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Government final consumption expenditure

Australian System of National Accounts: Concepts, Sources and Methods
Reference period
2020-21 financial year

Concept

10.65    Government final consumption expenditure (GFCE) is current expenditure by general government bodies on services to the community such as defence, education, and public order and safety. Because these are provided free of charge or at charges which cover only a small proportion of costs, the government is considered to be the consumer of its own output. Government output has no directly observable market value, and so it is valued in the national accounts at its cost of production. GFCE is estimated by deducting the value of any proceeds from sales of government output (e.g. statistical publications by the ABS) from this value of government output.

10.66    GFCE covers net outlays by general government on goods and services for current purposes; that is, outlays which do not result in the creation of capital assets, or in the acquisition of land and existing buildings or second-hand capital goods. Transfer payments are not included; for example, interest payments on government debt securities and social assistance benefits.

10.67    2008 SNA revised the treatment of defence expenditure. The purchases of durable military equipment such as ships and aircraft used as weapons platforms, and outlays on construction works that can only be used for military purposes are now to be treated as capital expenditure. (Expenditure on major items of military equipment with no equivalent civilian use was included in GFCE in 1993 SNA). The ASNA has adopted the 2008 SNA recommendations in this regard. Current expenditures such as compensation of employees and consumable military items such as boots, petrol and bullets, will continue to be treated as GFCE.

10.68    Government final consumption expenditure can be regarded as comprising the following:

compensation of employees paid to employees of general government bodies (other than any employees producing capital goods)
plusintermediate consumption of goods and services (e.g. purchases of office supplies and the services of consultants)
lessthe value of goods and services sold by general government to other sectors
plusconsumption of fixed capital
plusthe timing adjustment for overseas purchases of defence equipment.

10.69    Intermediate consumption for general government includes general government's share of the imputed financial services provided by banks and other financial intermediaries (FISIM).

10.70    ASNA classifies GFCE according to the functions of government. Two classifications have been developed, namely, the Government Purpose Classification (GPC) and the Local Government Purpose Classification (LGPC). These are designed for classifying current transactions (such as consumption expenditure, subsidies and current transfers), capital outlays (capital formation and capital transfers) and acquisition of financial assets by general government and its subsectors. The categories used in the classifications are in accordance with the 1993 SNA Classification of the Functions of Government (COFOG) and are as follows:

1General public services
2Defence affairs and services
3Public order and safety affairs
4Education affairs and services
5Health affairs and services
6Social security and welfare affairs and services
7Housing and community amenity affairs and services
8Recreational, cultural and religious affairs and services
9Fuel and energy affairs and services
10Agriculture, forestry, fishing and hunting affairs and services
11Mining and mineral resource affairs and services, other than fuels; manufacturing affairs and services; and construction affairs and services
12Transportation and communication affairs and services
13Other economic affairs and services
14Expenditures not classified by major group

10.71    COFOG, and consequently the GPC, is also used to help distinguish between expenditure by government on individual services and collective services. By convention, all government final consumption expenditures under each of the following headings are treated as expenditures on individual services, except for expenditures on general administration, regulation, research, etc.:

4Education
5Health
6Social security and welfare
8Recreation, sport and culture

10.72    In addition, expenditures under the following subheadings should also be treated as individual when they are important:

7Part of the provision of housing, part of the collection of household refuse
12Part of the operation of transport systems

10.73    GFCE covers net outlays by general government on goods and services for current purposes; that is, outlays which do not result in the creation of capital assets, or in the acquisition of land and existing buildings or second-hand capital goods. Transfer payments are not included, for example, interest payments on government debt securities and social assistance benefits.

10.74    Detailed estimates of government final consumption expenditure classified by purpose are available, as a general rule, from 1961-62.

Sources and methods

10.75    GFCE estimates are compiled using Government Finance Statistics (GFS) data. Data is obtained from the Department of Finance, State and Territory Treasuries, local governments and universities. GFS data is classified by Economic Type Framework (ETF) which includes employee expenses, non-employee expenses and revenue from sales of goods and services that are captured in government consumption.

10.76    The current method is based on the Australian System of Government Finance Statistics: Concepts Sources and Methods, Australia 2015 (AGFS15) which was implemented in the Australian National Accounts in 2017. Estimates on an AGFS15 basis which includes data classified by ETF are available back to 2002. Estimates of Government Consumption prior to 2002 have been backcast to ensure consistency across the time series.

10.77    GFCE is compiled as the sum of the following components:

 employee expenses (i.e. wages, salaries, superannuation, and redundancies)
 social benefits to households (i.e. Medicare, Pharmaceutical Benefits, Child Care Subsidy, Aged care, National Disability Insurance Scheme, transport and energy concessions)
 other non-employee expenses (such as supplies, contractors and materials)
(less)sales of goods and services (such as licence fees, tuition fees and hospital fees)
(plus)ASNA adjustments

10.78    ASNA adjustments are scope and coverage adjustments which include the following four components:

  • Consumption of fixed capital (depreciation)
  • Consumption of FISIM
  • State and local consolidation adjustments (i.e. payroll tax paid by departments to own state treasury)
  • (less) Intellectual property which are capitalised (i.e. computer software, research and development and artistic originals)