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Enhancing measures of non-market output in economic statistics: A roadmap Jason Annabel - Economic Research Hub Introduction These three industries make up around 17% (footnote 1) of the Australian economy and support 3,782,100 jobs (footnote 2). These industries are of great importance to the Australian community – the services they provide directly affect the lives of many. Given the increasing importance of government spending in health and education, and against the backdrop of an aging population, the share of the economy represented by these industries and the employment opportunities they will provide in the future is expected to grow. With Government funding as part of the Enhancing Economic Statistics New Policy Proposal, the ABS Economic Research Hub is undertaking work to enhance ABS measures of non-market activity. The work aims to build robust and sustainable indicators for measuring growth in non-market output volumes for the health and education industries. These indicators will be:
These indicators will implicitly reflect the impact of technological progress and innovation underpinning the delivery of non-market services. The work will leverage off work done by other National Statistical Offices (NSOs) and in response to changing policy dimensions. Measurement options
Work done so far Enhancing output measures of the health care industry (June 2018) (footnote 4) The paper outlined Australia’s current data sources and methods. Where possible, quantity indexes are used to measure non-market output. These are weighted by input costs. The 'mix' of health products changes over time as a result of consumer demand, new treatments coming online, technological progress and other factors, but it doesn't explicitly take patient outcomes into account. This is known in the literature as ‘implicit’ quality adjustment. It is a way of building a proxy for utility into the measurement, but the drawback is that it is observed from the producer’s perspective and not the consumer’s. The paper concluded by framing ABS’ preferred short term approach, which led directly into the paper discussed below. Disease based output measures for hospitals (December 2018) (footnote 5) Hospitals provide three broad types of services – admitted patient care, emergency department care, and non-admitted patient care. The paper focused on admitted patient care, which makes up 74% of total hospital spending. The paper stratified by diagnosis, because it allows for ‘substitutions’ across different types of treatments to be accounted for over time. It also allowed more focus on treatment outcomes, as opposed to the specific types of goods and services provided. The paper further stratified by patient age. The paper outlined the data used and the methods employed in constructing a volume index, as well as some of the complications encountered. It framed an alternative method which used the source data at a more dis-aggregated level. The paper found that growth in output volumes is marginally slower when more detailed data is used. This is because ‘substitutions’ across treatments through time is more accurately accounted for, though the source data is probably less reliable at more granular levels. The paper found that while the Australian population increased by 1.7% per year on average between 2004-05 and 2014-15, aggregate hospital output increased by 3.4% per year on average. This represents an increase in real expenditure on hospital admissions per person during this period. This could be driven by demographic change, though this question was not considered in the paper. It also found a disparity of growth across different types of treatments provided by hospitals. Treatments of diseases of the eyes, blood and nervous system increased much more quickly than aggregate hospital output, whereas treatment of circulatory system diseases and the provision of pregnancy and childbirth services grew more slowly than population. It further found that private hospital output increased at a faster average annual rate than public hospitals, mainly driven by stronger growth in the number of private hospital admissions. What's next Education Owing to measurement complexities, the work on producing independent volume measures for special education and tertiary education is not expected to be completed by June 2020. Other Collaboration The ABS will also work with the Productivity Commission, the Australian Institute of Health and Welfare, and the Commonwealth Departments of Health and Education. Where to from here For further queries please email <economic.research@abs.gov.au> Footnotes 1. Australian System of National Accounts, 2017-18 (cat. no. 5204.0) 2. Labour Account, Australia, March quarter 2019 (cat. no. 6150.0.55.003) 3. System of National Accounts 2008 (Chapter 15, para.15.117 to 15.119) 4. Enhancing Output Measures of the Health Care Industry (June 2018) 5. Disease Based Output Measures For Hospitals (December 2018) 6. T. Atkinson, Atkinson Review: Final Report – Measurement of Government Output and Productivity for the National Accounts, HMSO / Palgrave Macmillan, 2005. 7. Measuring government sector productivity in New Zealand: a feasibility study
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