- 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).
- 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.
- UN (1953) A System of National Accounts and Supporting Tables, Studies in Methods, Series F(2). New York: United Nations.
- UNSO (1968) A System of National Accounts, Studies in Methods, Series F(2), Rev. 3. New York: United Nations Statistical Office (UNSO).
- 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).
- 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.
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.
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:
- Discussion paper: Introduction of Revised International Statistical Standards in ABS, December, 1994.
- Information Paper: Implementation of Revised International Standards in the Australian National Accounts, September, 1997.
- Information Paper: Australian National Accounts, Introduction of Chain Volume Measures and Price Indexes, March, 1998.
1.26 Preliminary data on a 1993 SNA basis were made available in re-releases of the following publications:
- Australian National Accounts: National Income, Expenditure and Product, June quarter, 1998 re-released in November 1998 in Information Paper: Upgraded Australian National Accounts.
- Australian National Accounts: Finance and Wealth, June quarter, 1998 re-released in December 1998 in Information Paper: Upgraded Australian National Accounts.
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:
- Information Paper: Introduction of Revised International Standards in ABS Economic Statistics in 2009, September, 2007
- Information Paper: Implementation of New International Standards in ABS National and International Accounts, October, 2009
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.
- 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.
- CBCS (1960) Quarterly Estimates of National Income and Expenditure. Canberra: Commonwealth Bureau of Census and Statistics (CBCS).
- CBCS (1963) Australian National Accounts: National Income and Expenditure, 1948-49 to 1961-62. Canberra: Commonwealth Bureau of Census and Statistics (CBCS).
- CBCS (1964) Australian Input-Output Tables, 1958-59. Canberra: Commonwealth Bureau of Census and Statistics (CBCS).
- 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).
- CBCS (1973) Australian National Accounts: Input-Output Tables, 1962-63. Canberra: Commonwealth Bureau of Census and Statistics (CBCS).
- Bailey, Cherylee (1981) Studies in National Accounting: Current-cost and Constant-cost Depreciation and Net Capital Stock. Canberra: Australian Bureau of Statistics (ABS).
- Johnson A.G. (1982) The Accuracy and Reliability of the Quarterly Australian National Accounts. Canberra: Australian Bureau of Statistics (ABS).
- Burrell S., Daniel J., Johnson A. and R. Walters (1984) State Accounts, Australia: Issues and Experimental Estimates. Canberra: Australian Bureau of Statistics (ABS).
- ABS (1987) Australian National Accounts: State Accounts, 1985-86. Canberra: Australian Bureau of Statistics (ABS).
- Dippelsman, R.J. (1985) The Effects of Rebasing the Constant Price Estimates of the Australian National Accounts. Canberra: Australian Bureau of Statistics (ABS).
- Walters, R. and R. Dippelsman (1986) Estimates of Depreciation and Capital Stock, Australia. Occasional Paper 1985/3. Canberra: Australian Bureau of Statistics (ABS).
- ABS (1987) Australian National Accounts: Estimates of Capital Stock, 1985-86. Canberra: Australian Bureau of Statistics (ABS).
- ABS (1988) Australian National Accounts: Gross Product, Employment and Hours Worked, June Quarter, 1988. Canberra: Australian Bureau of Statistics (ABS).
- ABS (1990) Occasional Paper: Estimates of Multifactor Productivity, Australia. Canberra: Australian Bureau of Statistics (ABS).
- ABS (1990) Information Paper: Australian National Accounts: Flow of Funds Developmental Estimates. Canberra: Australian Bureau of Statistics (ABS).
- ABS (1993) Information Paper: Australian National Accounts: Introduction of Constant Price Estimates at Average 1989-90 Prices. Canberra: Australian Bureau of Statistics (ABS).
- 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:
- Australian System of National Accounts (ASNA) – annual;
- Australian National Accounts: National Income, Expenditure and Product (NIEP) – quarterly;
- Australian National Accounts: Input-Output Tables – annual;
- Australian National Accounts: Supply Use Tables – annual;
- Australian National Accounts: State Accounts – annual;
- Australian National Accounts: Finance and Wealth – quarterly;
- Estimates of Industry Multifactor Productivity – annual;
- Estimates of Industry Level KLEMS Multifactor Productivity – annual;
- Australian National Accounts: Tourism Satellite Accounts – annual;
- Australian National Accounts: Non-Profit Institutions Satellite Accounts – irregular; and
- Australian National Accounts: Information and Communication Technology Satellite Accounts – irregular.
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.