesale Industry Survey (RIS/WIS) provides the primary benchmarks for this series.

The following scope and coverage adjustments are made:

  • sales that are out of scope of the RIS/WIS survey, which are:
    • manufacturing and wholesaling units selling directly to households;
    • electricity, gas and water industry units selling directly to households;
    • dealers’ margins associated with second-hand goods; and
    • flea market sales and sales by NPISH units.
  • net expenditure overseas.

For the years where RIS/WIS data are not available the annual estimate is the sum of the four quarters.

When the next RIS/WIS benchmark becomes available a linear interpolation technique is used to align the current estimates to best fit the linear model between the two benchmarks.

The initial data is compiled according to the COICOP classification. This is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The HFCE estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore. adjustments are likely to be applied to the initial HFCE estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

  Volume estimates

 

 

Current price estimates of purchases of household appliances in Australia are re-valued using relevant price deflators from the Consumer Price Index.

Glassware, tableware and household utensils
  Current price estimates

 

 

The periodic Retail and Wholesale Industry Survey (RIS/WIS) provides the primary benchmarks for this series.

The following scope and coverage adjustments are made:

  • sales that are out of scope of the RIS/WIS survey, which are:
    • flea market sales.
  • net expenditure overseas.

For the years where RIS/WIS data are not available the annual estimate is the sum of the four quarters.

When the next RIS/WIS benchmark becomes available a linear interpolation technique is used to align the current estimates to best fit the linear model between the two benchmarks.

The initial data is compiled according to the COICOP classification. This is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The HFCE estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial HFCE estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

  Volume estimates

 

 

Current price estimates of purchases of glassware, tableware and household utensils in Australia are re-valued using relevant price deflators from the Consumer Price Index.

Tools and equipment for house and garden
  Current price estimates

 

 

The periodic Retail and Wholesale Industry Survey (RIS/WIS) provides the primary benchmarks for this series.

The following scope and coverage adjustments are made:

  • sales that are out of scope of the RIS/WIS survey, which are:
    • flea market sales.
  • net expenditure overseas.

For the years where RIS/WIS data are not available the annual estimate is the sum of the four quarters.

When the next RIS/WIS benchmark becomes available a linear interpolation technique is used to align the current estimates to best fit the linear model between the two benchmarks.

The initial data is compiled according to the COICOP classification. This is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The HFCE estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial HFCE estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

  Volume estimates

 

 

Current price estimates of purchases of tools and equipment for house and garden in Australia are re-valued using relevant price deflators from the Consumer Price Index.

Non-durable household goods
  Current price estimates

 

 

The periodic Retail and Wholesale Industry Survey (RIS/WIS) provides the primary benchmarks for this series.

The following scope and coverage adjustments are made:

  • sales that are out of scope of the RIS/WIS survey, which are:
    • manufacturing and wholesaling units selling directly to households; and
    • flea market sales.
  • net expenditure overseas.

For the years where RIS/WIS data are not available the annual estimate is the sum of the four quarters.

When the next RIS/WIS benchmark becomes available a linear interpolation technique is used to align the current estimates to best fit the linear model between the two benchmarks.

The initial data is compiled according to the COICOP classification. This is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The HFCE estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial HFCE estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

  Volume estimates

 

 

Current price estimates of purchases of non-durable household goods in Australia are re-valued using relevant price deflators from the Consumer Price Index.

Table 10.7 Annual household final consumption expenditure — Health
Item Comment
Medicines, medical aids and therapeutic appliances
  Current price estimates

 

 

The periodic Retail and Wholesale Industry Survey (RIS/WIS) provides the primary benchmarks for this series.

The following scope and coverage adjustments are made:

  • net expenditure overseas.

For the years where RIS/WIS data are not available the annual estimate is the sum of the four quarters.

When the next RIS/WIS benchmark becomes available a linear interpolation technique is used to align the current estimates to best fit the linear model between the two benchmarks.

The initial data is compiled according to the COICOP classification. This is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The HFCE estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial HFCE estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

  Volume estimates

 

 

Volume estimates for the series are based on the sum of the quarterly volumes.

Ambulatory health care
  Current price estimates

 

 

The Household Expenditure Survey provides the primary benchmarks for this series.

The following scope and coverage adjustments are made:

  • coverage for remote and non-private dwellings which are not in scope of the HES;
  • to capture current grants from government to NPISH units providing ambulatory health care sourced from annual time series data from the Government Finance Statistics;
  • to capture current grants and donations from corporations and households to NPISH units providing ambulatory health care as extrapolated from the ABS publication, Australian National Accounts: Non-Profit Institutions Satellite Accounts;
  • household claims from private health insurance funds sourced from the Private Health Insurance Administration Council (PHIAC);
  • an estimate of 15 per cent of household claims associated with the health service component of workers’ compensation and motor vehicle and third party insurance sourced from the Australian Prudential Regulation Authority (APRA). This was derived from workers’ compensation and other insurance estimates associated with health services for ANZSIC Subdivision 85 Medical and other health care services, published in Health Care Services; and
  • net expenditure overseas.

For the years where HES data are not available, the annual estimate is the sum of the four quarters.

When the next HES benchmark becomes available a linear interpolation technique is used to align the current estimates to best fit the linear model between the two benchmarks.

The initial data is compiled according to the COICOP classification. This is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The HFCE estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial HFCE estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

  Volume estimates

 

 

Volume estimates for ambulatory health care are based on the sum of the quarterly volumes.

Hospital, ambulance services and nursing home care
  Current price estimates

 

 

The Household Expenditure Survey (HES) provides the primary benchmarks for this series.

The following scope and coverage adjustments are made:

  • coverage for remote and non-private dwellings which are not in scope of the HES;
  • to capture current grants from government to NPISH units providing ambulatory health care sourced from annual time series data from the Government Finance Statistics;
  • to capture current grants and donations from corporations and households to NPISH units providing ambulatory health care as extrapolated from the ABS publication, Australian National Accounts: Non-Profit Institutions Satellite Accounts;
  • household claims from private health insurance funds sourced from the Private Health Insurance Administration Council (PHIAC); and
  • an estimate of 15 per cent of household claims associated with the health service component of workers’ compensation and motor vehicle and third party insurance sourced from the Australian Prudential Regulation Authority (APRA). This estimate was derived from workers’ compensation and other insurance estimates associated with health services for ANZSIC Subdivision 85 Medical and other health care services published in Health Care Services;
  • an estimate of household expenses associated with nursing home fees. As nursing homes are not in scope of the HES, direct expenditure on these services is estimated using services income associated with Aged care residential services from the Economic Activity Survey; and
  • net expenditure overseas.

For the years where HES data are not available, the annual estimate is the sum of the four quarters.

When the next HES benchmark becomes available a linear interpolation technique is used to align the current estimates to best fit the linear model between the two benchmarks.

The initial data is compiled according to the COICOP classification. This is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The HFCE estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial HFCE estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

  Volume estimates

 

 

Annual volume estimates for healthcare HFCE are estimated in conjunction with direct volume estimates for health output, as described in Chapter 9, Table 9.30.

The sources used are private and public hospital separations and number of non-hospital services provided, stratified at various levels of procedure type, and weighted together by their respective current price value of expenditures.

Public and Private Hospital separations by procedure type and average separation costs are sourced from the Australian Institute of Health and Welfare (AIHW) hospital publication. The number of non-hospital services provided, and costs are sourced from Medicare, the Private Health Insurance Administration Council and the Productivity Commission (PC) Report on Government Services.

Table 10.8 Annual household final consumption — Transport
Item Comment
Purchase of vehicles
  Current price estimates

 

 

The periodic Retail and Wholesale Industry Survey (RIS/WIS) provides the primary benchmarks for this series.

The following scope and coverage adjustments are made:

  • purchase of vehicles that are out of scope of the survey;
  • dealers’ margins on used vehicles traded between households;
  • the value of private imports of used vehicles are estimated using data supplied from Customs documentation and an average price for used cars sourced from Vehicle Sales from the Federal Chamber of Automotive Industries (FCAI) publication, Vehicle Facts (VFACTs), or Glass' Automotive Business Intelligence (Glass' Guide); and
  • net expenditure overseas.

For the years where RIS/WIS data are not available the annual estimate is the sum of the four quarters.

When the next RIS/WIS benchmark becomes available a linear interpolation technique is used to align the current estimates to best fit the linear model between the two benchmarks.

The initial data is compiled according to the COICOP classification. This is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The HFCE estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial HFCE estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

  Volume estimates
    Volume estimates for this series are based on the sum of the quarterly volumes.
Operation of personal transport equipment
  Current price estimates

 

 

Annual household expenditure on automotive petroleum and coal products are based on the ABS publication, Survey of Motor Vehicle Use, Australia (SMVU).

The SMVU includes information on the fuel consumption of all motor vehicles by motor vehicle type and the private use of all vehicles by type of vehicle. Using this information and the national average retail price per litre of petrol and diesel sourced from the Australian Institute of Petroleum and the Automotive Petroleum Association, respectively, supplemented by Energy Accounts data, annual estimates of household expenditure for automotive petroleum and coal products are estimated.

The Household Expenditure Survey provides the primary benchmarks for the series relating to pneumatic tyres and tubes for motor cars and motor cycles, motor vehicle engines, chassis and panels; transport equipment not elsewhere classified, motor vehicle repair and maintenance expenditure and miscellaneous motoring expenditure.

The proportion of household claims associated with Motor Vehicle Comprehensive and third party insurance that captures estimates for the repair of accident damage to insured motor vehicles owned by the household sector is also included in compilation of Automotive repair and maintenance services.

The following scope and coverage adjustments are made:

  • coverage for remote and non-private dwellings which are not in scope of the HES; and
  • net expenditure overseas.

For the years where HES data are not available, the annual estimate is the sum of the four quarters.

When the next HES benchmark becomes available a linear interpolation technique is used to align the current estimates to best fit the linear model between the two benchmarks.

The initial data is compiled according to the COICOP classification. This is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The HFCE estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial HFCE estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

  Volume estimates
    Volume estimates for operation of personal transport equipment are based on the sum of the quarterly volumes.
Transport services
  Passenger transport by railway
    Current price estimates

 

   

The Household Expenditure Survey provides the primary benchmarks for this series.

The following scope and coverage adjustments are made:

  • coverage for remote and non-private dwellings which are not in scope of the HES;
  • to capture the final consumption expenditure of NPISH units using railway passenger transport services based on current grants information as sourced from the Government Finance Statistics;
  • current grants from government to NPISH (sourced from annual Government Finance Statistics); and
  • net expenditure overseas.

For the years where HES data are not available, the annual estimate is the sum of the four quarters.

When the next HES benchmark becomes available a linear interpolation technique is used to align the current estimates to best fit the linear model between the two benchmarks.

The initial data is compiled according to the COICOP classification. This is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The HFCE estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial HFCE estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

    Volume estimates

 

   

Expenditures on rail fares are re-valued using relevant price deflators from the Consumer Price Index.

Passenger transport by road
  Current price estimates

 

   

The Household Expenditure Survey provides the primary benchmarks for this series.

The following scope and coverage adjustments are made:

  • coverage for remote and non-private dwellings which are not in scope of the HES; 
  • to capture the final consumption expenditure of NPISH units using road passenger transport services based on current grants information as sourced from the Government Finance Statistics;
  • current grants from government to NPISH (sourced from annual Government Finance Statistics); and
  • net expenditure overseas.

For the years where HES data are not available, the annual estimate is the sum of the four quarters.

When the next HES benchmark becomes available a linear interpolation technique is used to align the current estimates to best fit the linear model between the two benchmarks.

The initial data is compiled according to the COICOP classification. This is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The HFCE estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial HFCE estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

  Volume estimates

 

   

Current price annual household expenditures on bus and taxi fares are re-valued using relevant price deflators from the Consumer Price Index.

Passenger transport by air
  Current price estimates

 

   

The Household Expenditure Survey provides the primary benchmarks for this series.

The following scope and coverage adjustments are made:

  • coverage for remote and non-private dwellings which are not in scope of the HES;
  • current grants from government to NPISH (sourced from annual Government Finance Statistics); and
  • net expenditure overseas.

For the years where HES data are not available, the annual estimate is the sum of the four quarters.

When the next HES benchmark becomes available a linear interpolation technique is used to align the current estimates to best fit the linear model between the two benchmarks.

The initial data is compiled according to the COICOP classification. This is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The HFCE estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial HFCE estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

  Volume estimates

 

   

Current price annual household expenditures on airfares are re-valued using relevant price deflators from the Consumer Price Index.

Passenger transport by sea and inland water
  Current price estimates

 

   

The Household Expenditure Survey provides the primary benchmarks for this series.

The following scope and coverage adjustments are made:

  • coverage for remote and non-private dwellings which are not in scope of the HES;
  • to capture the final consumption expenditure of NPISH units using passenger transport by sea and inland waterway services based on current grants information as sourced from the Government Finance Statistics;
  • current grants from government to NPISH (sourced from annual Government Finance Statistics); and
  • net expenditure overseas.

For the years where HES data are not available, the annual estimate is the sum of the four quarters.

When the next HES benchmark becomes available a linear interpolation technique is used to align the current estimates to best fit the linear model between the two benchmarks.

The initial data is compiled according to the COICOP classification. This is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The HFCE estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial HFCE estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

    Volume estimates

 

   

Current price annual household expenditures on passenger transport by sea and inland waterway services are re-valued using relevant price deflators from the Consumer Price Index.

 

Table 10.9 Annual household final consumption expenditure — Communications
Item Comment
Postal services
  Current price estimates

 

 

The Household Expenditure Survey provides the primary benchmarks for this series.

The following scope and coverage adjustments are made:

  • coverage for remote and non-private dwellings which are not in scope of the HES;
  • current grants from government to NPISH (sourced from annual Government Finance Statistics); and
  • net expenditure overseas.

For the years where HES data are not available, the annual estimate is the sum of the four quarters.

When the next HES benchmark becomes available a linear interpolation technique is used to align the current estimates to best fit the linear model between the two benchmarks.

The initial data is compiled according to the COICOP classification. This is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The HFCE estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial HFCE estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

  Volume estimates

 

 

Current price estimates of expenditure on postal services are re-valued using relevant price deflators from the CPI.

Telecommunication services
  Current price estimates

 

 

The Household Expenditure Survey provides the primary benchmarks for this series.

The following scope and coverage adjustments are made:

  • coverage for remote and non-private dwellings which are not in scope of the HES;
  • to capture the final consumption expenditure of NPISH units using telecommunication services based on current grants information sourced from the Government Finance Statistics;
  • current grants from government to NPISH (sourced from annual Government Finance Statistics); and
  • net expenditure overseas.

For the years where HES data are not available, the annual estimate is the sum of the four quarters.

When the next HES benchmark becomes available a linear interpolation technique is used to align the current estimates to best fit the linear model between the two benchmarks.

The initial data is compiled according to the COICOP classification. This is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The HFCE estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial HFCE estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

  Volume estimates

 

 

Current price annual estimates of expenditure on telephone and facsimile services are re-valued using relevant price deflators from the Consumer Price Index.

Volume estimates for internet services are based on the sum of the quarterly volumes.

Table 10.10 Annual household final consumption expenditure — Recreation and culture
Item Comment
Audio visual, photographic and data processing equipment and accessories
  Current price estimates

 

   

The periodic Retail and Wholesale Industry Survey (RIS/WIS) provides the primary benchmarks for this series.

The following scope and coverage adjustments are made:

For the years where RIS/WIS data are not available the annual estimate is the sum of the four quarters.

When the next RIS/WIS benchmark becomes available a linear interpolation technique is used to align the current estimates to best fit the linear model between the two benchmarks.

The initial data is compiled according to the COICOP classification. This is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The HFCE estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial HFCE estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

  Volume estimates
      Current price estimates of purchases of audio visual, photographic and data processing equipment and accessories in Australia are re-valued using relevant price deflators from the Consumer Price Index.
Other major durables for recreation and culture
  Current price estimates

 

   

The periodic Retail and Wholesale Industry Survey (RIS/WIS) provides the primary benchmarks for this series.

The following scope and coverage adjustments are made:

  • sales that are out of scope of the RIS/WIS survey, which are:
    • manufacturing units selling directly to the public;
    • a proportion of caravans used as residences is excluded,
    • dealers’ margins for sales of second-hand boats and caravans, excluding transactions between households; and
    • flea market sales.
  • current grants from government to NPISH (sourced from annual Government Finance Statistics); and
  • net expenditure overseas.

For the years where RIS/WIS data are not available the annual estimate is the sum of the four quarters.

When the next RIS/WIS benchmark becomes available a linear interpolation technique is used to align the current estimates to best fit the linear model between the two benchmarks.

The initial data is compiled according to the COICOP classification. This is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The HFCE estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial HFCE estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

  Volume estimates

 

   

Current price estimates of purchases of other major durables for recreation and culture are re-valued using relevant price deflators from the Consumer Price Index.

Other recreational items and equipment
  Current price estimates

 

   

The periodic Retail and Wholesale Industry Survey (RIS/WIS) provides the primary benchmarks for this series.

The following scope and coverage adjustments are made:

  • sales that are out of scope of the RIS/WIS survey, which are:
    • manufacturing units selling directly to the public;
    • sales of ‘backyard’ pure bred pets based on a historical value extrapolated using a growth rate for retail sales of pets and live animals over the last seven years from RIS/WIS;
    • sales of toys and other goods provided by NPISH units; and
    • flea market sales.
  • current grants from government to NPISH (sourced from annual Government Finance Statistics); and
  • net expenditure overseas.

For the years where RIS/WIS data are not available the annual estimate is the sum of the four quarters.

When the next RIS/WIS benchmark becomes available a linear interpolation technique is used to align the current estimates to best fit the linear model between the two benchmarks.

The initial data is compiled according to the COICOP classification. This is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The HFCE estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial HFCE estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

  Volume estimates

 

   

Current price annual estimates of purchases of other recreational items and equipment are re-valued using relevant price deflators from the Consumer Price Index.

Recreational and cultural services
  Sporting and recreational services
    Current price estimates

 

   

Household expenditure for sporting and recreational services not elsewhere classified is based on historical estimates which are rolled forward by multiplying movements associated with the estimated resident population and the CPI for the sports participation series.

The Household Expenditure Survey provides the primary benchmarks for this series relating to the cost of hiring entertainment equipment and facilities and sporting and educational services.

The following scope and coverage adjustments are made:

  • coverage for remote and non-private dwellings which are not in scope of the HES; and
  • net expenditure overseas.

Current expenditure of NPISHs providing sporting and recreational services is sourced from current grants to NPISH units providing sporting and recreational services. These data are sourced from Government Finance Statistics and current grants and donations from corporations and households to NPISHs units extrapolated from the ABS publication, Australian National Accounts: Non-Profit Institutions Satellite Account.

For the years where HES data are not available, the annual estimate is the sum of the four quarters.

When the next HES benchmark becomes available a linear interpolation technique is used to align the current estimates to best fit the linear model between the two benchmarks.

The initial data is compiled according to the COICOP classification. This is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The HFCE estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial HFCE estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

    Volume estimates

 

   

Current price estimates of purchases of expenditures on sporting and recreational services are re-valued using relevant price deflators from the Consumer Price Index.

  Cultural and entertainment services
    Current price estimates

 

   

The Household Expenditure Survey provides the primary benchmarks for this series.

The following scope and coverage adjustments are made:

  • coverage for remote and non-private dwellings which are not in scope of the HES;
  • to capture the final consumption expenditure of NPISH units providing cultural and entertainment services based on current grants information as sourced from the Government Finance Statistics and donations and sponsorship from households and corporations to NPISH units for providing these services extrapolated from the ABS publication, Australian National Accounts: Non-Profit Institutions Satellite Account; and
  • net expenditure overseas.

For the years where HES data are not available, the annual estimate is the sum of the four quarters.

When the next HES benchmark becomes available a linear interpolation technique is used to align the current estimates to best fit the linear model between the two benchmarks.

The initial data is compiled according to the COICOP classification. This is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The HFCE estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial HFCE estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

    Volume estimates
      Current price estimates of expenditures on cultural and entertainment services are re-valued using relevant price deflators from the Consumer Price Index.
Net losses from gambling
  Current price estimates

 

   

Current price estimates on Net losses from gambling are sourced from the Australian Gambling Statistics publication (published by the Queensland government). This publication provides comprehensive annual data on gambling in Australia.

The initial data is compiled according to the COICOP classification. This is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The HFCE estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial HFCE estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

  Volume estimates
      Net losses from personal outlays on gambling by households are re-valued using relevant price deflators from the CPI.
Newspapers, books and stationery
  Current price estimates

 

   

The periodic Retail and Wholesale Industry Survey (RIS/WIS) provides the primary benchmarks for this series.

The following scope and coverage adjustments are made:

For the years where RIS/WIS data are not available the annual estimate is the sum of the four quarters.

When the next RIS/WIS benchmark becomes available a linear interpolation technique is used to align the current estimates to best fit the linear model between the two benchmarks.

The initial data is compiled according to the COICOP classification. This is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The HFCE estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial HFCE estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

  Volume estimates
      Annual current price estimates of household expenditures on newspapers, books and stationery are re-valued using relevant price deflators from the Consumer Price Index.

 

Table 10.11 Annual household consumption expenditure — Education services
Item Comment
Current price estimates

 

The Household Expenditure Survey provides the primary benchmarks for this series.

The following scope and coverage adjustments are made:

  • coverage for remote and non-private dwellings which are not in scope of the HES;
  • to capture current grants from government to NPISH units providing education services sourced from annual time series data from Government Finance Statistics;
  • to capture current grants and donations from corporations and households to NPISH units providing education services extrapolated from benchmark data in the ABS publication, Australian National Accounts: Non-Profit Institutions Satellite Accounts; and
  • net expenditure overseas.

The household expenditure associated with the tertiary education services Higher Education Loan Program (HELP) was derived from time series data on HELP provided by the Department of Education.

For the years where HES data are not available, the annual estimate is the sum of the four quarters.

When the next HES benchmark becomes available a linear interpolation technique is used to align the current estimates to best fit the linear model between the two benchmarks.

The initial data is compiled according to the COICOP classification. This is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The HFCE estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial HFCE estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

Volume estimates

 

Annual volume estimates for education are estimated in conjunction with direct volume estimates for education output, as described in Chapter 9, Table 9.29.

The sources used are total numbers of students at both private and government schools, student load of universities, course hours for TAFE and other vocational education providers stratified at various levels of education and weighted together by their respective current price value of expenditures.

Student numbers are sourced from the ABS publication, Schools; annual reports from the departments of Education and Employment for school and university students; and data from the National Centre for Vocational Education Research (NCVER) for vocational students.

Table 10.12 Annual household final consumption expenditure — Hotels, catering and restaurants
Item Comment
Catering
  Current price estimates

 

 

The Household Expenditure Survey provides the primary benchmarks for this series.

The following scope and coverage adjustments are made:

  • coverage for remote and non-private dwellings which are not in scope of the HES;
  • to capture current grants from government to NPISH units providing catering services as sourced from annual time series data from Government Finance Statistics, and
  • to capture current grants and donations from corporations and households to NPISH units providing catering services as extrapolated from the ABS publication, Australian National Accounts: Non-Profit Institutions Satellite Accounts; and
  • net expenditure overseas.

For the years where HES data are not available, the annual estimate is the sum of the four quarters.

When the next HES benchmark becomes available a linear interpolation technique is used to align the current estimates to best fit the linear model between the two benchmarks.

The initial data is compiled according to the COICOP classification. This is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The HFCE estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial HFCE estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

  Volume estimates
    Expenditures on catering by Australian residents are re-valued using relevant price deflators from the Consumer Price Index.
Accommodation services
  Current price estimates

 

 

The Household Expenditure Survey provides the primary benchmarks for this series.

The following scope and coverage adjustments are made:

  • coverage for remote and non-private dwellings which are not in scope of the HES;
  • to capture current grants from government to NPISH units providing accommodation services as sourced from annual time series data from Government Finance Statistics, and
  • to capture current grants and donations from corporations and households to NPISH units providing accommodation services as extrapolated from the ABS publication, Australian National Accounts: Non-Profit Institutions Satellite Accounts; and
  • net expenditure overseas.

For the years where HES data are not available, the annual estimate is the sum of the four quarters.

When the next HES benchmark becomes available a linear interpolation technique is used to align the current estimates to best fit the linear model between the two benchmarks.

The initial data is compiled according to the COICOP classification. This is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The HFCE estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial HFCE estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

  Volume estimates

 

 

Expenditures on accommodation services by Australian residents are re-valued using relevant price deflators from the Consumer Price Index.

Table 10.13 Annual household final consumption expenditure — Miscellaneous goods and services
Item Comment
Personal care
  Current price estimates

 

   

The periodic Retail and Wholesale Industry Survey (RIS/WIS) provides the primary benchmarks for the series relating to personal outlays on personal care products such as perfume, cosmetics and soap.

The Household Expenditure Survey (HES) provides the benchmarks for miscellaneous services including hair dressing and beauty salon services.

The following scope and coverage adjustments are made:

  • sales that are out of scope of the RIS/WIS survey, which are:
    • sales on aircraft and ships; and
    • flea market sales.
  • coverage for remote and non-private dwellings which are not in scope of the HES;
  • current grants from government to NPISH (sourced from annual Government Finance Statistics); and
  • net expenditure overseas.

For the years where RIS/WIS and HES data are not available the annual estimate is the sum of the four quarters.

When the next RIS/WIS and HES benchmarks become available a linear interpolation technique is used to align the current estimates to best fit the linear model between the benchmarks.

The initial data is compiled according to the COICOP classification. This is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The HFCE estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial HFCE estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

  Volume estimates

 

   

Expenditures on personal care by Australian residents are re-valued using relevant price deflators from the Consumer Price Index.

Personal effects

  Current price estimates

 

   

The periodic Retail and Wholesale Industry Survey (RIS/WIS) provides the primary benchmarks for this series relating to personal outlays on jewellery and watches etc.

The following scope and coverage adjustments are made:

  • sales that are out of scope of the RIS/WIS survey, which are:
    • sales on aircraft and ships, and
    • flea market sales.
  • current grants from government to NPISH (sourced from annual Government Finance Statistics), and
  • net expenditure overseas.

For the years where RIS/WIS data are not available the annual estimate is the sum of the four quarters.

When the next RIS/WIS benchmark becomes available a linear interpolation technique is used to align the current estimates to best fit the linear model between the two benchmarks.

The initial data is compiled according to the COICOP classification. This is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The HFCE estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial HFCE estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

  Volume estimates

 

   

Expenditures on personal effects by Australian residents are re-valued using relevant price deflators from the Consumer Price Index.

Insurance
  Description
      Included in this item is the service charge paid by householders for insurance. Premiums paid for general insurance of householders' effects, motor vehicle insurance, health insurance, and life insurance and superannuation can be seen to comprise a service charge for insuring, a payment for the risk of insuring and, for life insurance and superannuation funds, an element of saving.
  Current price estimates
    Homeowner and household insurance

 

   

This is the service charge for insuring householders' furniture and effects, generally called home contents insurance. Insurance of the dwelling itself is excluded from household final consumption expenditure as it is considered to be part of the intermediate consumption of the industry, Ownership of dwellings.

Premiums and claims for Homeowner and Household Insurance are obtained from Quarterly General Insurance Performance Statistics; General Insurance Supplementary Statistical Tables; half-yearly General Insurance Bulletin and Selected Statistics on the General Insurance Industry, published by the Australian Prudential Regulatory Authority (APRA) in quarterly, half-yearly and annual bulletins.

Expected claims are derived by using a centred five-year moving average of claims incurred.

Premium supplements are calculated using the proportion of Homeowner and Household premiums to total general insurance premiums multiplied by total investments earnings on general insurance technical reserves.

Premium supplements are added together with personal premiums to give the total value of premiums.

Personal premiums paid plus premium supplements less expected personal claims incurred gives the value of the service charge which is included in household final consumption expenditure.

Taxes on products are added to derive a purchases price value. Taxes on products are allocated to this product using a number of methods. These include the proportion of GST from net of premiums less claims and the supply proportion of Government taxes on insurance n.e.c. for other taxes on products.

    Motor vehicle insurance

 

   

Motor vehicle insurance service charges cover both compulsory third party (personal injury) insurance, and comprehensive and third party property insurance on motor vehicles.

Premiums and claims for motor vehicle property and compulsory third party (personal injury) insurance are obtained from Quarterly General Insurance Performance Statistics; General Insurance Supplementary Statistical Tables; half-yearly General Insurance Bulletin and Selected Statistics on the General Insurance Industry, published by the APRA in quarterly, half-yearly and annual bulletins.

APRA data are classified in a consistent manner to national accounts requirements. Domestic comprehensive motor vehicle insurance is applicable directly to household final consumption expenditure, commercial comprehensive motor vehicle insurance is categorised to business and government. Compulsory third party motor vehicle insurance for householders is obtained by multiplying total compulsory third party motor vehicle insurance by the proportion of personal vehicles to business and government vehicles from the ABS Survey of Motor Vehicle Use, Australia.

Expected claims are derived by using a centred five-year moving average of claims incurred.

Premium supplements are added together with personal premiums to give the total value of premiums for both motor vehicle property and compulsory third party (personal injury) insurance. Premium supplements for each type of motor vehicle insurance are calculated using the proportion of motor vehicle insurance premiums to total general insurance premiums multiplied by total investment earnings on general insurance technical reserves.

Personal premiums paid plus premium supplements less expected personal claims incurred gives the value of the service charge which is included in household final consumption expenditure.

Taxes on products are added to derive a purchases price value. Taxes on products are allocated to this product using a number of methods. These include the proportion of GST from net of premiums less claims and the direct amount of government third party insurance taxes for other taxes on products.

    Health insurance

 

   

The insurance service charge for health insurance is calculated in the same way as for general insurance of householders' effects.

Information about premiums paid and claims incurred by households from health insurers is sourced from the Private Health Insurance Administration Council publication, Operations of the Registered Health Benefits Organisations.

Expected claims are derived by using a centred five-year moving average of claims incurred.

Personal premiums paid plus premium supplements less expected personal claims incurred gives the value of the service charge which is included in household final consumption expenditure.

 Premium supplements are added together with personal premiums to give the total value of premiums. Premium supplements are calculated by dividing health insurance premiums by total general insurance premiums multiplied by investment earnings on general insurance technical reserves.

The Medicare levy paid by individuals is considered to be an element of income tax levied by the Commonwealth Government. As such, it is not included in household final consumption expenditure.

    Other non-life insurance by households as consumers

 

   

This is the service charge for various classes of insurance which are taken out by households, but which have not been explicitly discussed above. Included are travel, consumer credit, marine hull, and sickness and accident.

Premiums and claims for the relevant classes of insurance business are obtained from Quarterly General Insurance Performance Statistics; General Insurance Supplementary Statistical Tables; half-yearly General Insurance Bulletin and Selected Statistics on the General Insurance Industry, published by the Australian Prudential Regulation Authority in quarterly, half-yearly and annual bulletins.

The households' share of both premiums and claims for each class of business are estimated using available information and subjective judgement.

Expected claims are derived by using a centred five-year moving average of claims incurred.

Premium supplements are added together with personal premiums to give the total value of premiums.

Premium supplements are calculated using the proportion of households' premiums for the relevant classes of business to total general insurance premiums, multiplied by total investment earnings on general insurance technical reserves.

Personal premiums paid plus premium supplements less expected personal claims incurred gives the value of the service charge which is included in household final consumption expenditure.

Taxes on products are added to derive a purchases price value. Taxes on products are allocated to this product using a number of methods. These include the proportion of GST from net of premiums less claims and supply proportions of government taxes on insurance n.e.c. for other taxes on products.

    Life insurance and superannuation

 

   

Premiums and contributions paid by policyholders to life insurance corporations and superannuation are considered to include an insurance service charge element. A proportion of life insurance and superannuation premiums/contributions is actually paid by employers on behalf of their employees. However, for national accounts purposes these premiums are included in employers' social contributions, which is a component of compensation of employees. The employee pays the insurance service charge (a component of household final consumption expenditure) and invests in life insurance and superannuation funds recorded in the household financial account.

For life insurance corporations and friendly societies, the insurance service charge is equal to the cost of running the business plus a profit margin. The service charge is compiled from data on life insurance statutory funds available from Quarterly Life Insurance Performance Statistics; half-yearly Life Insurance Bulletin and the Annual Friendly Society Bulletin, published by the Australian Prudential Regulatory Authority. The profit margin is calculated by estimating a proxy return on equity (where the return on equity is defined as gross operating surplus over shareholders' funds).

For pension funds the insurance service charge is equal to cost of running the fund, included are administrative and investment expenses. The service charge is compiled from data on pension funds available from the ABS publications, Managed Funds, Australia  and Australian National Accounts: Finance and Wealth; and the APRA publications, Superannuation Performance Statistics and the Annual Superannuation Bulletin.

Taxes on products are added to derive a purchases price value. Other taxes on products are allocated to this product using supply proportions of government taxes on insurance n.e.c.

    Workers’ compensation insurance

 

   

The insurance service charge for workers’ compensation insurance paid by employers is included in household final consumption expenditure. The insurance service charge measures the value of services provided by the insurance enterprises in arranging payments for claims in exchange for the receipts of premiums.

Premiums and claims for the relevant classes of insurance business are obtained from, quarterly General Insurance Performance Statistics; General Insurance Supplementary Statistical Tables; half-yearly General Insurance Bulletin and Selected Statistics on the General Insurance Industry, published by the Australian Prudential Regulation Authority in quarterly, half-yearly and annual bulletins.

Premium supplements are added together with personal premiums to give the total value of premiums. Premium supplements are calculated using the proportion of workers’ compensation insurance premiums to total general insurance premiums, multiplied by total investment earnings on general insurance technical reserves. Personal premiums paid plus premium supplements less expected personal claims incurred gives the value of the service charge which is included in household final consumption expenditure.

Taxes on products are added to derive a purchases price value. Taxes on products are allocated to this product using a number of methods. These include the proportion of GST from net of premiums less claims and supply proportion of government taxes on insurance n.e.c. for other taxes on products.

    Supply and use balancing process for insurance services

 

   

The initial data is compiled at the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

The SUPC level data are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

    Volume estimates

 

   

Current price estimates of purchases of insurance services are re-valued using relevant price deflators from the CPI.

Financial services
  Description

 

   

The scope of this item is household expenditure, both actual and imputed, on services provided by financial institutions other than insurers. Three broad categories of expenditure are covered.

The first relates to the charges that households pay explicitly to financial institutions for services rendered. Examples are account-keeping fees; commission on money orders, travellers' cheques and overseas drafts; brokerage on share trading; and financial advisers' charges.

The second covers taxes on production and imports levied by general government on financial transactions undertaken by households. Examples are financial institutions duty and stamp duty incurred by trading in financial instruments. The stamp duty payable on the transfer of titles to residential property is treated as part of the transfer costs of ownership of dwellings (which are included in gross fixed capital formation) and as such is not part of household final consumption expenditure.

The last component is the indirectly charged service charges of banks and other similar financial intermediaries. In the national accounts an imputation is made for the value of the services provided by financial intermediaries; that is, Financial Intermediation Services Indirectly Measured (FISIM). It is estimated by reference to the difference in interest rates offered to borrowers and depositors and the average levels of outstanding loans and deposits. The payment for financial services is implicit in both the higher interest paid by borrowers and the lower interest received by depositors. That part of this service which relates to personal loans to households to finance household consumption and household deposits held by financial intermediaries is regarded as being paid by persons and included in household final consumption expenditure. FISIM relating to mortgages on dwellings owned by persons is not included in household final consumption expenditure, but is treated as a component of intermediate consumption in the calculation of gross operating surplus for dwellings owned by persons.

  Current price estimates
    Explicit charges

 

   

The total value of explicit charges (e.g. account-keeping fees; commission on money orders; travellers' cheques and overseas drafts; brokerage on share trading; and financial advisers' charges) paid by households is calculated using data from the following sources:

  • Banks', Credit Unions' and Building Societies' performance statistics published quarterly by the Australian Prudential Regulatory Authority (APRA);
  • the Reserve Bank of Australia's Statistical Bulletin;
  • suite of APRA forms – quarterly Bank Statement of Financial Performance and quarterly Registered Financial Corporations Statement of Financial Performance; and
  • Economic Activity Survey

Taxes on products are added to derive a purchases price value. Taxes and subsidies on products are allocated to specific products using a number of methods. These include household final consumption expenditure proportions in the case of the Goods and Services Tax and supply proportions for other taxes on products.

    FISIM

 

   

FISIM is estimated as the difference between the interest rates on loans and deposits and a pure or reference rate of interest, multiplied by the level of loans and deposits, respectively. The total value of FISIM paid by households is calculated using data from the following sources:

  • Balance sheets:
  • Income and expenditure:
    • RBA: Annual Report; Financial Stability Report (6 monthly); Statement of Monetary Policy (quarterly);
    • ABS publications: Balance of Payments and International Investment Position; Statistics of Financial Institutions  (note: Statistics of Financial Institutions has ceased but for completeness it is included as the data in this publication still underpins the estimates);
    • ABS collections – Economic Activity Survey, quarterly Survey of Financial Information, Government Finance Statistics;
    • suite of APRA forms – quarterly Bank Statement of Financial Performance and quarterly Registered Financial Corporations Statement of Financial Performance;
    • APRA publications:  quarterly Banks, Building Societies and Credit Unions Performance Statistics; and
    • ad hoc reports: annual reports for small subsectors such as listed investment companies, bank annual reports and private consultant banking reports.
  • Interest rates:
    • RBA Statistical Bulletin.

To compile household final consumption expenditure FISIM estimates for banks, other depository corporations and securitisers, the total interest receivable and payable estimates by financial instruments (i.e. deposits, bills of exchange, one-name paper, bonds and loans) and counterparty sector and subsector flows for the following five sectors and subsectors are compiled:

  • Rest of the world;
  • Reserve Bank of Australia;
  • Banks;
  • Other depository corporations;
  • Securitisers.

Three datasets are required to compile the interest flows, namely:

  1. total interest payable and receivable;
  2. interest rates for relevant financial instruments for various sectors and subsectors; and
  3. balance sheets for the five sectors and subsectors.

The next step is to calculate FISIM for loans and deposits (banks and other depository corporations) and for loans (securitisers). That is:

  • For banks and other depository corporations, FISIM is derived as the sum of the counterparty sector and subsector stock levels of loans and deposits; that is:

[(counterparty loan rate – reference rate) * counterparty stock of loans] + [(reference rate – counterparty deposit rate) * counterparty stock of deposits]

where the reference rate is the mid-point between the average interest rate on loans and the average interest rate on deposits.

  • For securitisers, FISIM is derived as the sum of the counterparty sector and subsector stock levels of loans; that is:

[(counterparty loan rate – reference rate) * counterparty stock of loan]

where the reference rate is the weighted average bond yield.

The above calculations are undertaken in separate loan and deposit FISIM tables for each of the three FISIM generating institutions. Each table captures the counterparty sector and subsector loan and deposit balances, their respective interest flows and interest margins and the subsequent FISIM estimates.

The FISIM tables mentioned above for loans and deposits enable the allocation of FISIM by final use (i.e. household final consumption expenditure), exports and intermediate use directly.

    Supply and use balancing process for finance services

 

   

The initial data is compiled at the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

The SUPC level data are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results. For more information on the product flow method refer to Chapter 7.

  Volume estimates
    Explicit charges

 

   

Current price estimates of purchases of direct financial services by Australian residents are re-valued using relevant price deflators from the CPI.

    FISIM

 

   

The detailed information from the current price FISIM loan and deposit tables for the four financial intermediaries (i.e. banks, other depository corporations, central borrowing authorities and securitisers) are used to construct chain volume measures.

Chain volume FISIM measures are produced for the total, household final consumption expenditure, intermediate use of ownership of dwellings, intermediate use by general government, total intermediate use, exports and imports:

Laspeyres chain volume estimates of balances (loans and deposits) by counterparty sectors and subsectors are calculated by deflating the current price estimates using the All groups CPI.

The deflated loans and deposits are multiplied by the associated interest margin for the previous year to produce estimates of FISIM in prices of the previous year.

The estimates in the previous step are summed across the four financial intermediaries to produce Laspeyres chain volume estimates of total FISIM, final use (i.e. household final consumption expenditure), exports, imports, total intermediate use and dwellings and general government intermediate use.

Other goods and services
  Current price estimates

 

   

The Household Expenditure Survey provides the primary benchmarks for miscellaneous services including personal outlays on dry cleaning, photographic services, laundering, removalist services, funeral services and professional services (other than health care services) such as legal and accounting services.

The following scope and coverage adjustments are made:

  • coverage for remote and non-private dwellings which are not in scope of the HES;
  • to capture current expenditure of NPISH units providing professional services such as other social assistance services not elsewhere classified (including elderly, disabled, marriage and adoption services), legal services as compiled based on current grants from government to NPISH units as sourced from annual time series data from Government Finance Statistics;
  • to capture current grants and donations from corporations and households to NPISH units providing childcare services, interest groups not elsewhere classified (including welfare fundraising services) as extrapolated from the ABS publication, Australian National Accounts: Non-Profit Institutions Satellite Accounts, and
  • net expenditure overseas.

Current expenditure on NPISHs such as religious services are sourced from current grants and donations from corporations and households to NPISH units providing religious services extrapolated from the ABS publication, Australian National Accounts: Non-Profit Institutions Satellite Accounts.

For the years where HES data are not available, the annual estimate is the sum of the four quarters.

When the next HES benchmark becomes available a linear interpolation technique is used to align the current estimates to best fit the linear model between the two benchmarks.

The initial data is compiled according to the COICOP classification. This is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The HFCE estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial HFCE estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

  Volume estimates

 

   

Current price estimates on household expenditures on other goods and services by Australian residents are re-valued using relevant price deflators from the Consumer Price Index.

Latest year

10.63    For the majority of HFCE components, annual estimates are constructed by summing of the quarterly estimates for the years after the latest Supply and Use tables.

Sources and methods - Quarterly

10.64    The tables below outline the data sources and methods used in the estimation of quarterly household final consumption expenditure by COICOP category. They include both the current price estimates and volume estimates.

Table 10.14 Quarterly household final consumption expenditure — Food and non-alcoholic beverages
Item Comment
Current price estimates

 

Quarterly indicator series for Food and non-alcoholic beverages are derived by weighting together series from the ABS publication, Retail Trade, Australia, based on weights from the 2012-13 Retail and Wholesale Industries Surveys (RIS/WIS).

The indicator at the national level is used to allocate benchmarked annual estimates to the four quarters of the year, as well as to derive quarterly estimates for Food and non-alcoholic beverages past the latest available benchmark.

State/Territory estimates are derived from the national estimates using the relative proportions in the indicator series.

The following scope and coverage adjustments are made:

  • net expenditure overseas;
  • backyard production; and
  • underground (or cash) economy.
Volume estimates

 

Current price estimates of purchases of food and non-alcoholic beverages by Australian residents in Australia are re-valued using a weighted average of components from the CPI Food and non-alcoholic Beverages group.

Current price estimates of purchases of food and non-alcoholic beverages by Australian residents overseas are re-valued using a composite index of overseas CPIs adjusted for exchange rate changes.

Chain volume estimates of Food and non-alcoholic beverages are derived by aggregating the elemental volume components above.

Table 10.15 Quarterly household final consumption expenditure — Alcoholic beverages
Item Comment
Current price estimates

 

Quarterly indicator series for Alcoholic beverages are derived by weighting together series from the ABS publication, Retail Trade, Australia and the quarterly Business Indicators: Australia, based on weights from the 20012-13 Retail and Wholesale Industries Surveys.

The indicator at the national level is used to allocate benchmarked annual estimates to the four quarters of the year, as well as to derive quarterly estimates for Alcoholic beverages past the latest available benchmark.

State/Territory estimates are derived from the national estimates using the relative proportions in the indicator series.

The following scope and coverage adjustments are made:

  • net expenditure overseas;
  • backyard production; and
  • taxes refunded through the Tourist Refund Scheme.
Volume estimates

 

Current price estimates of purchases of alcohol by Australian residents in Australia are re-valued using a weighted average of components from the CPI Alcoholic beverages sub-group.

Current price estimates of purchases of alcohol by Australian residents overseas are re-valued using a composite index of overseas CPIs adjusted for exchange rate changes.

Chain volume estimates of Alcoholic beverages are derived by aggregating the elemental volume components above.

Table 10.16 Quarterly household final consumption expenditure — Cigarettes and Tobacco
Item Comment
Current price estimates

 

The quarterly indicator for Cigarettes and tobacco is derived using price and quantity information sourced from the scanner data of the major supermarket chains. The data contains product codes (SKUs), product descriptions, prices, quantities and store metadata. SKUs are aggregated into five major categories: cartons, packs (normal cigarettes and cigars), grams of leaf tobacco sold, filters and papers.

The indicator at the national level is used to allocate benchmarked annual estimates to the four quarters of the year, as well as to derive quarterly estimates for Cigarettes and tobacco past the latest available benchmark.

State/Territory estimates are derived from the national estimates using the relative proportions in the indicator series.

The following scope and coverage adjustments are made:

  • net expenditure overseas.
Volume estimates

 

Current price estimates of purchases of cigarettes and tobacco by Australian residents in Australia are re-valued using the CPI for Tobacco.

Current price estimates of purchases of cigarettes and tobacco by Australian residents overseas are re-valued using a composite index of overseas CPIs adjusted for exchange rate changes.

Chain volume esti