2. Institutional units and sectors
Part A - Introduction
In order to determine the boundary of the GFS system, the institutional units and sectors of an economy need to be identified. An institutional unit is defined in paragraph 2.22 of the IMF GFSM 2014 as an economic entity that is capable, in its own right, of owning assets, incurring liabilities, and engaging in economic activities and in transactions with other entities. An institutional sector is defined in paragraph 2.50 of the IMF GFSM 2014 as groups of similar kinds of institutional units according to their economic objectives, functions, and behaviour.
The Australian standard for defining institutional sectors and subsectors is the Standard Institutional Sector Classification of Australia (SISCA), which is set out in Standard Economic Sector Classifications of Australia (SESCA), 2008 (Version 1.1) (ABS cat. no. 1218.0). The SISCA standards are applied in the classification of public sector units in the GFS system in Australia.
This chapter describes the scope and coverage of the public sector, including the concepts of residence and economic territory, institutional units, institutional sectors, the different levels of government, and jurisdictions in Australian GFS. Also discussed in this chapter is government control of corporations (including a decision tree to assist with the classification of public sector units), and the practical application of sector classification principles.
The term 'scope' is used in GFS to denote the group of institutional units that define the intended boundary of a statistical system. The aim of a statistical system is to record a defined set of information relating to all of the statistical units defined as falling within the scope of that system. The term ‘in-scope units’ is often used by the ABS to describe the group of units falling within the scope of a statistical system.
The scope of the GFS system is defined as all institutional units comprising the total public sector of Australia. The SESCA defines these to be:
- All resident units that are classified to the general government sector;
- All resident corporations and quasi-corporations that are classified to the non-financial corporations sector and are controlled by government units or other public corporations (known as public nonfinancial corporations); and
- All resident corporations and quasi-corporations that are classified to the financial corporations sector and are controlled by government units or other public corporations (known as public financial corporations).
It is important to note that the scope of the GFS system is defined in terms of resident units. In GFS, the concept of residence is based on the concept of the economic territory of a country, rather than the legal or political concepts. The concepts of residence and economic territory of a country are further discussed in Part B of this chapter.
For the purposes of the public / private classification, government control of corporations does not include a government’s ability to exercise general legislative or regulatory powers over corporations as a group. Government authority to determine the general policy of a corporation usually comes from legislation that is specific to the individual corporation over which control is exercised. Government control of corporations is further discussed in Part G of this chapter.
The term 'coverage' is used in GFS to denote the extent to which the defined scope of a statistical system is actually achieved in practice. Ideally, scope and coverage would be identical but there are many reasons why it may not be feasible to achieve full coverage. Under-coverage can arise because units are omitted in their entirety or because some activities of some units are not covered.
Units are omitted entirely from coverage only when the economic activity of the units is judged to be relatively insignificant and not worth the cost of collection. Units are omitted partially from coverage only when indirect sources of measuring the major part of the units’ activities are available and it is not worth the cost of collecting the missing information directly.
Omitted units are few in number and consist mainly of small commodity marketing boards. Units for which partial coverage is achieved are restricted to units that are entirely or mainly funded from Commonwealth, state or territory budgets. Budget documents provide information about such units’ budget allocations, which can be used to impute measures of the units’ economic activity. However, this methodology does not cover any revenues that the units may raise in addition to their budget allocations and any activity that the units may fund from such revenues.
The ABS takes steps to ensure that under-coverage is not increased by changing circumstances. In particular, care is taken to ensure that there is not an increase in the level of activity of units that are not covered or an increase in the capacity of indirectly covered units to fund economic activity from their own resources. The non-coverage and indirect coverage of units do not affect the overall accuracy of GFS significantly.