The compilation of current price and chain volume estimates
6.56 There are three approaches to deriving estimates of GDP: the income approach (GDP(I)); the expenditure approach (GDP(E)); and the production approach (GDP(P)). It is possible to derive volume measures of GDP using the last two approaches, but it is not possible to derive a volume measure of GDP by summing volume estimates of its income components. The reason is that some of the income components of GDP either do not have price and quantity dimensions in the usual sense (e.g. gross operating surplus) or they do not have unique price and quantity dimensions (e.g. wages, for which the price and quantity characteristics differ according to whether they are viewed from the perspective of an employer or of an employee). However, it is possible to derive a volume measure of GDP(I) by dividing the current price estimate of GDP(I) by the implicit price deflator of GDP(E).
6.57 From 1995-96, annual volume estimates of expenditure and production are compiled in the prices of the previous year in a S-U framework. Volume estimates of the supply of products by each Australian industry and imports are confronted and balanced with volume estimates of products used by Australian industries, final domestic expenditures, changes in inventories and exports. The balance between supply and use for each product category ensures that the volume measure of GDP in the prices of the previous year is the same whether it is derived by summing final expenditures and changes in inventories plus exports less imports or by summing the gross value added of each industry and taxes less subsidies on products. In other words, the expenditure and production volume estimates of GDP are identical. The estimates in the prices of the previous year are divided by comparable current price estimates for the previous year to derive year-to-year Laspeyres volume indexes. These are chained to form annual chain volume estimates.
6.58 From 1994-95, annual current price estimates of income, expenditure and production are compiled in a S-U framework in parallel with the volume estimates, so that the annual current price and volume estimates of GDP using the income, expenditure and production approaches are identical from 1994-95 for all but the latest year.
6.59 For current price and volume estimates prior to 1994-95, and for quarterly estimates for all years, the estimates using each approach are only partially balanced, and there are usually differences between the I, E and P estimates. Nevertheless, for these periods, a single estimate of GDP is 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 GDP(E).