Government final consumption expenditure

10.67    Government final consumption expenditure (GFCE) is current expenditure by general government bodies on services to the community such as defence, education, and public order and safety. Because these are provided free of charge or at charges which cover only a small proportion of costs, the government is considered to be the consumer of its own output. Government output has no directly observable market value, and so it is valued in the national accounts at its cost of production. GFCE is estimated by deducting the value of any proceeds from sales of government output (e.g. statistical publications by the ABS) from this value of government output.

10.68    GFCE covers net outlays by general government on goods and services for current purposes; that is, outlays which do not result in the creation of capital assets, or in the acquisition of land and existing buildings or second-hand capital goods. Transfer payments are not included; for example, interest payments on government debt securities and social assistance benefits.

10.69    2008 SNA revised the treatment of defence expenditure. The purchases of durable military equipment such as ships and aircraft used as weapons platforms, and outlays on construction works that can only be used for military purposes are now to be treated as capital expenditure. (Expenditure on major items of military equipment with no equivalent civilian use was included in GFCE in 1993 SNA). The ASNA has adopted the 2008 SNA recommendations in this regard. Current expenditures continue to be treated as GFCE, including compensation of employees and consumable military items such as boots, petrol and bullets, .

10.70    Government final consumption expenditure can be regarded as comprising the following:

10.71    Intermediate consumption includes purchases of office supplies and the services of consultants. It also includes general government's share of the imputed financial services provided by banks and other financial intermediaries (FISIM).

10.72    GFCE is classified according to the functions of government. The system recommended by 2008 SNA is the Classification of the Functions of Government (COFOG). The COFOG framework 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.

10.73    The ASNA classifies GFCE according to the Australian version of the Classification of the Functions of Government (COFOG-A). It is presented in Australian System of Government Finance Statistics: Concepts, Sources and Methods (AGFS15). The main categories for government spending in the ASNA are:

• General public services (01)
• Defence (02)
• Public order and safety (03)
• Economic affairs (04)
• Environmental protection (05)
• Housing and community amenities (06)
• Health (07)
• Recreational, culture and religion (08)
• Education (09)
• Social protection (10)
• Transport (11).

10.74    COFOG is also used to help distinguish between expenditure by government on individual services and collective services. By convention, all government final consumption expenditures under each of the following headings are treated as expenditures on individual services, except for expenditures on general administration, regulation, research, etc.:

• Health (07)
• Recreational, culture and religion (08)
• Education (09)
• Social protection (10).

10.75    GFCE covers net outlays by general government on goods and services for current purposes; that is, outlays which do not result in the creation of capital assets, or in the acquisition of land and existing buildings or second-hand capital goods. Transfer payments are not included, for example, interest payments on government debt securities and social assistance benefits.

10.76    Detailed estimates of government final consumption expenditure classified by purpose are available, as a general rule, from 1961-62.

10.77    GFCE estimates are compiled using Government Finance Statistics (GFS) data. Data is obtained from the Department of Finance, state and territory treasuries, local governments and universities. GFS data is classified by Economic Type Framework (ETF) which includes employee expenses, non-employee expenses and revenue from sales of goods and services that are captured in government consumption.

10.78    The current method is based on the Australian System of Government Finance Statistics: Concepts Sources and Methods, Australia 2015 (AGFS15) which was implemented in the Australian National Accounts in 2017. Estimates on an AGFS15 basis which includes data classified by ETF are available back to 2002. Estimates of Government Consumption prior to 2002 have been backcast to ensure consistency across the time series.

10.79    GFCE is compiled as the sum of the following components:

10.80    Employee expenses include wages, salaries, superannuation and redundancies. Non-employee expenses expenditure on supplies, contractors and materials.

10.81    Social benefits include Medicare, pharmaceutical benefits, child care subsidies, aged care, the National Disability Insurance Scheme, transport and energy concessions.

10.82    ASNA adjustments are scope and coverage adjustments which include the following four components:

• Consumption of fixed capital (depreciation)
• Consumption of FISIM (Financial Intermediation Services Indirectly Measured)
• State and local consolidation adjustments (i.e. payroll tax paid by departments to own state treasury)
• (less) Intellectual property which are capitalised (i.e. computer software, research and development and artistic originals).

10.83    Sales of goods and services include licence fees, tuition fees and hospital fees.