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Gross fixed capital formation – Sources and methods

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

Dwellings

21.123    Gross fixed capital formation (GFCF) for dwellings consists of the value of acquisitions of new and existing (used) dwellings less the value of disposals of existing dwellings. State estimates are derived using the top-down approach.

21.124    The following table outlines the quarterly data sources used to estimate gross fixed capital formation for dwelling construction. Annual estimates are compiled as the sum of quarterly estimates, with differences between quarterly and annual estimates due to timing.

Table 21.30 Gross fixed capital formation – Dwellings
Item  Comment
New and used dwellings
 Current price estimates
  Private

 

  

State splits for new and used dwellings are constructed using new residential building data from the Building Activity Survey.

  Public

         

  

State level estimates are constructed by allocating GFS data for each state to the relevant state. Estimates for the Commonwealth jurisdiction are allocated using a proportion based on public employment from the Survey of Employment and Earnings (SEE).

 Volume estimates

    

  

Total public and private sector new and used dwellings are deflated using Residential Property Price Indexes, Eight Capital Cities. State indexes are derived as a weighted average of a price index for contract-built houses and non-contract-built houses.

Alterations and Additions
 Current price estimates

    

  

Alterations and additions to existing dwellings are estimated using data from the regular Building Activity Survey and from the periodic Household Expenditure Survey (HES).

State estimates are constructed using Alterations and additions to residential buildings from BACS, this excludes estimates under $10,000. These are modelled based on data from the HES. Between HES years the under $10,000 component is assumed to move in the same proportion as items from the BACS survey.

 Volume estimates

    

  

Current price estimates are deflated by applying a two quarter ending moving average of the project home price index from Residential Property Price Indexes, Eight Capital Cities.

Private non-dwelling construction

21.125    Non-dwelling construction at the state level comprises of three components: new building, new engineering construction and net purchases of second-hand assets. State estimates are derived using the top-down approach using data from BACS, ECS and GFS for second-hand assets.

21.126    The following table outlines the quarterly data sources used to estimate gross fixed capital formation for private non-dwelling construction. Annual estimates are compiled as the sum of quarterly estimates, with differences between quarterly and annual estimates due to timing.

Table 21.31 Gross fixed capital formation – Non-dwelling construction
ItemComment
New non-dwelling buildings
 Current price estimates

 

 

The main source is the quarterly Building Activity Survey. This survey covers work done on private sector owned non-residential building valued at $50,000 or more.

The following adjustments are made at the state level:

  • for work done on non-residential building with an approval value of less than $50,000;
  • where approvals are not obtained such as for farm buildings; and
  • for services involved in the construction of the building such as architectural fees.
 Volume estimates

 

 

State-specific price indexes are derived as a three-quarter ending moving average of new building price indexes.

New engineering construction
 Current price estimates

    

 

The main source is the Engineering Construction Survey.

As farm non-dwelling construction is not included in the ECS, adjustments are made to capital formation to estimate expenditure of farm non-dwelling construction.

 Volume estimates

    

 

Current price estimates are deflated using a composite of price indexes for roads, dams, sewerage, electricity infrastructure and telecommunications infrastructure. For all but road construction, these price indexes are derived for Australia only.

The price indexes used are from the Producer Price Indexes, Australia, Wage Price Index, Australia and the Consumer Price Index, Australia.

Net purchases of second-hand assets
 Current price estimates

    

 

The estimates from both the BACS and the ECS are adjusted to reflect net purchases of second-hand assets from the public sector by using Government Finance Statistics data.

 Volume estimates

    

 

Current price estimates are deflated for each state using the state-specific implicit price deflator for the aggregate of private new non-dwelling building and new engineering construction.

Machinery and equipment

21.127    Gross fixed capital formation (GFCF) in machinery and equipment is recorded as the value of the acquisitions of new and existing machinery and equipment, less the value of the disposals of existing machinery and equipment.

21.128    At state level private gross fixed capital formation of machinery and equipment is published with two sub-components: new machinery and equipment and net purchases of second-hand assets.

21.129    The following table outlines the quarterly data sources used to estimate gross fixed capital formation for machinery and equipment. Annual estimates are produced as the sum of four quarters, with differences in annual and quarterly estimates due mostly to timing differences.

Table 21.32 Gross fixed capital formation – Machinery and equipment
ItemComment
New machinery and equipment
 Current price estimates

    

 

State splits are sourced from Survey of New Capital Expenditure (Private New Capital Expenditure and Expected Expenditure, Australia). This survey excludes a number of industries for which adjustment are made including:

  • Agriculture, forestry and fishing industry - import statistics from International Merchandise Imports, Australia.
  • Public administration and safety, Education and training and Health care and social assistance industries are produced annually from GFS data, with estimates modelled quarterly.
 Volume estimates

    

 

Current price estimates of GFCF for new machinery and equipment are deflated using state-specific chain price indexes derived from the Consumer Price Index, Australia; Producer Price Indexes, Australia; International Trade Price Indexes, Australia; and several price indexes from overseas, including the US Bureau of Economic Analysis (BEA) hedonic computer price index.

Net purchases of second-hand equipment
 Current price estimates

    

 

Net purchase of second-hand assets includes:

  • net purchases of second hand assets from the public sector from GFS data;
  • used motor vehicle sales from businesses to households is allocated to states from national ABS Survey of Motor Vehicle Use and motor vehicle sales data available through the VFACTS service; and
  • used equipment sold overseas (which is deducted from private GFCF). Estimates of merchandised goods are used to value used equipment sold overseas.
 Volume estimates

    

 

Current price estimates of GFCF for net purchases of second-hand machinery and equipment are deflated using state-specific chain price indexes derived from the Consumer Price Index, Australia; Producer Price Indexes, Australia; International Trade Price Indexes, Australia; and several price indexes from overseas, including the BEA hedonic computer price index.

Intellectual property products

21.130    Gross fixed capital formation (GFCF) of research and development (R&D) is allocated to the state in which the research work occurs.

21.131    Mineral and petroleum exploration is the value of expenditure on exploration for mineral and petroleum undertaken in each state. Exploration expenditure covers all exploration activity undertaken on land and in state territorial waters, with offshore exploration in Commonwealth waters allocated to closest state of proximity.

21.132    The following table outlines the quarterly data sources used to estimate gross fixed capital formation for intellectual property products. All items with the exception of mineral and petroleum exploration are compiled annually with interpolation used to create quarterly estimates.

Table 21.33 Gross fixed capital formation – Intellectual property products (quarterly)
ItemComment
Research and development
 Current price estimates

    

 

Interpolation of annual estimates.

 Volume estimates

    

 

The volume of capital expenditure on R&D is calculated by deflating the cost-based expenditure values. These current price estimates are deflated using price indexes for labour inputs and other current expenditure used as inputs into the R&D products. This is undertaken at state level. Quarterly estimates for state, like national, are calculated using trend.

Mineral and petroleum exploration
 Current price estimates

    

 

Quarterly estimates are obtained from Mineral and Petroleum Exploration, Australia.

 Volume estimates

    

 

Current price estimates are deflated using a composite index of the Wage Price Index for ANZSIC Division B Mining Division and a producer price index for equipment and material categories associated with exploration—steel pipes and tubes, non-ferrous pipe fittings, iron and steel casting and forging, and other industrial machinery.

Computer software
 Current price estimates

    

 

Interpolation of annual estimates.

 Volume estimates

    

 

Volume estimates are produced by deflating current prices estimates with the Manufacturing Industry (APMI) price index.

Entertainment, literary and artistic originals
 Current price estimates

    

 

Interpolation of annual estimates.

 Volume estimates

    

 

Volume estimates are produced by deflating current prices estimates using a combination of data from Producer Price Indexes, Australia; Consumer Price Index, Australia and the historic publication, Price Indexes of Articles Produced by Manufacturing Industry, Australia (this publication has been ceased but data from it still underpins estimates).

21.133    The following table outlines the annual data sources used to estimate gross fixed capital formation for intellectual property products.

Table 21.34 Gross fixed capital formation – Intellectual property products (annual)
ItemComment
Research and Development
 Current price estimates

 

 

State estimates for both own account R&D expenditure and R&D undertaken on contract by other institutions are derived from the Survey of Research and Experimental Development published in Research and Experimental Development, Businesses, Australia; Research and Experimental Development, Government and Private Non-Profit Organisations, Australia; and Research and Experimental Development, Higher Education Organisations, Australia.

 Volume estimates

 

 

The volume of capital expenditure on R&D is calculated by deflating the cost based expenditure values. These current price estimates are deflated using price indexes for labour inputs and other current expenditure used as inputs into the R&D products. This is undertaken at state level. Quarterly estimates for state, like national, are calculated using trend.

Mineral and petroleum exploration
 Current price estimates

 

 

The sum of quarterly estimates are obtained from Mineral and Petroleum Exploration, Australia.

 Volume estimates

 

 

Current price estimates are deflated using a composite index of the Wage Price Index for ANZSIC Division B Mining and a producer price index for equipment and material categories associated with exploration—steel pipes and tubes, non-ferrous pipe fittings, iron and steel casting and forging, and other industrial machinery.

Computer software
 Current price estimates

 

 

State estimates are derived by allocating national estimates using fixed weight splits produced largely from historic surveys for in house software, as well as packaged software imports for the off-the-shelf component.

 Volume estimates

    

 

Volume estimates are produced by deflating current prices estimates with the Manufacturing Industry (APMI) price index.

Entertainment, literary and artistic originals
 Current price estimates

    

 

State estimates of GFCF of entertainment, library and artistic originals are allocated from the national estimates using Estimated Resident Population.

 Volume estimates

    

 

Volume estimates are produced by deflating current prices estimates using a combination of data from the publications, Producer Price Indexes, Australia; Consumer Price Index, Australia; and the historic publication, Price Indexes of Articles Produced by Manufacturing Industry, Australia (this publication has been ceased but data from it still underpins estimates).

Ownership transfer costs

21.134    Ownership transfer costs at state level consist of the following components:

  • fees paid to lawyers associated with the transfer of ownership;
  • fees and commissions paid to real estate agents, auctioneers, architects, surveyors, engineers and valuers;
  • stamp duty;
  • titles Office charges; and
  • local government charges.

21.135    The following table outlines the quarterly data sources used to estimate gross fixed capital formation for ownership transfer costs. Annual estimates are produced as the sum of four quarters, with differences in annual and quarterly estimates due mostly to timing differences.

Table 21.35 Gross fixed capital formation – Ownership transfer costs
ItemComment
Ownership transfer costs
 Current price estimates

 

 

Stamp duty estimates are based on quarterly data from each State Titles Offices. These estimates are based on the number of Land Title Transfer transactions occurring in each state for the quarter, and local government charges are estimated from the number of transactions occurring in each quarter.

Real estate agents' commissions and lawyers' fees are derived from movements in a composite indicator based on state data for the number and value of real estate transactions.

Data on the number of transactions and average sale prices are obtained from State Titles Offices (land title transfers) and Valuers-General departments (average sale prices).

 Volume estimates

 

 

Volume estimates for ownership transfer costs are derived by quantity revaluation at the state level, by multiplying the number of transactions by the average price in the previous year.

Cultivated biological resources

21.136    Cultivated biological resources data are compiled by state for animal resources (livestock), as well as crop and plant resources yielding repeat products (orchard growth).

21.137    The following table outlines the quarterly data sources used to estimate gross fixed capital formation for cultivated biological resources. Annual estimates are produced as the sum of four quarters, with differences in annual and quarterly estimates due mostly to timing differences.

Table 21.36 Gross fixed capital formation – Cultivated biological resources (quarterly)
ItemComment
Livestock
 Current price estimates

 

 

Livestock uses sheep and cattle numbers adjusted slaughtering and exports from Livestock Products, Australia at state level.

Data on acquisition and disposal prices of other animals are calculated using the ABARES publication, Agriculture Commodities. Values for sheep and cattle are estimated by multiplying the number of animals by an average price per head.

 Volume estimates

 

 

Quantity revalued using ABARES data on herd size.

Orchard growth
 Current price estimates

 

 

Orchard growth is estimated using number of trees and hectares of vines. These data are available annually from the ABS publication, Agricultural Commodities, Australia.

The current price value is derived by applying average costs incurred in the planting and growing of orchards to this data.

 Volume estimates

 

 

Quantity revalued using number of trees and hectares of vines data outlined above.

Public corporations

21.138    Public corporations capital formation is split into Commonwealth, and State and local.

21.139    The following table outlines the quarterly data sources used to estimate gross fixed capital formation for public corporations. Annual estimates are produced as the sum of quarters with differences due to timing. For GFS estimates these timing differences can be significant due to inclusion of audited GFS data from Government Finance Statistics, Australia. These timing differences arise in the state accounts, and also in Australian National Accounts: National Income, Expenditure and Product.

Table 21.37 Gross fixed capital formation – Public corporations
ItemComment
Commonwealth
 Current price estimates

 

 

Government Finance Statistics is the main source for Commonwealth Public Corporations GFCF.

Intellectual property products estimates are constructed using external and internal data sources including Research and Experimental Development, Businesses, Australia.

Commonwealth Public Corporations GFCF is allocated to states using estimated resident population data. Allowances are made to allocate significant identifiable projects to the states where they occur.

 Volume estimates

 

 

Volume estimates are compiled from current price estimates using price deflation. Deflation is performed using composite deflators of various price indexes constructed using annual current price asset composition as weights.

State and local
 Current price estimates

 

 

Government Finance Statistics is the main source for State and local Public Corporations GFCF.

Intellectual property products estimates are constructed using external and internal data sources including Research and Experimental Development, Businesses, Australia.

 Volume estimates

 

 

The volume estimates are compiled from current price estimates using price deflation. Deflation is performed using composite deflators of various price indexes constructed using annual current price asset composition as weights

General government

21.140    General government capital formation is allocated to Commonwealth and State and local government using data from GFS. Commonwealth is further separated into defence and non-defence.

21.141    The following table outlines the quarterly data sources used to estimate gross fixed capital formation for general government. Annual estimates are produced as the sum of quarters with differences due to timing. For GFS estimates these timing differences can be significant due to inclusion of audited GFS data from Government Finance Statistics, Australia. These timing differences arise in the state accounts, and also in Australian National Accounts: National Income, Expenditure and Product.

Table 21.38 Gross fixed capital formation – General government
ItemComment
National defence
 Current price estimates

 

 

Government Finance Statistics is the main source for Commonwealth Defence GFCF.

Intellectual property products estimates are constructed using external and internal data sources including Research and Experimental Development, Government and Private Non-Profit Organisations.

Commonwealth Defence GFCF for fixed assets and computer software are allocated to states using Commonwealth employment from the ABS publication, Employment and Earnings, Public Sector, Australia. Allowances are made to allocate significant identifiable projects to the states where they occur.

Defence weapons systems, and Research and development are allocated using estimated resident population data.

 Volume estimates

 

 

The volume estimates are compiled from current price estimates using price deflation. Deflation is performed using composite deflators of various price indexes constructed using annual current price asset composition as weights.

National non-defence
 Current price estimates

 

 

Government Finance Statistics is the main source for National Non-defence GFCF.

Intellectual property products estimates are constructed using external and internal data sources including Research and Experimental Development, Government and Private Non-Profit Organisations.

National non-defence GFCF is allocated to states using Commonwealth employment from the ABS publication, Employment and Earnings, Public Sector, Australia. Allowances are made to allocate significant identifiable projects to the states where they occur.

 Volume estimates

 

 

The volume estimates are compiled from current price estimates using price deflation. Deflation is performed using composite deflators of various price indexes constructed using annual current price asset composition as the weights.

State and local
 Current price estimates

 

 

Government Finance Statistics is the main source for State and local GFCF.

Intellectual property products estimates are constructed using external and internal data sources including Research and Experimental Development, Government and Private Non-Profit Organisations.

 Volume estimates

 

 

The volume estimates are compiled from current price estimates using price deflation. Deflation is performed using composite deflators of various price indexes constructed using annual current price asset composition as weights.

International trade in goods and services – sources and methods

21.142    International trade in merchandise goods are allocated to state based on the location at which the customs barrier is crossed.

21.143    Published state level merchandise goods trade is not consistent with trade estimates for the national accounts which is produced on a balance of payments (BOP) basis. The difference for each state is reconciled on a BOP basis, with the difference between state merchandise trade and state allocations on a BOP basis included as part of the balancing item.

Merchandise goods basis splits

21.144    The following tables outline the data sources and methods used to estimate international trade in goods and services:

Table 21.39 International trade – Goods
ItemComment
Annual current price estimates
 Merchandise goods is consistent with ABS publication, International Trade, with BOP basis reconciliation values consistent with ABS publication Balance of Payments and International Investment Position, Australia.
Annual volume estimates
 Annual state merchandise goods exports and imports for volume are consistent with ABS publication, International Trade, with related BOP basis reconciliation values consistent with ABS publication Balance of Payments and International Investment Position, Australia.
Table 21.40 International trade – Services
ItemComment
Current price estimates
 Current price international trade in services data is allocated to state using data from International Trade in Services by Country, by State and by Detailed Services Category. These estimates are benchmarked to national estimates of international trade in services.
Volume estimates

 

Volume measures are obtained by deflation of the current price values, using relevant ABS price indexes underlying those published in: