Appendix 1 Classifications

A1.1    Standard classifications and definitions of statistical units and items are essential elements underlying the compilation and presentation of statistics produced by national statistical offices, such as the Australian Bureau of Statistics (ABS). The use of such standards ensures that statistics are comparable across industry and sector boundaries and can be aggregated from various collections, for example, for national accounts purposes.

A1.2    Furthermore, the ABS has adopted the System of National Accounts 2008 (2008 SNA) as the standard for the compilation of its national accounts statistics. This promotes the integration of economic and related statistics as an analytical tool, as well as the international reporting of comparable national accounting data.

A1.3    Dividing the economy into sectors provides information about groups of economic units, such as financial corporations or households, sharing similar economic functions and institutional characteristics. The main purpose of these classifications is to facilitate analysis of economic activity along sectoral or institutional lines. The Standard Economic Sector Classifications of Australia (SESCA) describes a number of standard classifications used by the ABS in the compilation of statistics that involve dividing the economy into broad economic sectors.

A1.4    A key classification within SESCA is the Standard Institutional Sector Classification of Australia (SISCA). SISCA is based on the 2008 SNA institutional sector classification. The Australian System of National Accounts (ASNA) bases its sector classification on the international standards set out in the 2008 SNA. In the ASNA, there are five sectors:

• non-financial corporations (including public non-financial corporations)
• financial corporations
• households (including unincorporated enterprises and NPISHs)
• general government; and
• rest of the world (ROW).

A1.5    The 2008 SNA delineates an extra sector for non-profit institutions serving households (NPISHs), but these units are included within the household sector in the ASNA.

A1.6    The main feature for both the non-financial corporations and financial corporations’ sectors, is that they cover businesses which are legally, or clearly act as, entities separate from their owners with regard to their economic activities. Businesses mainly classified to these sectors include companies registered under the Companies Act or other Acts of Parliament, or large unincorporated enterprises which maintain complete and independent financial records.

A1.7    The non-financial corporations sector comprises all resident corporations and quasi-corporations mainly engaged in the production of market goods and/or non-financial services. Also included are non-profit institutions (NPIs) that mainly engage in market production of goods and non-financial services. These NPIs include those set up by associations of non-financial corporations to mainly provide member corporations with services, for which the members pay directly or by way of regular membership fees.

A1.8    Public non-financial corporations include government owned or controlled enterprises which are mainly engaged in the production of goods and services for sale in the market with the intention of substantially covering their costs.

A1.9    Financial corporations are mainly engaged in both incurring liabilities and acquiring financial assets, i.e. in borrowing and lending money, in financial leasing or investing in financial assets. Corporations providing services closely related to and designed to facilitate these activities are also classified to this sector; for example, the Reserve Bank of Australia is included in the financial corporations’ sector.

A1.10    Households and unincorporated enterprises are included in the one sector because the owners of ordinary partnerships and sole proprietorships frequently combine their business and personal transactions. Non-profit institutions serving households (NPISHs) comprise all resident non-market NPIs that are not controlled by government.¹¹⁸ Such NPIs provide goods and services to households free, or at prices that are not economically significant.

A1.11    The general government sector includes all departments, offices and other bodies mainly engaged in the production of goods and services for consumption by governments and the general public, whose costs of production are mainly financed from public revenues. NPIs which are mainly financed and controlled by governments are included in this sector.

A1.12    The rest of the world sector encompasses non-resident governments, businesses and persons that engage in transactions with Australian residents. It includes only non-resident units that enter into or have other economic links with Australian resident units. Therefore, non-resident units are excluded from all other sectors.

A1.13    Further information on the classification of institutional sectors in ABS statistics is contained in the ABS publication, Standard Economic Sector Classifications of Australia, 2008.

A1.14    The 2008 SNA proposes 'functional' classifications to identify the 'functions'—in the sense of 'purposes' or 'objectives'—for which groups of transactors engage in certain transactions.

A1.15    The 2008 SNA uses functional classifications to analyse expenditure by different sectors. They are:

• Classification of Individual Consumption by Purpose (COICOP);
• Classification of the Functions of Government (COFOG);
• Classification of the Purposes of Non-Profit Institutions Serving Households (COPNI); and
• Classification of Outlays of Producers by Purpose (COPP).

A1.16    The ASNA uses COICOP and COFOG to classify household and government expenditures. COPNI and COPP are not used in Australia's national accounts. The household final consumption expenditure data is classified according to a modified version of the COICOP. The government final consumption expenditure data is classified according to the Australian version of the Classification of the Functions of Government (COFOG-A).

A1.17    COICOP is used to classify individual consumption expenditures in the household final consumption expenditure aggregate. Individual consumption expenditures are defined as those which are made for the benefit of individual persons or households. COICOP groups together goods and services that serve similar functions.

A1.18    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, Australia does not include an estimate of HFCE on narcotics or prostitution services (classified in COICOP item 02 Alcoholic beverages, tobacco and narcotics and item 13.9 Other Services respectively). Reliable data on narcotics and prostitution expenditure are currently unavailable. The functional categories of HFCE are based on COICOP and modified for Australian circumstances in the ASNA. The categories include:

• Food and non-alcoholic beverages
• Alcoholic beverages and tobacco
• Clothing and footwear
• Housing, water, electricity, gas, and other fuels
• Furnishings, household equipment and routine household maintenance
• Health
• Transport
• Communication
• Recreation and culture
• Education
• Restaurants and hotels
• Miscellaneous goods and services.

A1.19    Transactions that are associated with non-profit institutions serving households, and included in the household sector, are currently aligned to the COICOP functional classification.

A1.20    COFOG is the classification proposed by the 2008 SNA for the functions of government. It is designed to classify 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.

A1.21    Government final consumption expenditure is current expenditure by general government bodies on services to the community such as defence, education, and public order and safety. In the ASNA, the classification of GFCE is aligned with COFOG-A presented in AGFS15 since 1 July 2017, and is based on the 2008 SNA COFOG. The categories used are as follows:

• General public services
• Defence
• Public order and safety
• Economic affairs
• Environmental protection
• Housing and community amenities
• Health
• Recreational, culture and religion
• Education
• Social protection; and
• Transport

A1.22    The industry classification employed throughout the ASNA is based on the Australian and New Zealand Standard Industrial Classification, 2006 (ANZSIC06). ANZSIC identifies groupings of businesses which carry out similar economic activities. Each grouping defines an industry. The similar economic activities which characterise the businesses concerned are referred to as activities primary to that industry.

A1.23    The ANZSIC structure comprises categories at four levels namely, Divisions (the broadest level), Subdivisions, Groups and Classes (the finest level). At the Division level, ANZSIC provides a broad overall picture of the economy, and, hence, it is suitable for publication in summary tables in official statistics. The subdivision, group and class levels provide increasingly detailed dissections of the broad categories.

A1.24    In the ASNA, ANZSIC is employed with the single modification being that ownership of dwellings is treated as a separate industry. Industry detail is generally provided at the Division level. In preparing the accounts, it is sometimes necessary to shorten some of the lengthier ANZSIC Division title descriptions. Where this occurs, no change in industry definition or content is implied.

A1.25    The industry classifications used for S-U tables and I-O tables—Supply-Use Industry Classification and Input-Output Industry Group—are also based on ANZSIC, but in some respects they depart from the usual application of that classification. For I-O tables, it is desirable that an industry corresponds as closely as possible to the production of products primary to that industry. This applies especially where units classified to an industry produce significant amounts of products primary to another industry which has quite a different pattern of inputs. In these cases, where practical, secondary or subsidiary production is treated as output of the industry to which production is primary; this process is called redefinition of production.

A1.26    Redefinitions of production were included in the I-O tables up until 1996-97 and they can be found in the ABS publication, Input-Output Tables, 1996–97. Since 1996-97, redefinitions are no longer included in the I-O tables.

A1.27    The product classifications employed in the ASNA are the Supply-Use Product Classification and Input-Output Product Classification. The S-U and I-O systems describe the production and subsequent use of all goods and services in the economy; hence, the SUPC and IOPC are defined in terms of the characteristic products of industry.

A1.28    The structure of the SUPC and IOPC arise from their industry-of-origin basis. In an industry-of-origin classification, each product item is shown according to the industry in which it is primarily produced. Thus, the structure of the SUPC and IOPC consists of industry of origin headings with detailed product items shown under each heading.

A1.29    The overall principles for the preparation of such an industry-of-origin product classification are:

• homogeneity of inputs—each product or product group should consist of items that have similar input structures or technology of production. This principle is generally applied through the definition of each SUPC and IOPC item in terms of the ANZSIC industry sector in which it is mainly produced; and
• homogeneity of disposition—each product or product group, having satisfied the first criterion, should consist of items that have similar patterns of disposition or usage. This principle is applied by reference to the description of source data items and information about the transport, distribution and product taxation margins applying to particular products.

A1.30    This structure is implemented in the SUPC and IOPC by the adoption of ANZSIC classes as the basis for defining SUPC and IOPC items. In the Input-Output tables, each IOPC item is identified by an eight-digit code, with the first four digits indicating the ANZSIC class to which the item is primary, and the last four digits indicating the product number within the ANZSIC industry-of-origin class.

A1.31    At its most detailed level, the IOPC comprises approximately 900 individual product items. For a full description of the nature, purpose and principles underlying this classification, see Australian National Accounts: Input-Output Tables. Further information about the SUPC can be found in Australian National Accounts: Supply-Use Tables.

A1.32    The 2008 SNA describes three types of assets that should be included in the national accounts:

• non-financial produced assets;
• non-financial non-produced assets; and
• financial assets (and liabilities).

A1.33    Non-financial produced assets are defined as non-financial assets that have come into existence as outputs from processes that fall within the production boundary of the 2008 SNA. Produced assets need not be goods only. The 2008 SNA classifies mineral exploration expenditure, research and development, computer software and the value of produced entertainment, literary or artistic originals also under the heading of produced assets. Such assets were previously described as intangible but are now referred to as intellectual property products.

A1.34    There are two main types of produced assets: fixed assets and inventories. Both fixed assets and inventories are assets that are held only by producers for purposes of production.

A1.35    Fixed assets are defined as produced assets that are themselves used repeatedly, or continuously, in processes of production for greater than one year. The distinguishing feature of a fixed asset is not that it is durable in some physical sense, but that it may be used repeatedly or continuously in production over a long period of time, taken to be more than one year. Some goods, such as coal, may be highly durable physically but cannot be fixed assets because they can be used once only. Fixed assets include not only structures, machinery and equipment, but also cultivated assets such as trees or animals that are used repeatedly or continuously to produce other products such as fruit or dairy products. They also include assets such as research and development, computer software or artistic originals used in production. Inventories consist of:

• stocks of outputs that are still held by the units that produced them prior to them being further processed, sold, delivered to other units or used in other ways; and
• stocks of products acquired from other units that are intended to be used for intermediate consumption or for resale without further processing.

A1.36    Inventories are held either as finished goods, work-in-progress or raw materials.

A1.37    Non-financial non-produced assets are defined as non-financial assets that have come into existence in ways other than through processes of production. This group includes among other things, land, water, mineral and energy resources, and native forests. Also included are transferable contracts and purchased goodwill. At present, there is insufficient data to include estimates of water, purchased goodwill and transferable contracts in non-financial non-produced assets in the ASNA; the exception being spectrum licences which is included.

A1.38    Financial assets (and liabilities) differ from other assets in the national accounts in that, when a financial asset is owned by an institutional unit, there is (with the exception of SDRs) a counterpart liability on the part of another institutional unit. Financial assets include monetary gold, special drawing rights (SDRs) on the International Monetary Fund, cash and deposits, securities other than shares, loans and placements, shares and other equity, and other accounts receivable/payable.

A1.39    2008 SNA describes in greater detail the classification of assets and liabilities in the national accounts in Chapter 10 The capital account and Chapter 11 The financial account, as well as Annex 1 The classification hierarchies of the SNA and associated codes.