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# Australian National Accounts: National Income, Expenditure and Product methodology

Reference period
June 2019
Released
4/09/2019

## Explanatory notes

### Introduction

This publication contains estimates of gross domestic product (GDP) and its components, components of state final demand, the national income account, the national capital account and supporting series. Quarterly estimates are provided for the latest nine quarters. For the most part, these estimates are provided in trend and seasonally adjusted terms. Where trend and seasonally adjusted estimates are not available, original data are provided. Annual estimates, on an original basis, are provided for the key statistics for the past nine years. The List of Time Series Spreadsheets, set out in the Appendix, shows the full range of data provided. The full quarterly time series, including all original data on a quarterly basis (both national and state), are available from the Australian Bureau of Statistics (ABS) website

### Concepts, sources and methods

Australia's national accounts statistics are compiled in accordance with international standards contained in the System of National Accounts. These standards have recently been updated and are presented in the System of National Accounts, 2008 (SNA08). Australia's application of these SNA standards is described in Australian System of National Accounts: Concepts, Sources and Methods (cat. no. 5216.0). It is available on the ABS website http://www.abs.gov.au. This publication outlines major concepts and definitions, describes sources of data and methods used to derive annual and quarterly estimates for major aggregates at current prices and in chain volume terms, and discusses the accuracy and reliability of the national accounts. In addition, it includes documentation on input-output tables, financial accounts, capital stock, productivity measures, balance sheets, and state accounts.

While national estimates are based on the concepts and conventions embodied in SNA08, no such standard is available for sub-national (regional/state) accounts. In the main, the national concepts are applicable to state accounts, but there remain a number of conceptual and measurement issues that either do not apply or are insignificant at the national level. Information on some of the more important conceptual, methodological and data issues relating to annual and quarterly estimates by state is provided in Chapter 28 of the Concepts, Sources and Methods.

### Accuracy of quarterly estimates

Estimating the national accounts components for a period of less than one year presents special problems. It is often difficult to adhere strictly to definitions used in annual estimates when deriving quarterly ones. This is particularly the case for the quarterly measure of income, because it is not always possible to match the volume of production for a quarter with the cost incurred in that production. Difficulties are also encountered in obtaining detailed data for short periods and in preparing consistent estimates from different sources with different accounting procedures and periods. Furthermore, the quarter-to-quarter growth in seasonally adjusted terms is very sensitive to the timing of recording a transaction. If the recording of a transaction is delayed by one quarter, seasonally adjusted movements will be distorted for three consecutive quarters. All these problems affect the accuracy of the current price and chain volume estimates and should be taken into account in interpreting the estimates.

The majority of the estimates in the quarterly national accounts are based on the results of sample surveys. Many of the results of these surveys are released in the period leading up to the release of the quarterly accounts thus providing users with a guide to likely movements in key national accounting aggregates. In a national accounts context, these various pieces of information are referred to as partial indicators. Usually there are differences in concept and scope between the national accounts series and the relevant partial indicator which means that the movements in the partial indicator will not always be identical to the national accounts series movement. However, in general the movements should be similar. To ensure a reasonable level of consistency between the partial indicators and the national accounts series and hence present a common understanding of recent economic developments, the national accounts area liaises with the relevant survey areas and provides feedback regarding data quality and data coherence. This may result in adjustments being made by survey areas to their collected data prior to their release. The objective use of the national accounts framework to provide data coherence across all ABS economic statistics ensures that a common understanding of recent economic developments is presented.

The state estimates generally represent dissections of quarterly estimates published for Australia in this publication. Therefore, they will reflect any inaccuracies in those estimates as well as inaccuracies introduced by the particular conceptual, methodological and data problems inherent in the allocation of Australian estimates to states and territories. As such, the degree of accuracy and reliability will necessarily be lower than that for the counterpart Australian estimates.

Estimates for compensation of employees, household final consumption expenditure and private gross fixed capital formation are based on the results of sample surveys. By their nature, survey results become less accurate as they are disaggregated (for example into states and/or industries). Generally, the ABS surveys used to derive these aggregates are designed to provide accurate estimates at the Australian total level and individual state estimates that are less accurate but still of acceptable quality. However, it should be noted that relative standard errors are generally higher for the smaller states and territories than they are for the larger states. This may result in greater volatility in the quarterly estimates for the smaller states and two territories.

Estimates of government final consumption expenditure, and general government and public enterprise gross fixed capital formation can be substantially affected by the indicators chosen to apportion the Commonwealth government component to states and territories. Care is required when interpreting these estimates.

### Revisions

Most figures are subject to revision as more complete and accurate information becomes available. The revisions are of two types: those made to recent quarters and those made as a consequence of a redistribution across all quarters within a year following revisions to annual totals.

### Seasonally adjusted and trend estimates

The general methods for deriving seasonally adjusted and trend estimates are described in Australian System of National Accounts: Concepts, Sources and Methods (cat. no. 5216.0).

Data that are affected by seasonal factors are adjusted to remove the effects of these factors. Three important points should be noted here:

• The methods used in seasonal adjustment do not force the sum of the adjusted current price estimates for each quarter of a year to equal the original annual total.
• Where chain volume estimates have no apparent seasonality in their implicit price deflators, the estimates are adjusted using the corresponding factors for current price estimates.
• A special method, known as the pseudo-additive method, has been used to adjust the output of cereal crops. This is necessary to account for the fact that there is no cereal output in some quarters.

Seasonally adjusted chain volume figures are calculated from seasonally adjusted figures expressed in the prices of the previous year. As with original data, the seasonally adjusted chain volume measures are benchmarked to annual original estimates. As a consequence, the seasonally adjusted chain volume measures sum to the corresponding annual original figures - unlike their current price counterparts.

### Trend estimates

A trend estimate is obtained by removing the irregular component from the seasonally adjusted series. For estimates in this publication, it is calculated using a centred 7-term Henderson moving average of the seasonally adjusted series. The procedure is designed to minimise distortions in the trend level, turning point shape and timing of turning points. Estimates for the three most recent quarters cannot be calculated using this centred average method; instead an asymmetric average is used. This can lead to revisions in the trend estimates for the last three quarters when data become available for later quarters, even if none of the original data for earlier quarters has changed.

The higher the 'irregular' component in a series, then the greater the likelihood that trend estimates for the latest quarters will be revised as more observations become available. However, it is important to note that this does not make the trend series inferior to the seasonally adjusted or original series. In fact, in such cases the effect of the irregular component on overall movements is likely to be even more in the seasonally adjusted and the original estimates than in the trend series.

Trend estimates for aggregates such as GDP are derived directly, rather than as the sum of components. As a result, the sum of the trend estimates of individual components of a particular aggregate will not sum to the overall trend estimate of the aggregate for the latest three quarters. This approach provides higher quality trend estimates for key aggregates, particularly GDP.

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 (cat. no. 1349.0) or contact Time Series Analysis by email at Time.Series.Analysis@abs.gov.au.

### State and territory versus Australian series

For trend and seasonally adjusted series, the sum of the states and territories generally does not equal the corresponding estimate for 'total Australia', nor are the quarter-to-quarter movements identical. On a few occasions, these differences have been significant, particularly for the seasonally adjusted series. This reflects both the shorter span of data available for seasonal analysis at the state level and the fact that seasonal analysis is generally carried out at a more aggregated level than for the 'total Australia' series. The state and territory trend and seasonally adjusted series are less accurate than the Australian data. However, as the state and territory time series lengthen, the quarterly movements in the sum of the state estimates should more closely match those in the Australian series.

### Gross Domestic Product (GDP)

GDP is derived by three approaches: the income approach (I), the expenditure approach (E) and the production approach (P). A description of each approach is provided in the following paragraphs. While each measure should, conceptually, produce the same estimate of GDP, if the three measures are compiled independently using different data sources, then different estimates of GDP result. The ABS aligns the estimates of GDP annually by balancing them in supply and use tables. These tables have been compiled from 1994-95, up to the year preceding the latest complete financial year. Balancing in supply and use tables ensures that the same estimate of GDP is obtained from the three approaches. Annual estimates using the I, E and P approaches are identical for the years for which these tables are compiled. For years balanced using supply and use tables, quarterly GDP is benchmarked to annual GDP. However, the three estimates of GDP can be different for any given quarter. The annual GDP estimate produced by balancing using supply and use tables forms the benchmark for the production of quarterly GDP going forward. Quarterly GDP is compiled in chain volume terms using all three approaches. The headline measure of GDP is a simple average of the three separate measures. It is labelled GDP(A), with "A" denoting "average".

Prior to 1994-95 quarterly and annual estimates using each approach are based on independent sources, and there are usually differences between the I, E and P estimates. For these periods, a single estimate of GDP has been 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 the expenditure-based estimates.

As a result of the above methods:

• There is no statistical discrepancy for annual estimates from 1994-95 up to the year prior to the latest complete financial year, in either current price or volume terms, except for estimates released in the June quarter where discrepancies will exist for the latest two complete financial years.
• For years prior to 1994-95, and for all quarters, statistical discrepancies exist between estimates based on the I, E and P approaches and the single estimate of GDP, in both current prices and volume terms. These discrepancies are shown in the relevant tables.

### Income approach (I)

GDP using the income approach is derived as the sum of compensation of employees, gross operating surplus, gross mixed income and taxes less subsidies on production and imports. Volume estimates are derived at the total GDP level by deflating current price estimates by the implicit price deflator from the expenditure approach.

### Expenditure approach (E)

GDP using the expenditure approach is derived as the sum of all final expenditures, changes in inventories and exports of goods and services less imports of goods and services. Volume estimates are derived for each of the components as well as for their sum.

### Production approach (P)

GDP using the production approach is derived as the sum of gross value added for each industry, at basic prices, plus taxes less subsidies on products. Basic values represent the amounts received by producers, including the value of any subsidies on products, but before any taxes on products. The difference between the sum over all industries of gross value added at basic prices, and GDP at market (or purchasers') prices, is the value of taxes less subsidies on products.

In this publication, only volume estimates compiled using the production approach have been shown. These estimates are derived by extrapolating annual volume measures using various indicators. The information necessary to compile comprehensive current price estimates using the production approach is not available quarterly.

### Financial intermediation services

In the national accounts, estimates are made for the output of banks and similar institutions who produce services through the provision of deposit and loan services. Often there is no single explicit charge for these services and instead the relevant financial institutions set interest rates such that a service margin can be earned. Thus, interest rates on loans are higher than would otherwise be the case if there were no service element provided and interest rates on deposits are lower than would otherwise be the case.

In order to appropriately account for this service component the output produced by these financial institutions is shown as being consumed by Households (includes unincorporated enterprises and private non profit institutions serving households), Corporations, and General government. In the sector income accounts the effect of allocating the output to consuming sectors is that part of the interest flow is deemed a payment of service and the balance is shown as interest such that the net effect on saving is zero.

In interpreting the income accounts it is therefore necessary to regard the interest flow series as being a flow without a service element - i.e. a pure interest flow. In the case of loans the interest flow that is shown will be less than the observed interest payment made to the financial institution. In the case of deposits the interest flow that is shown will be greater than the observed interest payment made by the financial institution. For further information users should consult the Australian System of National Accounts: Concepts, Sources and Methods (cat. no. 5216.0).

### Related publications

Current publications and other products released by the ABS are freely available from the ABS website http://www.abs.gov.au, the website contains a link to the daily Release Advice which details products to be released in the weeks (months) ahead.

## Appendix - time series spreadsheets

### Show all

Electronic table (time series spreadsheet)Type of data
1.Key National Accounts AggregatesTrend, seasonally adjusted and original data for key aggregates including percentage changes and indexes.
2.Expenditure on Gross Domestic Product (GDP), Chain volume measuresTrend, seasonally adjusted and original data for expenditure on GDP including percentage changes, revisions to percentage changes and contributions to growth.
3.Expenditure on Gross Domestic Product (GDP), Current pricesTrend, seasonally adjusted and original data for expenditure on GDP including revisions (seasonally adjusted).
4.Expenditure on Gross Domestic Product (GDP), Chain price indexesOriginal and percentage changes (original).
6.Gross Value Added by Industry, Chain volume measuresTrend, seasonally adjusted and original data for industry GVA including percentage changes (trend & seasonally adjusted), revisions to percentage changes and contributions to growth (seasonally adjusted).
7.Income from Gross Domestic Product (GDP), Current pricesTrend, seasonally adjusted and original Income from GDP.
8.Household Final Consumption Expenditure (HFCE)Volume and current price data (trend , seasonally adjusted & original).
9.Changes in InventoriesVolume and current price data (trend , seasonally adjusted & original).
10.Agricultural Income, Current pricesTrend, seasonally adjusted and original.
11.National Income Account, Current pricesTrend, seasonally adjusted and original.
12.National Capital Account, Current pricesTrend, seasonally adjusted and original.
13.Non-Financial Corporations Income Account, Current pricesTrend, seasonally adjusted and original.
14.Private Non-Financial Corporations Income Account, Current pricesTrend, seasonally adjusted and original.
15.Public Non-Financial Corporations Income Account, Current pricesTrend, seasonally adjusted and original.
16.Financial Corporations Income Account, Current pricesTrend, seasonally adjusted and original.
17.General Government Income Account, Current pricesTrend, seasonally adjusted and original.
18.National General Government Income Account, Current pricesTrend, seasonally adjusted and original.
19.State and Local General Government Income Account, Current pricesTrend, seasonally adjusted and original.
20.Household Income Account, Current pricesTrend, seasonally adjusted and original.
21.External Account, Current pricesTrend, seasonally adjusted and original.
22.Taxes, Current pricesTrend, seasonally adjusted and original.
23.Social Assistance Benefits Payments, Current pricesOriginal.
24.Selected Analytical SeriesTrend, seasonally adjusted and original.
25.State Final Demand, Summary Components by State: Chain volume measuresTrend and seasonally adjusted, all states
26.State Final Demand, Detailed Components: New South WalesTrend, seasonally adjusted and original, and revisions to percentage changes (seasonally adjusted).
27.State Final Demand, Detailed Components: VictoriaTrend, seasonally adjusted and original, and revisions to percentage changes (seasonally adjusted).
28.State Final Demand, Detailed Components: QueenslandTrend, seasonally adjusted and original, and revisions to percentage changes (seasonally adjusted).
29.State Final Demand, Detailed Components: South AustraliaTrend, seasonally adjusted and original, and revisions to percentage changes (seasonally adjusted).
30.State Final Demand, Detailed Components: Western AustraliaTrend, seasonally adjusted and original, and revisions to percentage changes (seasonally adjusted).
31.State Final Demand, Detailed Components: TasmaniaTrend, seasonally adjusted and original, and revisions to percentage changes (seasonally adjusted).
32.State Final Demand, Detailed Components: Northern TerritoryTrend, seasonally adjusted and original, and revisions to percentage changes (seasonally adjusted).
33.State Final Demand, Detailed Components: Australian Capital TerritoryTrend, seasonally adjusted and original, and revisions to percentage changes (seasonally adjusted).
34.Key Aggregates and analytical series, AnnualAnnual
35.Income from GDP and Changes in Inventories, AnnualAnnual
36.Expenditure on Gross Domestic Product (GDP), Chain volume measures and Current prices, AnnualAnnual volume and current price data with chain price indexes and IPD's.
37.Industry Gross Value Added, Chain volume measures, AnnualAnnual volume measures.
38.National Income Account, Current prices, AnnualAnnual current price data.
39.National Capital Account, Current prices, AnnualAnnual current price data.
40.External Account, Current prices, AnnualAnnual current price data.
41.Indexes of Industrial ProductionQuarterly indexes.
42.Unit Labour CostsTrend, seasonally adjusted and original indexes.
43.Indexes of Industrial Production, AnnualAnnual indexes.
44.Compensation of Employees, State by Sector: Current PricesSeasonally Adjusted.

## Glossary

### Show all

#### Acquisitions less disposals of non-produced non-financial assets

Includes three distinct types of non-produced non-financial assets: natural resources; contracts, leases and licences; and goodwill and marketing assets. At present, estimates of the value of purchased goodwill and marketing assets are not compiled for the ASNA.

#### Agricultural income

The income accruing from agricultural production during an accounting period. It is equal to total agricultural factor income less consumption of fixed capital, compensation of employees, and net rent and interest payments.

#### Artistic originals

Original films, sound recordings, manuscripts, tapes, models, etc., on which drama performances, radio and television programming, musical performances, sporting events, literary and artistic output, etc. are recorded or embodied. Included are works produced on own-account. In some cases there may be multiple originals (e.g. films).

#### Average compensation per employee

Calculated as total compensation of employees divided by the number of wage and salary earners from the monthly Labour Force Survey.

#### Basic price

The amount receivable by the producer from the purchaser for a unit of a good or service produced as output, minus any tax payable plus any subsidy receivable, on that unit as a consequence of its production or sale; it excludes any transport charges invoiced separately by the producer.

#### Capital account

Records the values of the non-financial assets that are acquired, or disposed of, by resident institutional units by engaging in transactions, and shows the change in net worth due to saving and capital transfers or internal bookkeeping transactions linked to production (changes in inventories and consumption of fixed capital).

#### Capital transfers

Unrequited transactions where either;

• ownership of an asset (other than cash or inventories) is transferred from one institutional unit to another;
• cash is transferred to enable the recipient to acquire another asset; or
• the funds realised by the disposal of an asset are transferred.

Examples include general government capital transfers to private schools for the construction of science blocks or libraries, assistance to first home owners and transfers to charitable organisations for the construction of homes for the aged.

#### Chain price indexes

Annually-reweighted chain Laspeyres price indexes referenced to the same year as the chain volume measures. They can be thought of as a series of indexes measuring price change from a base year to quarters in the following year using current price values in the base year as weights, linked together to form a continuous time series. In other words, chain price indexes are constructed in a similar fashion to the chain volume indexes. Quarterly chain price indexes are benchmarked to annual chain price indexes in the same way as their chain volume counterparts. Unlike implicit price deflators, chain price indexes measure only the impact of price change.

#### Chain volume measures

Annually-reweighted chain Laspeyres volume indexes referenced to the current price values in a chosen reference year (i.e. the year when the quarterly chain volume measures sum to the current price annual values). Chain Laspeyres volume measures are compiled by linking together (compounding) movements in volumes, calculated using the average prices of the previous financial year, and applying the compounded movements to the current price estimates of the reference year. Quarterly chain volume estimates are benchmarked to annual chain volume estimates, so that the quarterly estimates for a financial year sum to the corresponding annual estimate.

#### Changes in inventories

The difference in value between inventories held at the beginning and end of the reference period by enterprises and general government. For national accounting purposes, physical changes in inventories should be valued at the prices current at the times when the changes occur. For these purposes, changes in inventories are obtained after adjusting the increase in book value of inventories by the inventory valuation adjustment. The need for the latter arises because the changes in the value of inventories as calculated from existing business accounting records do not meet national accounting requirements. The inventory valuation adjustment is the difference between the change in (book) value of inventories and the physical changes valued at current prices. The physical changes at average current quarter prices are calculated by applying average quarterly price indexes to the changes in various categories of inventories in volume terms.

#### Compensation of employees

Total remuneration, in cash or in kind, payable by an enterprise to an employee in return for work done by the employee during the accounting period. It is further classified into two sub-components: wages and salaries; and employers’ social contributions. Compensation of employees is not payable in respect of unpaid work undertaken voluntarily, including the work done by members of a household within an unincorporated enterprise owned by the same household. Compensation of employees excludes any taxes payable by the employer on the wage and salary bill (e.g. payroll tax). See also Employers’ social contributions and Wages and salaries.

#### Computer software

Computer programs, program descriptions and supporting materials for both systems and applications software. Included are purchased software and, if the expenditure is large, software developed on own-account. It also includes the purchase or development of large databases that the enterprise expects to use in production over a period of more than one year. The ASNA does not separately identify databases from computer software as recommended by the 2008 SNA.

#### Consumption of fixed capital

The value of the reproducible fixed assets used up during a period of account as a result of normal wear and tear, foreseen obsolescence and the normal rate of accidental damage. Unforeseen obsolescence, major catastrophes and the depletion of natural resources are not taken into account.

#### Contributions to growth in GDP

The contributions to growth for a given aggregate '$$A$$' is calculated as:

$$\large{100 \text{ * }(\frac{({PY^A}_t-{PP^A}_t)}{{PP^A}_t}) \times (\frac{{PP^A}_t}{{PP^{GDP}}_t})}$$

Where:

• $$\large{{PY^A}_t}$$ is the quantity of an aggregate in the current period, in previous period prices
• $$\large{{PP^A}_t}$$ is the quantity of an aggregate in the previous period, in previous period prices
• $$\large{{PP^{GDP}}_t}$$ is the current price value of GDP in the previous period.

Additivity for contributions to growth exists for the years where the statistical discrepancy is zero, effectively 1995-96 onwards, by using GDP expressed in the prices of the previous year. For the period 1986-87 to 1994-95, where the statistical discrepancy is not zero, the result is close to additive but not exact because the statistical discrepancy cannot be expressed in prices of the previous year. Additionally, quarterly contribution to growth estimates will not add to GDP growth due to the existence of a statistical discrepancy between the three quarterly measures of GDP.

#### Cultivated biological resources

Includes livestock raised for breeding, dairy, wool, etc., and vineyards, orchards and other plantations of trees yielding repeat products that are under the direct control, responsibility and management of institutional units. Immature cultivated assets are excluded unless produced for own use.

#### Current prices

Estimates are valued at the prices of the period to which the observation relates. For example, estimates for this financial year are valued using this financial year’s prices. This contrasts to chain volume measures where the prices used in valuation refer to the prices of the previous year.

#### Current taxes on income, wealth, etc

Include taxes on the incomes of households or the profits of corporations and taxes on wealth that are payable regularly every tax assessment period (as distinct from capital taxes that are levied infrequently).

#### Current transfers

Transfers, other than those classified as capital transfers, in which one institutional unit provides a good, service or cash to another unit without receiving from the latter anything of economic value in return.

#### Domestic sales

Defined as:

• household final consumption expenditure on goods
• plus private gross fixed capital formation: dwellings, non-dwelling construction, and machinery and equipment
• plus public gross fixed capital formation: dwellings, non-dwelling construction, and machinery and equipment.

#### Dwellings

Buildings, or designated parts of buildings, that are used entirely or primarily as residences, including any associated structures, such as garages, and all permanent fixtures customarily installed in residences. Houseboats, barges, mobile homes and caravans used as principal residences of households are also included, as are public monuments identified primarily as dwellings. The costs of site clearance and preparation are also included in the value of dwellings.

#### Employers’ social contributions

Payments by employers which are intended to secure for their employees the entitlement to social benefits should certain events occur, or certain circumstances exist, that may adversely affect their employees' income or welfare - namely work-related accidents and retirement.

#### Exports of goods and services

The value of goods exported and amounts receivable from non-residents for the provision of services by residents.

#### External account

Records all current transactions between Australian residents and non-residents.

#### Farm GDP

Is the part of gross domestic product which derives from production in agriculture and services to agriculture.

#### Farm inventories

Includes:

• inventories held on farms (including wool, wheat, barley, oats, maize, sorghum, hay, fertiliser, apples and pears, and livestock);
• wool held in store awaiting sale; and
• produce (e.g. vegetables) held in cold store where ownership remains with the primary producer.

#### Final consumption expenditure - general government

Net expenditure on goods and services by public authorities, other than those classified as public corporations, which does not result in the creation of fixed assets or inventories or in the acquisition of land and existing buildings or second-hand assets. It comprises expenditure on compensation of employees (other than those charged to capital works, etc.), goods and services (other than fixed assets and inventories) and consumption of fixed capital. Expenditure on repair and maintenance of roads is included. Fees, etc., charged by general government bodies for goods sold and services rendered are offset against purchases. Net expenditure overseas by general government bodies and purchases from public corporations are included. Expenditure on defence assets is classified as gross fixed capital formation.

#### Final consumption expenditure - households

Net expenditure on goods and services by persons and expenditure of a current nature by private non-profit institutions serving households. This item excludes expenditures by unincorporated businesses and expenditures on assets by non-profit institutions (included in gross fixed capital formation). Also excluded is expenditure on maintenance of dwellings (treated as intermediate expenses of private enterprises), but personal expenditure on motor vehicles and other durable goods and the imputed rent of owner-occupied dwellings are included. The value of 'backyard' production (including food produced and consumed on farms) is included in household final consumption expenditure and the payment of wages and salaries in kind (e.g. food and lodging supplied free to employees) is counted in both household income and household final consumption expenditure.

#### Gross disposable income - households

Gross household income less income tax payable, other current taxes on income, wealth etc., consumer debt interest, interest payable by unincorporated enterprises and dwellings owned by persons, net non-life insurance premiums and other current transfers payable by households.

#### Gross domestic product (GDP)

Is the total market value of goods and services produced in Australia within a given period after deducting the cost of goods and services used up in the process of production but before deducting allowances for the consumption of fixed capital. Thus gross domestic product, as here defined, is 'at market prices'. It is equivalent to gross national expenditure plus exports of goods and services less imports of goods and services.

#### GDP per capita

The ratio of the chain volume estimate of GDP to an estimate of the resident Australian population. Population estimates use data published in the quarterly publication Australian Demographic Statistics (cat. no. 3101.0) and ABS projections.

#### Gross domestic product per hour worked

The ratio of the chain volume estimate of GDP to an estimate of hours worked. Hours worked estimates are derived as the product of employment and average hours worked.

Movements in chain volume estimates of GDP per hour worked are commonly interpreted as changes in labour productivity. However, it should be noted that these measures reflect not only the contribution of labour to changes in production per hour worked, but also the contribution of capital and other factors (such as managerial efficiency, economies of scale, etc.).

#### Gross fixed capital formation

Expenditure on new fixed assets plus net expenditure on second-hand fixed assets, including both additions and or replacements. Expenditure on repair and maintenance of fixed assets is excluded, being chargeable to the production account. Compensation of employees and other costs paid by corporations in connection with own-account capital formation are included.

#### Gross income - households

The total income, whether in cash or kind, receivable by persons normally resident in Australia. It includes both income in return for productive activity (such as compensation of employees, the gross mixed income of unincorporated enterprises, gross operating surplus on dwellings owned by persons, and property income receivable, etc.) as well as transfers receivable (such as social assistance benefits and non-life insurance claims).

#### Gross mixed income of unincorporated enterprises (GMI)

The surplus or deficit accruing from production by unincorporated enterprises. It includes elements of both compensation of employees (returns on labour inputs) and operating surplus (returns on capital inputs).

#### Gross national expenditure (GNE)

The total expenditure within a given period by Australian residents on final goods and services (i.e. excluding goods and services used up during the period in the process of production). It is equivalent to gross domestic product plus imports of goods and services less exports of goods and services.

#### Gross national income (GNI)

The aggregate value of gross primary incomes for all institutional sectors, including net primary income receivable from non-residents.

#### Gross operating surplus

The operating surplus accruing to all enterprises, except unincorporated enterprises, from their operations in Australia. It is the excess of gross output over the sum of intermediate consumption, compensation of employees, and taxes less subsidies on production and imports. It is calculated before deduction of consumption of fixed capital, dividends, interest, royalties and land rent, and direct taxes payable, but after deducting the inventory valuation adjustment. Gross operating surplus is also calculated for general government and it equals general government's consumption of fixed capital.

The value of output at basic prices minus the value of intermediate consumption at purchasers' prices. The term is used to describe gross product by industry and by sector. Basic prices valuation of output removes the distortion caused by variations in the incidence of commodity taxes and subsidies across the output of individual industries.

#### Hours worked

The hours worked by all labour engaged in the production of goods and services, including hours worked by civilian wage and salary earners, employers, self-employed persons, persons working one hour or more without pay in a family business or on a farm, and members of the Australian defence forces.

#### Household saving ratio

The ratio of household net saving to household net disposable income. Household net saving is calculated as household net disposable income less household final consumption expenditure. Household net disposable income is calculated as household gross disposable income less household consumption of fixed capital.

#### Implicit price deflator

Obtained by dividing a current price value by its real counterpart (the chain volume measure). When calculated from the major national accounting aggregates, such as gross domestic product, implicit price deflators relate to a broader range of goods and services in the economy than that represented by any of the individual price indexes that are published by the ABS. Movements in an implicit price deflator reflect both changes in price and changes in the composition of the aggregate for which the deflator is calculated.

#### Imports of goods and services

The value of goods imported and amounts payable to non-residents for the provision of services to residents.

#### Imports to domestic sales ratio

Imports of merchandise goods divided by domestic sales. This ratio is calculated using current price estimates. See also Domestic sales.

#### Income account

Shows how gross disposable income is used for final consumption expenditure and the consumption of fixed capital (depreciation), with the balance being net saving. Income flows are divided into primary income and secondary income. Primary incomes are incomes that accrue to institutional units as a consequence of their involvement in processes of production or ownership of assets that may be needed for purposes of production. Secondary incomes are incomes that are redistributed between institutional units by means of payments and receipts of current transfers. Income redistribution also includes social transfers in kind.

#### Income tax

Consists of taxes on the income of households, corporations and non-residents, and taxes on wealth which are levied regularly (wealth taxes which are levied irregularly are classified as capital taxes and are recorded in the sectoral capital accounts).

#### Intellectual property products

Are as a result of research and development, investigation or innovations leading to knowledge that the developers can market or use for their own benefit. Includes computer software, research and development, entertainment, literary or artistic originals, and mineral exploration intended to be used for more than a year.

#### Interest

Receivable by the owners of financial assets such as deposits, loans, and securities other than shares for putting the financial asset at the disposal of another institutional unit.

#### Machinery and equipment

Includes transport equipment and other machinery and equipment, other than that acquired by households for final consumption.

#### Market sector

The 'market sector' is defined to include all industries except for Public administration and safety (O); Education and training (P); Health care and social assistance (Q) and Ownership of dwellings.

#### Mineral and petroleum exploration

The value of expenditures on exploration for petroleum and natural gas and for non-petroleum mineral deposits. These expenditures include pre-licence costs, licence and acquisition costs, appraisal costs and the costs of actual test drilling and boring, as well as the costs of aerial and other surveys, transportation costs etc., incurred to make it possible to carry out the tests.

#### National saving

Calculated as the sum of the net saving of each of the resident sectors - households and unincorporated enterprises, non-financial corporations, financial corporations and general government.

#### Net domestic product

Calculated as GDP less consumption of fixed capital.

#### Net lending to non-residents

The excess of net acquisition of financial assets in the rest of the world by resident institutional units over their net incurrence of liabilities in the rest of the world.

Defined as non-life insurance premiums plus premium supplements less the non-life insurance service charge.

#### Net saving

Balancing item of the income account, this is equal to total income receivable less total income payable, final consumption expenditure and consumption of fixed capital. Represents the excess of income over consumption.

#### Net secondary income from non-residents

All transfers to or from non-residents to resident government or private institutional units which are not payments for goods and services, compensation of employees or property income.

#### Non-dwelling construction

Consists of non-residential buildings and other structures. ‘Non-residential buildings’ are buildings other than dwellings, including fixtures, facilities and equipment that are integral parts of the structures and costs of site clearance and preparation.

‘Other structures’ are structures other than buildings, including streets, sewers and site clearance and preparation other than for residential or non-residential buildings. Also included are shafts, tunnels and other structures associated with the extraction of mineral and energy resources. Major improvements to land, such as dams, are also included.

#### Non-farm GDP

Non-farm GDP arises from production in all industries other than agriculture.

#### Non-farm inventories

All inventories except those classified to farm and public authorities inventories.

#### Non-life insurance claims

Claims payable in settlement of damages that result from an event covered by a non-life insurance policy in the current accounting period.

#### Other current taxes on income, wealth etc.

Other current taxes on income, wealth etc. consists mainly of payments by households to obtain licences to own or use vehicles, boats or aircraft, and for licences to hunt, shoot or fish.

#### Other subsidies on production

Consists of all subsidies, except subsidies on products, which resident enterprises may receive as a consequence of engaging in production. Other subsidies on production include: subsidies related to the payroll or workforce numbers, including subsidies payable on the total wage or salary bill, on numbers employed, or on the employment of particular types of persons, e.g. persons with disabilities or persons who have been unemployed for a long period.

#### Other taxes on production

Consists of all taxes that enterprises incur as a result of engaging in production, except taxes on products. Other taxes on production include: taxes related to the payroll or workforce numbers excluding compulsory social security contributions paid by employers and any taxes paid by the employees themselves out of their wages or salaries; recurrent taxes on land, buildings or other structures; some business and professional licences where no service is provided by the government in return; taxes on the use of fixed assets or other activities; stamp duties; taxes on pollution; and taxes on international transactions.

#### Ownership transfer costs

Consists of fees paid to lawyers, fees and commissions paid to real estate agents and auctioneers, stamp duty, Title Office charges and local government charges. Ownership transfer costs in the ASNA relate to dwellings and non-dwelling construction.

Defined as:

• non-dwelling construction
• plus machinery and equipment
• plus cultivated biological resources
• plus intellectual property products.

Second hand asset sales by the public sector to private corporations are included in private business investment in the components non-dwelling construction and machinery and equipment. As the public sector also sells secondhand assets to the household sector and to the external sector, not all secondhand asset sales by the public sector will be included in private business investment.

#### Private non-farm inventories to total sales ratio

Private non-farm inventories divided by total sales. This ratio is calculated using current price estimates. See also Total sales.

#### Production account

A common method of examining changes in productivity over an extended period involves identifying and dividing the data into productivity 'growth cycles'. Year to year changes in measured productivity may reflect changes that are conceptually distinct from the notion of productivity. By analysing averages of productivity statistics between growth cycle peaks, the effects of some of these temporary influences can be minimised, allowing better analysis of the drivers of productivity growth in different periods. Productivity growth cycle peaks are determined by comparing the annual MFP estimates with their corresponding long-term trend estimates. The peak deviations between these two series are the primary indicators of a growth-cycle peak, although general economic conditions at the time are also considered.

#### Property income flows attributable to insurance policy holders

Includes imputed flows relating to life insurance, superannuation and non-life insurance operations. These include imputed interest from life insurance and pension funds to households; premium supplements which are an imputed property income flow from non-life insurance corporations to policy-holders; and imputed interest from the general government sector to households, which is recorded on the account of the unfunded superannuation schemes operated by the general government sector.

#### Public authorities inventories

Include estimates for general government, public non-financial corporations and public financial corporations. Recorded inventories include demonetised gold transactions (gold sales and gold loans) by the Reserve Bank of Australia and the construction of military equipment for export.

#### Purchasers' prices

The amount paid by the purchaser, excluding any deductible tax, in order to take delivery of a unit of a good or service at the time and place required by the purchaser. The purchaser’s price of a good includes any transport charges paid separately by the purchaser to take delivery at the required time and place.

#### Real gross domestic income

Measures the purchasing power of the total incomes generated by domestic production.

It is calculated by:

• taking the volume measure of gross national expenditure (GNE)
• adding exports of goods and services at current prices deflated by the implicit price deflator for imports of goods and services
• deducting the volume measure of imports of goods and services
• adding the current price statistical discrepancy for GDP(E) deflated by the implicit price deflator for GDP.

In the derivation of the aggregate all of the adjustments are made using the chain volume aggregation method used to derive all of the ABS chain volume estimates.

#### Real gross national income

The real aggregate value of gross primary incomes for all institutional sectors, including net primary income receivable from non-residents. It is calculated by adjusting real gross domestic income for the real impact of primary income flows (property income and labour income) to and from overseas.

#### Real net national disposable income

Is calculated by:

• taking real gross domestic income
• deducting real incomes payable to the rest of the world
• adding real incomes receivable from the rest of the world
• deducting the volume measure of consumption of fixed capital.

Real incomes payable and receivable are calculated by dividing the nominal income flows by the implicit price deflator for gross national expenditure. In the derivation of the aggregate, all of the adjustments are made using the chain volume aggregation method used to derive all of the ABS chain volume estimates.

#### Reference period

In connection with price or volume indexes, the reference period means the period to which the indexes relate. It is typically set equal to 100 for price indexes and to the corresponding current price values of the reference year for volume indexes, and it does not necessarily coincide with the base period.

#### Reinvested earnings

Imputed transactions related to that component of income that is not distributed to equity and or unit holders in direct foreign investment enterprises, and resident and non-resident investment funds in the form of dividends.

#### Rent on natural assets

Income receivable by the owner of a natural resource (the lessor or landlord) for putting the natural resource at the disposal of another institutional unit (a lessee or tenant) for use of the natural resource in production.

#### Research and development

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. It is included in Intellectual property products as a produced fixed asset.

#### Social assistance benefits

Current transfers payable to households by government units to meet the same needs as social insurance benefits, but which are not made under a social insurance scheme incorporating social contributions and social insurance benefits. They may be payable in cash or in kind. In Australia, they include the age pension and unemployment benefits.

#### Statistical discrepancy (I), (E) and (P)

For years in which a balanced supply and use table is available to benchmark the national accounts, the same measure of GDP is obtained regardless of whether one sums incomes, expenditures or gross value added for each industry. For other years, however, statistical discrepancies between the measures remain. The differences between those three separate estimates and the single measure of GDP for those years are called statistical discrepancy (I), statistical discrepancy (E) and statistical discrepancy (P), respectively.

#### Subsidies on products

Subsidies payable per unit of a good or service. The subsidy may be a specific amount of money per unit of quantity of a good or service, or it may be calculated ad valorem as a specified percentage of the price per unit. A subsidy may also be calculated as the difference between a specified target price and the market price actually paid by a purchaser. A subsidy on a product usually becomes payable when the product is produced, sold or imported, but it may also become payable in other circumstances, such as when a product is exported, leased, transferred, delivered or used for own consumption or own capital formation.

#### Taxes on production and imports

Consists of ‘Taxes on products’ and ‘Other taxes on production’. These taxes do not include any taxes on the profits or other income received by an enterprise. They are payable irrespective of the profitability of the production process. They may be payable on the land, fixed assets or labour employed in the production process, or on certain activities or transactions.

#### Taxes on products

Taxes payable per unit of some good or service. The tax may be a specific amount of money per unit of quantity of a good or service (quantity being measured either in terms of discrete units or continuous physical variables such as volume, weight, strength, distance, time, etc.), or it may be calculated ad valorem as a specified percentage of the price per unit or value of the goods or services transacted. A tax on a product usually becomes payable when the product is produced, sold or imported, but it may also become payable in other circumstances, such as when a good is exported, leased, transferred, delivered, or used for own consumption or own capital formation.

Terms of trade represent the relationship between export and import prices. Australia's terms of trade are calculated by dividing the implicit price deflator of exports by the implicit price deflator of imports.

#### Total factor income

That part of the cost of producing the gross domestic product which consists of gross payments to factors of production (labour and capital). It represents the value added by these factors in the process of production and is equivalent to gross domestic product less taxes plus subsidies on production and imports.

#### Total sales

Defined as:

• household final consumption expenditure on goods
• plus private gross fixed capital formation: dwellings, non-dwelling construction, and machinery and equipment
• plus public gross fixed capital formation: dwellings, non-dwelling construction, and machinery and equipment
• plus exports of goods.

#### Unfunded superannuation claims

Represent the liabilities of the general government sector to public sector employees in respect of unfunded retirement benefits. In Australia, most governments operate, or used to operate, superannuation schemes for their employees that are unfunded or only partly funded.

#### Unit labour costs

These series represent a link between productivity and the cost of labour in producing output. A nominal Unit Labour Cost (ULC) measures the average cost of labour per unit of output while a real ULC adjusts a nominal ULC for general inflation. A ULC is calculated as the ratio of labour costs per hours worked by employees divided by volume gross value added per total hours worked. Positive growth in a real ULC indicates that labour cost pressures exist.

#### Wages and salaries

Consist of amounts payable in cash including the value of any social contributions, income taxes, fringe benefits tax, etc., payable by the employee even if they are actually withheld by the employer for administrative convenience or other reasons and paid directly to social insurance schemes, tax authorities, etc., on behalf of the employee. Wages and salaries may be paid as remuneration in kind instead of, or in addition to, remuneration in cash. Separation, termination and redundancy payments are also included in wages and salaries.

#### Weapons systems

Weapons systems consist of delivery systems such as warships, submarines, fighter aircraft, bombers and tanks. They are classified as produced non-financial fixed assets.

## Quality declaration

### Institutional environment

For information on the institutional environment of the Australian Bureau of Statistics (ABS), including the legislative obligations of the ABS, financing and governance arrangements, and mechanisms for scrutiny of ABS operations, please see ABS Institutional Environment.

### Relevance

The standards governing national accounts are agreed internationally, and detailed in the "System of National Accounts 2008" (SNA08). SNA08 is endorsed by the five major international economic organisations: the United Nations, the International Monetary Fund, the OECD, the World Bank and the European Commission. The current complete version of SNA08 is available online: http://unstats.un.org/unsd/nationalaccount/sna2008.asp

The Australian national accounts differ from the recommendations in the SNA08 in certain cases where the data is not available to meet these requirements, or it is not considered practical to adhere to the standards. For more information on the differences between the Australian national accounts and the SNA08 please see Australian System of National Accounts: Concepts, Sources and Methods (cat. no. 5216.0).

### Timeliness

The quarterly Australian national accounts are compiled using data from three consecutive months (e.g. January, February, March), with the release of this information generally occurring on the first Wednesday of the third month following the end of the quarter (e.g. data for the June quarter will be released on the first Wednesday in September).

### Accuracy

Accuracy remains the main focus of ABS quality control. However, in the case of the national accounts, it is recognised internationally that an objective accuracy measure in the sense of proximity to the ‘true value’ is impossible to produce. The national accounts are a highly complex set of economic statistics. They combine a very large number of internal and external data sources covering various aspects of the economy to derive GDP and other headline measures.

The national accounts compilation process transforms the various partial data into a set of economic accounts. To make the data more analytically useful it also requires a further transformation of the data to produce the headline chain volume, seasonally adjusted/trend estimates of GDP and components. These data transformations involve various assumptions.

Given the variety of data used, and the transformations and aggregations used in the national accounts process, an assessment of accuracy is necessarily subjective and indirect. It involves an assessment of the national accounts process, the input data and the transformations used to produce the national accounts. The ABS aims to achieve best practice in each of these facets of national accounts compilation. The related quality concept of reliability can be objectively measured by an analysis of revisions, but a reliable series is not necessarily accurate if it is based on poor quality data.

For a more in-depth discussion of the accuracy of the national accounts including an analysis of revisions please see the Information Paper: Quality Dimensions of the Australian National Accounts (cat. no. 5216.0.55.002).

### Coherence

The coherence of data is an aspect of quality closely associated with accuracy, both within the national accounts system, and compared with the partial indicators of the economy. A major unifying feature within the Australian System of National Accounts is the use of supply and use methodology to confront the data and balance the components of GDP in annual terms.

The ABS publishes a large amount of data on various aspects of the economy. As the majority of these are used in the national accounts it could be expected that there would be coherence between the partial indicators data and the national accounts. While there are some differences in coverage and concept, there are formal processes in place to ensure that the collections and national accounts staff come to a common view of the statistical treatment of current economic events. National accounts staff also have the opportunity to comment on the partial indicators before they are finalised for publication. None the less, over time, the process of annual benchmarking may lead to some divergencies with the partial indicators.

### Interpretability

There are a number of derived statistics and data transformations published with national accounts output to aid interpretation of the data. These include chain volume estimates, trend and seasonally adjusted estimates, GDP growth rates and contributions to GDP growth. Analysis and commentary is included with each publication, and quarterly presentations are available to key users across Australia to provide more information and discussion of the estimates. Australian System of National Accounts: Concepts, Sources and Methods (cat. no. 5216.0) is a comprehensive description of the methods and concepts underpinning the national accounts.

### Accessibility

For links to all national accounts related data and publications, recent national accounts changes and forthcoming events, relevant websites and a range of other information about the Australian National Accounts, please see the National Accounts Statistics homepage.

For more detailed information about the quality dimensions of the Australian National Accounts please see the Information Paper: Quality Dimensions of the Australian National Accounts (cat. no. 5216.0.55.002).

## Abbreviations

### Show all

 ABS Australian Bureau of Statistics ACT Australian Capital Territory ANZSIC06 Australian and New Zealand Standard Industrial Classification, 2006 Edition Aust. Australia DFD domestic final demand GDP gross domestic product GFCE government final consumption expenditure GFCF gross fixed capital formation GNE gross national expenditure GNI gross national income GOS gross operating surplus GVA gross value added GVAP gross value of agricultural production HFCE household final consumption expenditure NSW New South Wales NT Northern Territory Qld Queensland RULC real unit labour costs SA South Australia SNA08 System of National Accounts 2008 version Tas. Tasmania ULC unit labour costs Vic. Victoria WA Western Australia WPI Wage Price Index