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Household final consumption expenditure

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

Concept

10.13    In the ASNA, household final consumption expenditure (HFCE) consists of expenditure by resident households on goods and services, whether the expenditure is made within the domestic territory or by Australian residents abroad, and expenditure by NPISHs.

10.14    Specific transactions in household final consumption expenditure include:

  • the value of income received in kind by employees which is treated as simultaneously spent by the employees on final consumption expenditure;
  • the value of goods produced by households for their own consumption, such as agricultural goods produced and consumed on the same farm, and 'backyard' production;
  • FISIM, the service charge component of households' interest payments and receipts (however, FISIM attributed to unincorporated enterprises owned by households is classified as intermediate consumption of the unincorporated business);
  • the service charge component of premiums paid for insurance and pension fund services; and
  • the imputed value of the services of owner-occupied dwellings. The imputation of rent to owner-occupied dwellings enables the services provided by dwellings to their owner-occupiers to be treated consistently with the marketed services provided by rented dwellings to their tenants. This treatment is considered necessary because, if a large number of rented houses were sold to their occupiers and if estimates of imputed rent were not calculated for owner-occupied dwellings, there would be an apparent decrease in gross domestic product without any decrease in the provision of housing services. In effect, owner-occupiers (like other owners of dwellings) are regarded as operating businesses; they receive rents (from themselves as consumers), pay expenses, and make a net contribution to the value of production which accrues to them as owners.

10.15    Any expenditure undertaken for business purposes by unincorporated enterprises (which are part of the household sector) is treated as intermediate consumption expenditure of the unincorporated enterprise, and not part of household final consumption expenditure.

10.16    Expenditures on the purchase of dwellings are explicitly excluded from household final consumption expenditure because dwellings are goods used by owners to produce housing services for those owners. Purchases of dwellings therefore constitute gross fixed capital formation. Similarly, valuables should be excluded from household final consumption expenditure because they are not used up in consumption or production, nor do they deteriorate over time. Valuables are a store of value, and are classified as part of gross capital formation. In the ASNA, however, some expenditure on valuables may be included in HFCE as a separate estimate for valuables is not compiled.

10.17    Expenditures on licences to use or own vehicles, boats and aircraft, and fees for shooting, fishing and hunting permits are also excluded. These are treated as taxes rather than as payments for services. All other kinds of licences, permits, certificates, passports etc., are treated as purchases of services and included in household final consumption expenditure.

10.18    HFCE is a large aggregate covering a wide range of goods and services. It is therefore desirable to further dissect this item. The 2008 SNA (and 1993 SNA) proposes a 'functional' classification to identify the 'functions' – in the sense of 'purposes' or 'objectives' – for which households engage in these transactions. The Classification of Individual Consumption by Purpose (COICOP) is used to classify HFCE by purpose or function. The outlays covered include:

  • expenditure on consumer durables such as cars, furniture and high-value, long-lasting household appliances (but excluding dwellings, which are regarded as the fixed assets of an 'industry');
  • consumer semi-durables such as clothing and footwear, other appliances, and crockery and cutlery;
  • single-use goods such as food, cigarettes and tobacco, and alcoholic drinks; and
  • services of all kinds such as hairdressing, dry cleaning and public transport.

10.19    COICOP provides for HFCE to be classified into the following major categories:

01Food and non-alcoholic beverages
02Alcoholic beverages, tobacco and narcotics
03Clothing and footwear
04Housing, water, electricity, gas and other fuels
05Furnishings, household equipment and routine maintenance of the house
06Health
07Transport
08Communications
09Recreation and culture
10Education
11Hotels, cafes and restaurants
12  Miscellaneous goods and services

10.20    These major categories are further split into subcategories, with the following 17 headline COICOP categories published in original, seasonally adjusted, and trend terms:

01Food
02.1Alcoholic beverages 
02.2Cigarettes and tobacco
03Clothing and footwear
04.1Rent and other dwelling services
04.2Electricity, gas and other fuel
05Furnishings and household equipment
06Health
07.1Purchase of vehicles
07.2Operation of vehicles
07.3Transport services
08Communications
09Recreation and culture
10Education
11Hotels, cafes and restaurants
12.1Insurance and other financial services
12.2Other goods and services

10.21    In the ASNA the classification of HFCE is aligned, as far as possible, with COICOP. However, there are some instances where it is not yet possible for Australia to follow COICOP's recommendations. For example:

  • ASNA does not include an estimate of HFCE on narcotics in COICOP Division 02 Alcoholic beverages, tobacco and narcotics, as reliable data on narcotics expenditure are not available.
  • Expenditure on COICOP Group 09.6 (Package holidays) is not specifically identified in Australia's HFCE, but the components of package holidays (airfares, accommodation and food) are included in the corresponding major categories of HFCE.
  • ASNA does not include an explicit estimate of HFCE on prostitution services in COICOP Group 12.1 (Personal care) as reliable data on such expenditure are not available.

10.22    The COICOP category for Maintenance and repair of the dwelling (Group 04.3) includes minor maintenance and repair of dwellings (e.g. interior decoration and repair to fittings which are commonly carried out by both tenants and owners) but excludes maintenance and repair which is major, such as replastering walls or repairing roofs, which are typically carried out by owners only. Such a distinction is consistent with 2008 SNA.⁴⁴ The ASNA deviates from the 2008 SNA recommendation and has excluded all maintenance and repair of dwellings from HFCE. Expenses associated with these activities are included as intermediate consumption of the Ownership of Dwellings industry and COICOP Group 04.3 is not included in HFCE in the ASNA.

10.23    The final consumption expenditure of NPISHs is included with that of households in the ASNA. 2008 SNA recommends that the final consumption of NPISHs should be classified according to the Classification of the Purposes of Non-Profit Institutions Serving Households (COPNI). The major divisions of COPNI are as follows:

01Housing
02Health
03Recreation and culture
04Education
05Social protection
06Religion
07Political parties, labour and professional organisations
08Environmental protection
09Services n.e.c.

10.24    Consequently, in the ASNA, the final consumption expenditure of NPISHs is classified, as far as possible, to the corresponding category of HFCE. Specifically, expenditure by NPISHs on Health, Recreation and culture, and Education are classified to the corresponding categories of HFCE, while final consumption expenditure for the other divisions is classified to Other goods and services in HFCE. As data sources for estimating the final consumption expenditure of NPISHs are very limited, indirect means are generally employed to compile these estimates. It is often necessary to assume that the final consumption expenditure for NPISHs can be estimated as the sum of income transferred by households, corporations and general government in a period, less an allowance for net property income payments and capital formation.

Endnotes

  1. See SNA, 2008, paras.9.66 and 9.67.