Australian Defence Industry Account

23.56   The Australian Defence Industry Account (ADIA) measures the direct economic contribution of the defence industry to the Australian economy. It presents estimates on the gross value added of the Australian defence industry disaggregated by state, industry division, sector and type of legal organisation (TOLO).

23.57   The ADIA has been designed to estimate the first-round economic impacts that Defence spending contributes to the Australian economy. The Australian defence industry represents the production of goods and services invoiced to the Commonwealth Department of Defence (Defence). Therefore, the scope of the ADIA is limited to Australian organisations that have directly received payments from Defence and have produced the goods and/or services that they deliver to Defence within Australia. Therefore, the ADIA GVA excludes:

• Defence expenditure to overseas entities
• Defence expenditure to Australian entities that have imported the good and/or service represented on the invoice
• transfers to other commonwealth government agencies
• wholesale and retail sales with no identified value add components (wholesale and retail margins are included).

23.58   Gross value added: Direct defence output (at basic prices) minus intermediate use (at purchasers' prices). The GVA of the Australian defence industry is a measure of the direct contribution of Defence expenditure to the Australian economy.

23.59   ADIA direct employment: the number of paid employees that are associated with the defence industry. This represents employment associated with defence expenditure, not employment created by Defence. Direct employment includes all part-time and full-time employees. This means some employees may be counted more than once if they work in more than one defence industry business. 

Defence Finance Group (DFG) dataset

23.60    Invoice-level data for all the expenditure made by the Department of Defence. The dataset contains the dollar amount of each invoice paid by the Defence. It includes descriptions of the expenditure, the Australian Business Number (ABN) of the organisations receiving the expenditure and other related metadata. 

Key use of data:

• Sets output at purchasers' price (PP) estimates for the Australian defence industry.
• Provides key location information for organisations in the Australian defence industry.
• Provides metadata used to code defence contracts to ABS product and industry classifications.

Australian National Accounts: Supply Use Tables

23.61    Key use of data:

• Model the conversion of Defence invoices from purchasers' prices (PP) to basic prices (BP).
• Model margin output of Defence invoices.
• Create total intermediate use (TIU) to output and primary input to output ratios to inform the GVA of Defence invoices.

ABS Business Register

23.62    Key uses of data:

• Classification of units in scope of the ADIA to their Australian and New Zealand Standard Industrial Classification (ANZSIC).
• Provides additional location information on units in scope of the ADIA.
• Provides employee headcount estimate for each ABN.
• Used to allocate ABN level data to type of activity units (TAU) to inform GVA and business counts.

Business Activity Statements (BAS)

23.63    Key uses of data:  Total business turnover.

Deriving defence industry GVA

23.64    The invoice level DFG datasets act as the main input with the national accounts supply-use tables used to model key economic variables.

To derive the direct GVA estimates for the ADIA, the following steps are applied for each ABN, for each financial year:

1. Coding of Defence transactions to product (SUPC) and industry (SUIC and ANZSIC):  
   1. SUPC are coded using either manual coding (higher value invoices); automated coding (lower value invoices); or where this information is not available the ANZSIC of the supplying business is used to infer the most likely SUPC.
   2. The ABN of each Defence invoice is coded to ANZSIC industry using the most appropriate Type of Activity Unit (TAU) on the ABS Business Register. Each invoice is also allocated a SUIC based on the primary producing industry for the product supplied.
2. Defence contracts are converted from purchaser price (PP) to basic price using relationships in the supply-use tables to split PP into output (ratios) at BP, margins, taxes, and subsidies at the SUPC level, based on the specific SUPC they are coded to.
3. For each invoice margins are removed from output at BP. The margin estimates are then reallocated to the main supplying Industry for the specific margin.
4. Primary inputs for each invoice are calculated by:
   1. Calculating the TIU and primary input ratios to total output at BP for each SUIC.
   2. Applying the TIU ratios to output at BP for each in scope invoice to derive the TIU estimate.
   3. Subtracting the derived TIU estimate from output at BP to derive the GVA value for each invoice.
5. Individual invoices are aggregated to calculate total GVA by industry, state, type of legal organisation (TOLO) and sector. 

Deriving employment headcount estimates

23.65    To derive the direct employment headcount estimates for the ADIA, the following steps are applied for each ABN, for each financial year:

1. Source input data:
   1. the total employment estimate for each ABN is sourced from the ABS Business Register.
   2. the total turnover for each ABN is sourced from the ATO (Business Activity Statement) data.
   3. Defence turnover (invoices) for each ABN is sourced from the DFG dataset.
2. Calculate the turnover ratio for each ABN: the turnover ratio is an ABN’s Defence turnover to its total turnover.
3. Estimate Defence employment for each ABN:
4. the total employment estimate from the ABS Business Register is multiplied by the turnover ratio to estimate the direct employment associated with Defence payments received by that ABN.
5. where employment or tax data is insufficient, a divisional ratio is used to calculate defence industry employment.

4. Calculate aggregate Defence employment: sum direct employment estimates for all ABNs to calculate aggregate direct defence industry employment.

Deriving business counts estimates

23.66    Counts of businesses that have provided goods and services to Defence are derived by counting:

• ABNs in the non-profiled population that receive a payment from Defence.
• TAUs in the profiled population that receive a payment from Defence. 

23.67    Total business counts are provided for Australia. Where a business provides goods and services to Defence in multiple states these activities are also captured in the state totals. The sum of the state totals will therefore not add to the Australia total.

23.68    Refer to the methodology page for more information.