Adjustments made to HFCE

10.26    This adjustment accounts for expenditure by resident households overseas and the expenditure of foreign tourists in Australia. It does not include online purchases by Australian households from international websites. Net expenditure overseas (NEO) therefore reflects the expenditure of resident households only (whether in Australia or overseas).

10.27   The NEO adjustment is necessary because a number of the data sources for HFCE are based on sales reported by Australian businesses. Those sales include expenditure by foreign tourists in Australia (i.e. exports) but exclude expenditure by Australians overseas (i.e. imports). The former are deducted from the relevant A-COICOP categories while the latter are added to different categories.

10.28    This adjustment is included in all A-COICOP categories except for Water, electricity, gas and other fuels (04). Expenditure by foreign tourists in Australia is deducted from the relevant categories. Expenditure by Australians overseas is added.

10.29    Calculation of NEO is a two-stage process based on services debits and credits data sourced from Tables 8 and 9 in the ABS publication, Balance of Payments and International Investments Position, Australia. The first stage estimates the total value of NEO while the second allocates expenditure to the relevant A-COICOP category. The total value of NEO is calculated by offsetting two items against each other; namely, the expenditure of Australian residents abroad (debits) and the expenditure of non-residents in Australia (credits).

10.30    The expenditure of residents overseas is calculated as the sum of two items:

• Personal travel debits
• Expenditure of Australian Government employees.

10.31    Personal travel debits, as adjusted for national accounting purposes, record the acquisition of goods and services abroad by residents travelling at their own expense, including students. Business travellers are not included as their expenditure is largely intermediate consumption of the employing business. Examples are purchases of accommodation, meals, ground transportation and tours.

10.32    The estimate for personal travel debits is calculated as the sum of two original current price Balance of Payments series: Services Debits - Travel - Personal - Education-related and Services Debits - Travel - Personal - Other services. State/Territory splits are derived using proportions from the ABS publication, Overseas Arrivals and Departures, Australia.

10.33    Expenditure of Australian Government employees records the personal expenditure on goods and services by Australian diplomats and their dependants stationed abroad. It is also based on an original current price Balance of Payments series: an unpublished lower level component of Services Debits – Government goods and services n.i.e. State/Territory estimates are derived using figures on the number of Australian government employees abroad.

10.34    The expenditure of non-residents in Australia is derived by aggregating three items:

• Business travel credits
• Personal travel credits;
• Expenditure of foreign government employees.

10.35    Business travel credits cover expenditures on goods and services by seasonal and non-resident workers employed in Australia, and by travellers who visit, for business purposes, on behalf of an enterprise resident in another economy. The Balance of Payments series for business travel credits is:

• Services Credits – Travel – Business.

 State/Territory splits are derived using proportions from the ABS publication, Overseas Arrivals and Departures, Australia.

10.36    Personal travel credits record expenditures on goods and services in Australia by non-residents travelling at their own expense, for purposes other than business. The estimate for personal travel credits is calculated as the sum of two original current price Balance of Payments series:

• Services Credits – Travel – Personal – Education-related
• Services Credits – Travel – Personal – Other services.

State/Territory estimates are again calculated using proportions from Overseas Arrivals and Departures, Australia.

10.37    Expenditure of foreign government employees records the personal expenditure in Australia on goods and services by foreign diplomats and their dependants stationed in Australia. It is based on the unpublished lower level component of the Balance of Payments series:

• Services Credits – Government goods and services

State/Territory estimates of the expenditure of foreign government employees in Australia are derived using information on the number of foreign diplomats.

10.38    Total NEO is calculated by subtracting the expenditure of non-residents in Australia from the expenditure of Australia residents overseas. This is then allocated to various categories of HFCE using information from the International Visitor Survey, published by Tourism Research Australia (TRA). Data on expenditure from this survey is used to derive weights for the HFCE categories, which are then applied to the total NEO estimate. The exception is NEO for HFCE rent which is allocated solely to actual rent.

10.39    Quarterly and annual estimates of total NEO in current price terms are published as a memorandum item in the ABS publications, Australian National Accounts: National Income, Expenditure and Product and Australian System of National Accounts.

10.40    This adjustment accounts for purchases by foreign tourists from Australian businesses. Tourists are able to claim refunds on payments made in Australia for the Goods and Services Tax (GST) and Wine Equalisation Tax (WET). The Australian government will refund payments on eligible purchases under the Tourism Refund Scheme (TRS) if tourists meet certain conditions.

10.41    Data for this adjustment are sourced from Australian Border Force (ABF), including the value of quarterly refunds broken down by type of good.

10.42    This adjustment is applied to the following A-COICOP categories:

• Total alcoholic beverages and tobacco (02)
• Clothing and footwear (03)
• Furnishings and household equipment (05)
• Total recreation and culture (09)
• Total miscellaneous goods and services (12).

10.43    This adjustment accounts for purchases by Australian households from international websites. Imports with a value below a threshold of one thousand dollars are in scope of this adjustment. This threshold means that some imported goods are exempt from customs duty. Nonetheless, Australian households must pay GST on all applicable goods of any value at the point of sale.

10.44    Data for this adjustment are sourced from Australian Border Force. The ABS accounts for scope and undercoverage by applying additional adjustments to ABF data.

10.45    Adjustments for the LVT are made to the following A-COICOP categories:

• Food (01)
• Clothing and footwear (03)
• Furnishings and household equipment (05)
• Health (06)
• Total transport (07)
• Total recreation and culture (09)
• Total miscellaneous goods and services (12).

10.46    This adjustment attempts to capture the understatement in HFCE due to activities occurring in the underground economy. An international handbook defines the underground economy as covering "those activities that are productive and legal but are deliberately concealed from the public authorities to avoid payment of taxes or complying with regulations". This publication is Measuring the Non-Observed Economy: A Handbook, which was jointly authored by the OECD, IMF, International Labour Organization (ILO) and the Interstate Statistical Committee of the Commonwealth of Independent States.

10.47    In HFCE, the understatement is most likely to result from businesses under-reporting retail turnover associated with cash transactions in the source data used for the compilation of household expenditure estimates. Another activity in the underground economy is the production and consumption of goods by households.

10.48    Annual estimates of home or 'backyard' production are incorporated into supply-use benchmarks for HFCE. The annual value of self-supplied food is based on estimates of the amount of food produced for home consumption from the ABS publication, Home Production of Selected Foodstuffs, Australia. The value of homemade alcohol is based on estimates of the amount of alcohol produced for home consumption from the publication cited above.

10.49    Estimates for the underground activity occurring in the various HFCE categories are calculated as proportions of the expenditure estimates. The factors used have been compiled based on analysis by the ABS. These are not varied from year-to-year but are subject to periodic review. Refer to Information Paper: The Non-Observed Economy and Australia’s GDP, 2012 for more information.

10.50    In ASNA, adjustments for the underground economy are made to the following A-COICOP categories:

• Food (01)
• Alcoholic beverages (02.1)
• Clothing and footwear (03)
• Furnishings and household equipment (05)
• Total transport (07)
• Total recreation and culture (09)
• Total hotels, cafes and restaurants (11)
• Total miscellaneous goods and services (12).

10.51    This adjustment represents the expenditure by households on the repair and maintenance of various HFCE products, other than those captured in the Repair and maintenance not identified elsewhere component of HFCE Other goods and services (A-COICOP Division 12).

10.52    The sources used to derive estimates of household expenditure such as retail sales do not include spending on repairs and maintenance, therefore making it necessary to adjust for this expenditure separately.

10.53    Data on the total repair and maintenance expenditure by households is benchmarked to the Household Expenditure Survey. Quarterly estimates are obtained by interpolating and extrapolating these benchmarks. Total repair and maintenance expenditure is broken down into HFCE product categories by applying weights, also obtained from the Household Expenditure Survey.

10.54    Adjustments for repairs and maintenance expenditure are applied to the following A-COICOP categories:

• Clothing and footwear (03)
• Furnishings and household equipment (05)
• Total recreation and culture (09)
• Total miscellaneous goods and services (12).