The Australian System of National Accounts

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Producer and International Trade Price Indexes: Concepts, Sources and Methods
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Reference period
2022

The Australian System of National Accounts (ASNA) is a systematic framework of statistics providing a wide range of information about the economy and its components. At their summary level, the accounts reflect key economic flows: production, income, consumption, investment and saving. At their more detailed level, they are designed to present a statistical picture of the structure of the economy and the detailed processes that make up domestic production and its distribution.

The Input-Output Framework

The Input-Output (I-O) tables form an integral part of the ASNA. They present a comprehensive picture of the supply and use of all products in the economy, and the incomes generated from production. They also provide a much more detailed disaggregation of gross domestic product than is available in the National Income, Expenditure and Production Accounts.  They provide a framework for checking the consistency of statistics on flows of goods and services obtained from quite different kinds of statistical sources - industrial surveys, household expenditure surveys, investment surveys, foreign trade statistics, etc. In national accounting and economic analysis two kinds of I-O tables are referred to:

  • Supply and Use (S-U) tables; and
  • I-O tables, including symmetric I-O tables (product by product or industry by industry matrices which combine supply and use into the one table, with identical classifications of products or industries applied to both rows and columns).

The S-U tables form the starting point for constructing I-O tables. Both the S-U tables and I-O tables provide a means of undertaking detailed analysis of the process of production and the use of goods and services (i.e. products), and of the income generated in that production.

Supply-use framework

In Figure 2.1 below, an example of the composition of the supply-use (S-U) tables that underpin the Input-Output (I-O) tables is presented. The S-U framework comprises of two tables 'supply' and 'use'. The supply table shows the total supply of products from domestic and foreign producers that are available for use in the domestic economy. The use table presents the use of this supply by industries as intermediate inputs and by final users.

  • Within supply is industry, and beneath this is output. Products under output are farmer to grain, baker to bread, and hospital to health services. These all make up total output (A). Also under supply are taxes/subsidies, margins, and imports.
  • Supply equals use. Within use is industry, and beneath this is intermediate input. Products under intermediate input are fertiliser to farmer, flour to baker, and pharmaceuticals to hospital. These all make up total intermediate input (B). Also under use is final demand. Beneath final demand are government, households, capital, exports, and inventories.
  • Gross value added (production) equals total output minus total intermediate input, or A minus B.
  • A minus B equals gross value added income. This includes compensation of employees, other net taxes on production, and gross operating surplus

Figure 2.1 Supply-use tables - framework for the economy

Figure shows an example of the composition of the Supply-Use tables that underpin the Input-Output tables is presented, and the table consists of two sections – ‘Supply’ and ‘Use’.
Within supply is industry, and beneath this is output. Products under output are farmer to grain, baker to bread, and hospital to health services. These all make up total output (A). Also under supply are taxes/subsidies, margins and imports. Supply equals use. Within use is industry, and beneath this is intermediate input. Products under intermediate input are fertiliser to farmer, flour to baker, and pharmaceuticals to hospital. These all make up total intermediate input (B). Also under use is final demand. Beneath final demand are government, households, capital, exports, and inventories. Gross value added (production) equals total output minus total intermediate input, or A minus B. A minus B equals gross value added income. This includes compensation of employees, other net taxes on production, and gross operating surplus.

Presenting the Input-Output Tables

The Input-Output (I-O) tables present a comprehensive picture of the supply and use of all products in the economy, and the incomes generated from production.

They provide a framework for checking the consistency of statistics on flows of goods and services obtained from quite different kinds of statistical sources - industrial surveys, household expenditure inquiries, investment surveys, foreign trade statistics, etc. The Australian System of National Accounts (ASNA), and the I-O tables in particular, serves as a coordinating framework for economic statistics, both conceptually for ensuring the consistency of the definitions and classifications used and as an accounting framework for ensuring the numerical consistency of data drawn from different sources. The I-O framework is also appropriate for data estimation purposes, and for detecting weaknesses in data quality and estimation. By providing information on the structure of, and the nature of product flows through the economy, the I-O tables assist in the decomposition of transactions into prices and volumes for the calculation of an integrated set of price and volume measures. As an analytical tool, input-output data are conveniently integrated into macroeconomic models in order to analyse the link between final demand and industrial output levels.

Input-Output tables can be presented in either basic prices or purchasers’ prices, and the valuation basis for products is an important factor dependent upon which section of the supply-use framework the products are situated.

If users are looking at a use matrix within an I-O table, for the intermediate inputs matrix, industries appear across columns and products across rows. In the intermediate inputs matrix, each cell indicates the amount of a product purchased by each industry as an intermediate input into the industry’s production process.  Within the final demand matrix, products are presented in the rows, and final demand categories (rather than industries) valued at purchasers' prices appear across the columns. The tables below are valued at basic and purchasers’ prices with Output indexes I-O framework at basic prices (Table 2.2) and Input indexes I-O framework at purchasers’ prices (Table 2.3). 

The 'Supply' table of the Input-Output tables

If looking at a supply matrix within an Input-Output table, the domestic output matrix forms the main body of the table. In this matrix, industries appear across columns and products across rows, and each cell indicates the amount of each product that is produced domestically by each industry at basic prices. Total domestic supply by commodity (valued at basic prices) presents the sum of the domestic output and imports. Imports are valued at domestic port value, that is, free on board, which is equivalent to the importer’s customs frontier price. An example of the supply 'output' table is demonstrated in Table 2.2 below.

The 'Use' table of the Input-Output tables

Table 2.3 is an industry-level use table in the supply-use framework. This table comprises the intermediate inputs matrix, final demand matrix, and value-added matrix. The structure of the use table shows the use of products by industries and by final users as well as the value added by industry at purchasers’ prices. Valuation in purchasers’ prices shows inputs to industries and final uses at values that reflect the actual cost to the user of the product. These costs include the costs of transporting the product to the user in addition to any wholesale and retail mark-ups incurred while bringing the product to market.

The intermediate inputs matrix forms the central part of the use table. This represents expenditure of products by industry that are used as an intermediate input into the industry’s production process. These products are valued at purchasers’ prices, meaning that taxes, transportation costs, and wholesale and retail trade margins are embedded in the total along with the underlying value of the product purchased. No distinction is made in the use table between imports and domestically produced output.

The final demand matrix within the ‘Use’ table presents expenditure-side components of GDP, including household and government final consumption expenditures, gross final capital formation, change in inventories and exports.

Table 2.2 Output indexes, PPI and ITPI coverage, Input-Output framework at basic prices

Table 2.2 Output indexes, PPI and ITPI coverage, Input-Output framework at basic prices
Looking across the rows of a table at purchasers’ prices, the margin elements are included in the values of the flows of all the products which attract the margin; on the other hand, in a table at basic prices, the margin product flows (e.g. retail trade, road freight, etc.) are shown separately in their own right against the appropriate industry (e.g. transport). Note that as per the 2008 SNA definition of basic prices, transport costs are included in basic prices of other products in those cases where the transport service is not separately invoiced. The I-O Output table consists of the following rows: Intermediate Inputs: Agriculture, forestry & fishing Mining Manufacturing Electricity, gas, water & waste services Construction Wholesale trade Retail trade Accommodation & food services Transport, postal & warehousing Information media & telecommunications Financial & insurance services Rental, hiring & real estate services Professional, scientific & technical services Administrative & support services Public administration & safety Education & training Health care & social assistance Arts & recreation services Other services Primary Inputs: Wages, salaries & supplements Gross operating surplus Commodity taxes (net) Indirect taxes n.e.c (net) Sales by final buyers And the following columns: Intermediate demand: Agriculture Mining Manufacturing Electricity etc Construction Services Final demand: Intermediate use (sub-total) Final consumption expenditure – private Final consumption Expenditure - government Gross fixed capital expenditure – private enterprises Gross fixed capital expenditure – public enterprises Gross fixed capital expenditure – general government Increases in stocks Exports of Goods and Services Final Demand (subtotal) Total supply (grand total) The maximum extent of PPI & ITPI coverage is Intermediate demand.

Table 2.3 Input indexes, Price index coverage, Input-Output framework at purchasers' prices

Table 2.3 Input indexes, Price index coverage, Input-Output framework at purchasers' prices.
There are two alternative treatments of imported products in the tables: direct allocation and indirect allocation. Direct allocation of imports involves allocating all imports directly to the industries which use them. All flows recorded in quadrants 1 and 2 refer only to the use of domestic products, and consequently quadrant 1 does not reflect the technological input structure of the industry. Indirect allocation of imports involves first recording all imports as adding to the supply of the industry to which they are primary and then allocating this supply along the corresponding row of the table to using industries. The result is that flows in quadrants 1 and 2 contain imported and domestically produced products without distinction. Quadrant 1 then better reflects the technological input structure of the industry and quadrant 2 better reflects the product composition of final demand. The I-O Input table consists of the following rows: Intermediate Inputs: Agriculture, forestry & fishing Mining Manufacturing Electricity, gas, water & waste services Construction Wholesale trade Retail trade Accommodation & food services Transport, postal & warehousing Information media & telecommunications Financial & insurance services Rental, hiring & real estate services Professional, scientific & technical services Administrative & support services Public administration & safety Education & training Health care & social assistance Arts & recreation services Other services Primary Inputs: Wages, salaries & supplements Gross operating surplus Commodity taxes (net) Indirect taxes n.e.c (net) Sales by final buyers And the following columns: Intermediate demand: Agriculture Mining Manufacturing Electricity etc Construction Services Final demand: Components of Final Demand (consumption, investment, inventories & exports) Domestic supply: Agriculture Mining Manufacturing Electricity etc Construction Services Total supply (grand total) The maximum extent of PPI & ITPI coverage is Intermediate demand, Imports and Final demand

Supply and use of products in aggregate

At the most aggregate level, the supply and use of products in the National Accounts is the macroeconomic identity equating total supply with total use. Total Supply is the sum of outputs, imports, margins and net taxes (taxes less subsidies on products). Total Use is the sum of intermediate consumption, final consumption of households and governments, capital formation, changes in inventories, and exports.

Gross Domestic Product
There are three approaches which can be used to measure Gross Domestic Product (GDP):

  1. The income approach - involves summing net factor incomes, consumption of fixed capital (depreciation) and taxes less subsidies on production and imports
  2. The expenditure approach - involves summing all final expenditures, changes in inventories and exports less imports of products
  3. The production approach - involves taking the value of products produced by an industry (i.e. output) and deducting the cost of products used up by the industry in the production process (i.e. intermediate consumption) and adding the result across all domestic industries. Taxes less subsidies are added on products if output is valued at basic prices, as recommended in the Australian System of National Accounts (ASNA).

GDP is internationally recognised as the central National Accounts aggregate for measuring national economic performance. It is a measure of production, as distinct from final demand. It measures the value added by the productive activity carried out by all the unit’s resident in an economy. Compiling indexes for tracking the relative change in GDP and its components that can be attributed to price and volume change is one of the primary objectives for ABS Price Indexes.

The individual elements in the value aggregate equation represent detailed product flows that are classified into categories of transactions.

There are two defining aspects of recording transactions: timing and valuation.

Timing of transactions covered

To associate each transaction with a date, the National Accounts use an accrual basis for accounting as outlined in the ASNA. Accrual accounting records flows at the time economic value is created, transformed, exchanged, transferred or extinguished. This means that flows that imply a change of ownership are entered when the change occurs, services are recorded when provided, output at the time products are created and intermediate consumption when materials and supplies are being used.

Valuation

There are two valuation principles in the National Accounts, one for suppliers and one for users. For suppliers, transactions in products are to be valued at basic prices. The basic prices is the price per unit of product receivable by the producer. As the producer does not receive taxes (if any) on products but does receive subsidies (if any) on products, taxes on products are excluded from the  basic price, while subsidies on products are included. Subsidies artificially reduce the sale price, so they are included in the  basic price to obtain a measure of the true value of products produced. Taxes on products, if included, would artificially increase the price and so are excluded. Separately invoiced transportation charges paid by consumers, or any distribution margins added by other, retail/wholesale service producers are also excluded from the basic price. On the other hand, the user, as purchaser, pays all of these charges, and users’ purchases are therefore valued at purchasers’ prices, which add taxes net of subsidies on products and margins for included transportation, insurance, and distribution services to the basic price.

Accordingly, output and imports are valued at basic prices, to which are added taxes less subsidies on products (net taxes) and margins to arrive at total supply. The components of total uses (including both final expenditure and intermediate consumption) are valued at purchasers’ prices. This is interpreted for the final consumption of households and government. For capital formation expenditures, the notion of purchasers’ prices also includes the costs of setting up fixed capital equipment. For exports, purchasers’ prices include export taxes net of subsidies, according to the free on board value at the Australian customs frontier.