CHAPTER 4 — DATA SOURCES AND METHODOLOGY: DISTRIBUTION OF THE HOUSEHOLD NATIONAL ACCOUNTS ESTIMATES


OVERVIEW OF METHODOLOGY

Current price household estimates for income, consumption and wealth from the Australian System of National Accounts, 2011-12 (cat. no. 5204.0), for the year 2009-10 was distributed for five household distributional indicators based on data from the ABS Survey of Income and Housing and ABS Household Expenditure Survey. Estimates for non-profit institutions serving households (NPISH) included in the household sector in the 5204.0 estimates were removed from the household national accounts in this information paper.

The household national accounts estimates (macro) and the corresponding ABS household survey estimates (micro) were compared, and coverage ratios (micro/macro) calculated. For some items, the macro and or micro estimates were adjusted to derive the most relevant common scope for comparison. The corresponding micro household items were sub sectored into the following household groups: main source of income; equivalised income quintiles; household composition; age of household reference person; and equivalised net worth quintiles. .

The Australian System of National Accounts (ASNA) household components and aggregates were distributed to the five household groups:

• directly using the distribution of the equivalent micro component when the coverage ratio was considered adequate, for example, social assistance benefits;
• indirectly by a related micro distribution when there was no direct micro distribution information for the national accounts item, for example the national accounts item non-life insurance claims were distributed using the micro distribution for total insurance premiums paid;
• indirectly by creating a micro distribution ('synthesised') based on related micro distribution, for example, synthesised micro distribution was created for the national accounts item financial intermediation services indirectly measured (FISIM) for consumer loans; and
• by the corresponding aggregate distribution for income (disposable income), consumption (final consumption expenditure), assets (total assets) and liabilities (total liabilities), when micro distributions either directly or indirectly are not available. For these national accounts items, the inclusion or exclusion of the item did not impact on the distribution of the national accounts aggregates.

The very remote communities and people living in non-private dwellings, populations that were out of scope of the micro surveys (1% and 1.5%, respectively of the resident population), were excluded from the ASNA estimates and distributed separately using data from the 2011 ABS Census of Population and Housing. These distributions were then added to the ASNA distributions based on the micro surveys to obtain the final distribution of the ASNA household income, consumption and wealth estimates.


MACRO DATA SOURCES - ASNA HOUSEHOLD ACCOUNTS

Current price estimates for income, consumption and wealth were sourced from the household sectoral tables: income account; final consumption expenditure; adjusted disposable income account; and balance sheet from the 2011-12 issue of the Australian System of National Accounts (cat. no. 5204.0). Appendix 2 provides the ASNA components of income, consumption and wealth that were distributed. ASNA household estimates measure the resident population living in private dwelling households, institutional households (e.g. long term patients in hospitals and people in retirement homes), unincorporated enterprises and non-profit institutions serving households (NPISH). NPISH estimates are included in the ASNA household sector due to the lack of sufficient data to enable the construction of a full range of sector accounts for NPISH activities. For an explanation of the concepts, sources and methods for the ASNA items see Australian System of National Accounts, Concepts, Sources and Methods, Australia 2012, Edition 3 (cat. no. 5216.0).


MICRO DATA SOURCES - ABS HOUSEHOLD SURVEYS

Micro information was sourced from the cross sectional 2009-10 ABS Survey of Income and Housing (SIH) and 2009-10 Household Expenditure Survey (HES). The SIH and HES collect information from individual households which was used to formulate distributional information of income, expenditure and wealth across the population and between various population subgroups. Both surveys collect detailed information about income, assets, liabilities and household characteristics of persons aged 15 years and over resident in private dwellings throughout Australia, however the main focus of the HES is consumption expenditure.

The study also utilised information from four household publications based on the SIH and HES:

• Household Income and Income Distribution, Australia, 2009-10 (cat. no 6523.0);
• Household Expenditure Survey, Summary of Results, Australia, 2009-10 (cat. no 6530.0);
• Household Wealth and Wealth Distribution, Australia, 2009-10 (cat. no 6554.0); and
• Government Benefits, Taxes and Household Income, Australia, 2009-10 (cat. no 6537.0).

The concepts and definitions relating to income, consumption, net worth, government benefit and taxes and households are included in the explanatory notes and glossary in the above publications. The survey methodology and reliability of estimates for SIH are described in explanatory notes in 6523.0 and 6554.0 and for HES in 6530.0

The household surveys exclude part of the population that was covered in the ASNA, the survey out of scope population relate to those individuals living in non-private dwellings (such as hotels, boarding schools, boarding houses and institutions), and those living in very remote communities. In the 2009-10 surveys, the out of scope population was approximately 3% of the resident population.

The SIH and HES do not provide information for a number of items that are part of the national accounts definition of income, consumption and wealth, for example, employer imputed social contributions, financial intermediation services indirectly measured (FISIM), property income attributed to insurance policy holders and fixed assets such as cultivated biological resources. These components are missing from household surveys due to conceptual and practical reasons. For example, compilers of micro statistics consider that some national accounts components that are useful to describe the economy as a whole, such as FISIM, are not relevant when the focus is the economic behaviour of households. On the other hand, property income attributed to insurance policy holders is missing from micro estimates because the information is difficult to collect or impute.

The income estimates from the micro sources included in the information paper include imputed rent for owner occupied housing and subsidised private rentals. This aligns with the definition of income included in ABS cat. no. 6537.0, but is broader than the definition used in the other household survey publications (e.g. cat. no. 6523.0). The micro income estimates include the following components that are not in scope of the ASNA, income from superannuation, annuities, private pensions and income from family members not living in the household, and excludes, income in scope of the ASNA such as imputed property income on investment income earned by insurance policy holders and financial intermediation services indirectly measured (FISIM). As a consequence, the income variable used to classify households into groups are not fully consistent with the national account income aggregates.

Divergences are also observed between survey and national accounts estimates because the micro surveys follow different classification rules to the national accounts for equivalent estimates. For example, wages and salaries reported in the surveys include workers' compensation received through the payroll, where as workers' compensation payments are a separate item in ASNA income accounts; unlike the survey estimates, dividends in the ASNA do not include imputation credits. However, for consumption estimates used in this information paper, there was generally good alignment between the micro and macro estimates. The initial HES data is coded to a detailed household expenditure classification (HEC), and then concorded to the United Nations' Classification of Individual Consumption by Purpose (COICOP) which is the classification used in ASNA. Other divergences that occur between micro data and national accounts reflect differences in valuations, for example imputed rent for owner occupied housing and, statistical adjustments applied, for example for non-response and sampling error.
DISTRIBUTION METHODOLOGY FOR HOUSEHOLD NATIONAL ACCOUNTS

To distribute the national account estimate by the five household groups (main source of income, equivalised income quintiles, household composition, age of household reference person, and equivalised quintiles) five steps were followed.


Step 1: Scope adjustment to national account aggregates and components

The ASNA household income, consumption and wealth estimates from 5204.0 for 2009-10 were adjusted to remove transactions related to NPISH, people living in non-private dwellings (such as nursing homes, hotels, boarding houses and institutions) and very remote communities. The household micro data used for distribution into household groups does not include these populations, and it was assumed that this out of scope population have income, consumption and wealth patterns that differ from those of the population covered by micro sources.

Non-profit institutions serving households (NPISH)

The NPISH income component, current transfers to non-profit institutions from general government and public corporations were directly removed from the household income account. The NPISH estimates for interest, dividends, income tax and other current transfers were modelled for 2009-10 from estimates in the Australian System of National Accounts: Non-Profit Institutions (NPI) Satellite Account, 2006-07 (cat. no 5256.0). The modelled NPISH estimates were removed from the income estimates in the household income account.

The ASNA household consumption estimates for education, health, transport and accommodation services were adjusted for NPISH. The estimates for current grants from general government were sourced from ABS Government Finance Statistics and the estimates for grants and donation from corporations and households were modelled from 2006-07 NPI satellite account. The final consumption estimates taken out for NPISH were then included in the household adjusted disposable income account as social transfers in kind provided by NPISH for education, health and other services.

The 2009-10 NPISH assets and liability estimates were modelled on the 2006-07 NPI satellite account, and experimental information on NPISH non-financial assets published in the ABS, Working Paper in Econometrics and Applied Statistics, Working Paper No. 2002/1, Experimental Estimates of the Distribution of Household Wealth, Australia, 1994-2000 (cat no. 1351.0). The modelled estimates were removed from the household balance sheet.

People living in non-private dwellings and very remote communities

For people living in non-private dwellings (NPD), and very remote communities (VRC), income, consumption and wealth components were calculated using demographic and economic information from the 2011 ABS Census of Population and Housing (2011 Census). It was assumed that the economic and demographic structure of the Australian population would have experienced minimal change since the financial year 2009-10 up to August 2011 (month the 2011 Census was undertaken).

The out of scope population for VRC were split into indigenous and non-indigenous communities. The NPDs were separated into three categories, institutions related to health and aged care, welfare institutions, and other. Corrective institutions such as prisons were excluded from the NPD estimates as the census data recorded minimal to nil income for inmates; the consumption expenditure for inmates were classified in ASNA as government final consumption expenditure; and it was assumed that their balance sheet (i.e. wealth) would be insignificant.

Shares of the NPDs and VRC (to the whole of Australia) were calculated from 2011 Census data, for population, employment status, age profile, and home ownership. The estimates were then used to calculate out of scope income, consumption and wealth components that were removed from the national accounts aggregates.

The following information from 2011 Census were used for VRC:

• number of families usual place of residency by tenure type;
• number of person, place of usual residence by employment; by total populations; 15 years and over and; 55 years and over;
• dwelling location on census night; and
• household family composition.

The following information from 2011 Census were used for NPDs:

• number of person, place of usual residence by employment; by total populations; by 55 years and over; and
• number of person, place of usual residence, 15 years and over in selected NPDs.

Step 2: Comparison of macro and micro estimates

The national accounts household income, consumption and wealth estimates (macro) after step 1, was compared to the corresponding household survey estimate (micro). Raw coverage ratios, that is the micro estimate divided by the macro estimate as a percentage were then calculated to assess the correlation between the two estimates. For some items, 'adjusted' coverage ratios were calculated, for these components further adjustments were made to macro or micro (or both) estimates to enable the most relevant common scope for comparison. The 'raw' and 'adjusted' coverage ratios are published in electronic table 9. A coverage ratio between 75% to 125% indicates good alignment between the micro and macro estimate, and therefore direct distribution using the micro distributional household indicator would be the chosen methodology. For example, the adjusted coverage ratio for social assistance benefits was 84% and was directly distributed to the household groups using the survey micro distributional information. However, bias could occur if under coverage or other reporting errors differ between household groups in the distributional indicator.

The ABS publications based on 2009-10 SIH and HES publish a comparison between the ASNA and corresponding survey estimate for income (Appendix 5, cat. no. 6523.0), consumption (Appendix 3, cat. no. 6530.0) and wealth (Appendix 3, cat. no. 6554.0). The ASNA estimates in the appendices are from the 2009-10 release of cat. no. 5204.0 (released on 28 October 2011) and are not adjusted for populations not in scope of the surveys and some NPISH estimates are still included. The coverage ratios published in these publications are marginally different to those presented in electronic table 9 in this information paper. Despite these differences, the appendices should be referenced for a detail description of the main scope, definitional and methodological difference between the micro and macro estimates .
Step 3: Create household groups for the micro estimates

The corresponding micro estimates to the ASNA income, consumption and wealth estimates are sub sectored into five household groups: main source of income; equivalised income quintiles; household composition; age of household reference person; and equivalised net worth quintiles. The household groups are created using information available at the individual and at the household level in micro sources. The criteria pursued in the choice of the households groups selected for this information paper were to:

• identify household groups that have different consumption, saving, and wealth patterns;
• allow users to easily identify themselves in a single group;
• compare income, consumption and wealth components across groups and;
• make direct comparison between income and wealth quintiles.

The groups selected are also considered useful for economic analysis and policy purposes.

Main Source of Income (MSI)

Households are classified according to the main source of income for the household as a whole. The five income sources identified were wages and salaries, income from unincorporated business, property income and superannuation, government pensions and allowances, and other. The MSI categories selected in this information paper are different to the MSI categories published in the ABS micro publications 6523.0, 6530.0, 6554.0 and 6537.0. The differences are: micro publications do not separate the MSI category 'property income and superannuation', they are included in the micro category 'other'; the micro category for MSI 'own unincorporated business income' does not include imputed income from owner occupied dwelling, those households are included in micro category 'other'. Table 4.1 below illustrates the major micro components, number of households and value in each category of the MSI used in this information paper, the information in column 2 to 4 are from ABS micro sources.

Main source of income (2009-10)	Micro components (major)	Number of households	Value, $b
Wages and salaries	Employee income	5 170 111	546.6
Income from unincorporated business	Unincorporated business income Imputed income from owner occupied dwelling.	650 298	81.2
Property income and superannuation	Dividends from own incorporated business and trusts Interest from financial institutions Dividends Trust income Property Superannuations, annuity and private pensions	560 608	61.2
Government pensions and allowances	Australian government pensions and allowances Overseas pensions and allowances	2 206 819	79.2
Other	Income from family members not living in the household Child support and maintenance Scholarships Workers' compensation	131 133	11.4

Equivalised Income Quintiles

Households were classified according to the level of their equivalised disposable income (EDI) as it enabled comparison of the relative economic well-being of households of different sizes and composition. EDI was calculated by adjusting disposable income by the 'modified OECD' equivalence scale. The scale assigns a value of 1 to the household head, 0.5 to each additional adult member and 0.3 to each child under 15. The scale reflects the requirement for a larger household to have a higher level of income to achieve the same standard of living as a smaller household. When household income is adjusted according to the equivalence scale, the equivalised income can be viewed as an indicator of economic resources available to a standardised household. For a single person household, it is equal to income received. For a household comprising more than one person, equivalised income is an indicator of household income that would be required by a single person household in order to enjoy the same level of economic well-being as the household in question. To obtain EDI quintiles, households were ranked according to the value of the equivalised disposable income and grouped into quintiles, each quintile comprised the same number persons, that is the quintiles were person weighted. For more information on the use of equivalence scales, see Appendix 3 in Household Income and Income Distribution, Australia, 2009-10 (cat. no 6523.0).

Household Composition

Households were classified according to three criteria: the number of adults in the household; the age of the adults; and the presence of children living at home. Seven household sub-groups are distinguished:

• lone person under the age 65;
• lone person aged 65 and older;
• one parent with dependent children (may also include non-dependent children, other relatives and unrelated individuals);
• couple only reference person under the age of 65;
• couple only reference person 65 and over;
• two adults or more with dependent children (may also include non-dependent children, other relatives and unrelated individuals); and
• other households (mainly consists of two or more unrelated persons over the age of 15).

Age of reference person in household

Households are classified according to six household sub-groups by age in the following years:

• 15-24;
• 25-34;
• 35-44;
• 45-54;
• 55-64; and
• 65 and older.

The reference person for each household is chosen by applying to all household members aged 15 years and over, the selection criteria below, in the order listed, until a single appropriate reference person is identified:

• the person with the highest tenure when ranked as follows, owner without a mortgage, owner with a mortgage, renter, other tenure;
• one of the partners in a registered or de facto marriage, with dependent children;
• one of the partners in a registered or de facto marriage, without dependent children;
• a lone parent with dependent children;
• the person with the highest income;
• the eldest person.

Equivalised Net Worth Quintiles (ENW)

Household equivalised net worth is calculated by adjusting net worth by application of the 'modified OECD' equivalence scale. The same methodology is applied to calculate equivalised net worth as described for equivalised disposable income quintiles. To obtain ENW quintiles, households were ranked according to the value of their equivalised net worth and grouped into quintiles, each quintile comprises the same number persons, that is the quintiles are person weighted.

It is generally accepted that the appropriate presentation of income quintiles should be in terms of equivalised income. However, there is far less agreement about delineating wealth quintiles in equivalised terms. For example, the new guidelines for household wealth released by the OECD do not provide a definitive recommendation on equivalising wealth. The following excerpt is taken from the OECD Guidelines for Micro Statistics on Household Wealth, 2013, Chapter 7.3.6 on equivalence scale.

In the case of household income, there are internationally recognised equivalence scales that are used to standardise the estimates with respect to household size and composition while taking into account the economies of scale that arise from living together, in particular through the sharing of dwellings. In the case of household wealth, however, no internationally agreed equivalence scales exist, and there is no consensus on whether the scales used for income are appropriate for wealth. In studies jointly analysing income and wealth, the equivalence scale applied to income is also applied to wealth (OECD, 2013).

The use of equivalence scales in the case of wealth depends on the purpose of the analysis. Equivalence scales should not be used when analysing the characteristics of individual components of wealth. If, on the other hand, wealth is treated as a source of income streams that can be used to finance consumption and contribute to economic well-being in the household, wealth might be equivalised just as income. Equivalised estimates are often expressed in terms of single-person household equivalents (i.e.. the level of wealth that would be required by a lone person household to have the same level of economic well-being as the household in question). Failure to equivalise could provide a misleading picture of the distribution of wealth, for example by overstating the share of single-person households at the bottom of the distribution.

In this information paper, equivalised net worth was used as the preferred household distributional indicator as the paper jointly analyses and presents household quintiles for income and wealth. A major argument for equivalising household wealth is that it does affect current economic well-being in some circumstances as it provides a buffer if income streams are disrupted and is likely to affect consumption decisions. However, it is recognised that wealth is generally accumulated over the working life of households so the end beneficiaries are not necessarily those present in the current household and therefore the use of the income equivalisation scale for wealth is not as appropriate when analysing long term beneficiaries of wealth.


Step 4: Allocation of the scope adjusted national accounts estimates to the five household groups

The scope adjusted national accounts estimates for income, consumption and wealth were distributed using the micro distributional information of the five household groups by:

• Method A - directly using the distribution of the equivalent micro component when the coverage ratio was considered adequate, that was generally when the ratio over 50%.
• Method B - indirectly by a related micro distributions, when there was no direct micro distribution information for the national accounts item. It was assumed that the distribution of a related micro item would be similar to a distribution of the micro item that was not available.
• Method C - indirectly by creating a micro distribution ('synthesised') based on related micro distribution. It was assumed that the distribution of synthesised micro item would be similar to a distribution of the micro item that was not available.
• Method D - by the corresponding aggregate distribution for income (disposable income), consumption (final consumption expenditure), assets (total assets) and liabilities (total liabilities), when distributions either directly or indirectly are not available. For these national accounts items, the inclusion or exclusion of the item did not impact on the distribution of the national accounts aggregates.

Tables 4.2, 4.3, 4.4 and 4.5 below summarise the methodology used to distribute ASNA income, consumption and wealth estimates.

ASNA Item	Method	Micro Distributional Component
Gross operation surplus(GOS) of dwelling owned by person	A - income from residential property, derived by removing macro components from GOS A and B for macro items added back to calculate GOS.	net income on residential property expenditure on water and sewerage service expenditure on house insurance premiums principle outstanding on dwelling and rental property loans
Gross mixed income (GMI)	A - net business income, derived by removing(and or adding) macro components from GMI B for macro items removed/added back to calculate GMI	net business income value of own unincorporated business imputed rent for owner- occupiers
Compensation of employees	A - wages and salaries B - employers' social contribution	wages and salaries
Property income receivable: interest	A - interest receivable by persons B - interest receivable by unincorporated enterprises	interest received net business income
Property income receivable: imputed Interest	B - investment income from superannuation, life insurance; and imputed interest for unfunded government superannuation. B- investment income from non-life insurance	balance of accounts with superannuation funds expenditure on insurance premiums
Property income receivable: dividends	A	dividend
Property income receivable: reinvested earnings	B	dividend
Property income receivable: rent on natural assets	B	net business income
Secondary income receivable :social benefits - workers' compensation	B	wages and salaries
Secondary income receivable :social benefits - social assistance benefits	A - social assistance benefits adjusted to align to micro component Australian government pensions and allowances. A - private health insurance rebate and child care benefit (added back to social assistance benefits).	Australian government pensions and allowances. private health insurance rebate child care benefit
Secondary income receivable: non–life insurance claims	B	expenditure on insurance premiums
Secondary income receivable: other current transfers	A - majority of other current transfers is from overseas, item includes transfers from NPISH	overseas pensions and benefits scholarships
Property income payable: interest-dwellings	B	principle outstanding on dwelling and rental property loans
Property income payable: interest- consumer debt	B	principle outstanding on investment loans principle outstanding on loans for vehicle principle outstanding on loans for other purposes amount of credit card debt amount HECS liability amount of student financial supplement liability
Property income payable: interest- unincorporated enterprises	B	net business income
Secondary income payable: income tax	A	income taxes paid
Secondary income payable: other current taxes on income, wealth, etc.	A - majority of other current taxes is licences to own or use vehicles, boats or aircraft.	compulsory registration paid for motor vehicles, motor cycles, caravan and trailer
Secondary income payable: social contributions - workers' compensation	B	wages and salaries
Secondary income payable: net non–life insurance premiums	B	expenditure on insurance premiums
Secondary income payable: other current transfers	A - Part of other current transfers paid to general government separated to align to micro component fines. D - other current transfers from NPISH and overseas, distributed on macro gross disposable income.	fines

ASNA Item	Method	Micro Distributional Component
Food	A	food and non-alcoholic beverages
Cigarettes and tobacco	A	tobacco
Alcoholic beverages	A	alcoholic beverages
Clothing and footwear	A	clothing and footwear
Actual rent for housing	A	actual rent for housing
Imputed rent for owner- occupiers	A	imputed rent for owner- occupiers
Water and sewerage services	A	water and sewerage services
Electricity, gas and other fuel	A	electricity, gas and other fuel
Furnishings and household equipment	A	furnishings and household equipment
Health	A	health
Purchase of vehicles	A	purchase of vehicles
Operation of vehicles	A	operation of vehicles
Transport services	A	transport services
Communications	A	communications
Goods for recreation and culture	A	goods for recreation and culture
Recreational and cultural services	A	recreational and cultural services
Books, papers, stationery and artists goods	A	books, papers, stationery and artists goods
Education services	A	education services
Catering	A	catering
Accommodation services	A	accommodation services
Insurance	B - Excluding any taxes that are included in the macro component, approximately 60% of the consumption of insurance is superannuation and 15% is life insurance and 25% is non-life insurance.	balance of accounts with superannuation funds insurance premiums
Other financial services	A - Excluding any taxes that are included in the macro component, approximately 15% of the consumption of other financial services are direct charges C- Excluding any taxes that are included in the macro component, approximately 85% of the consumption of other financial services are FISIM of consumer loans and deposits.	financial services n.e.c synthesised micro FISIM (derived from consumer loans and deposits balances)
Other goods and services	A	personal care personal effects n.e.c other services n.e.c

ASNA Item	Method	Micro Distributional Component
Social transfer in kind - health	B - social transfers in kind adjusted to include NPISH	health social transfers in kind provided by general government (excluding private health insurance rebate)
Social transfer in kind - education	B - social transfers in kind adjusted to include NPISH	education social transfers in kind provided by general government
Social transfer in kind - other	B - social transfers in kind adjusted to include NPISH	other social transfers in kind provided by general government (excluding child care benefit)

The micro distributional components for social in transfers in kind were modelled from survey and other data sources such as ABS Government Finance Statistics, for further information on the micro distributional components please refer to cat. no. 6537.0.

ASNA Item	Method	Micro Distributional Component
Non - financial assets: produced fixed dwellings	B	total value residential property (estimated sale price of dwelling plus value of residential property excluding selected dwellings)
Non - financial assets: produced fixed -ownership transfer costs	B	total value residential property (estimated sale price of dwelling plus value of residential property excluding selected dwellings)
Non - financial assets: produced fixed -non-dwelling construction	B	value of non- residential property
Non - financial assets: produced fixed -machinery and equipment	B	value of own unincorporated business (net of liabilities)
Non - financial assets: produced fixed -cultivated biological products	B	value of own unincorporated business (net of liabilities)
Non - financial assets: produced fixed -intellectual property products	B	value of own unincorporated business (net of liabilities)
Non - financial assets: produced -inventories	B	value of own unincorporated business (net of liabilities)
Non - financial assets: non-produced-lands	B, the macro land component, approximately 90% residential, 2% commercial and 8% rural.	total value residential property (estimated sale price of dwelling plus value of residential property excluding selected dwellings) value of non- residential property value of own unincorporated business (net of liabilities)
Non - financial assets: non-produced-native standing timber	B	value of own unincorporated business (net of liabilities)
Financial assets: currency and deposits	A	total accounts with financial institutions
Financial assets: securities other than shares	A	value of debentures and bonds
Financial assets: loans and placements	D -distributed on macro total financial assets
Financial assets: shares and other equity	A, the macro share component, approximately 30% of shares (listed), 60% of shares in unlisted private corporations shares and 10% of shares other unlisted shares.	value of shares value of own incorporated business (net of liabilities) value of trusts.
Financial assets: insurance technical reserves	The macro insurance technical reserve component: A, superannuation reserves (approximately 75% of total). B, remaining 25% of reserves (18% unfunded superannuation, 3 % life insurance reserves and 4% non-life insurance reserves).	balance of accounts with superannuation funds expenditure on insurance premiums
Financial assets: accounts receivable	B	value of own unincorporated business (net of liabilities)
Liabilities: securities other than shares	D -distributed on macro total financial liabilities	value of own unincorporated business (net of liabilities)
Liabilities: loans and placements	A	principle outstanding loans on selected dwellings principle outstanding on rental property loans principle outstanding on other property loans principle outstanding on investment loans principle outstanding on loans for vehicle purchases principle outstanding on loans for other purposes amount of credit card debt amount HECS liability amount of student financial supplement liability
Liabilities: accounts payable	B	value of own unincorporated business (net of liabilities)

Step 5: Distribution of the out of scope population.

For people living in non-private dwellings (NPD), and very remote communities (VRC): the disposable income (derived from Step 1) was 0.7% and 0.8% of total household disposable income; 1.0% and 1.1% of total consumption expenditure; and 0.8% and 0.6% of total net worth. As discussed in Step 1, it was assumed that the distribution pattern for NPD and VRC would differ from the population covered by micro sources and therefore separate distributions for the five household groups were derived to add back into the macro distributions derived from the micro surveys. Despite the contribution of these population groups being approximately only 1% to the national account aggregates such as disposable income, it is important to include these distributions as the aim of this study is to distribute fully the ASNA household estimates.

Information from the 2011 Census (specified in Step 1) are used to derive economic and demographic profiles for the NPD and VRC categories and the whole of Australia.

The following profiles and the share of the population and households in each profile are derived:

• income quintiles from the income ranges reported in the census data were calculated;
• main source of income (wages and salaries, unincorporated business, property income, government allowances and pensions and other);
• tenure type (owned outright, owned with mortgage, being purchased under rent/buy schemes, rented, occupied rent free and other);
• household composition (same classification as micro surveys); and
• age of household reference person ( same classification micro surveys).

The information from the profiles above indicated that the non-indigenous VRC were very similar to Australia as a whole, therefore their income, consumption and wealth estimates were distributed on the basis of the micro data (as described in Step 4).

The census profiles for indigenous VRC, health and aged care institutions, welfare institutions and other NPDs are used to distribute the national accounts 'out of scope' estimates (calculated in Step 1) into the five household groups. Distribution for some components required additional assumptions and imputation as detail data required was not available. For NPDs, it was assumed that the individual population count equated to equivalent number of households.
METHODOLOGICAL ISSUES

The methodology used in this study to allocate the national accounts totals raised the following methodological issues:

(1) The household distributions were estimated for income, consumption and wealth using both the SIH and HES. The income and consumption components were then combined to estimate the national accounts aggregates, e.g. adjusted disposable income, actual final consumption and saving by household groups. The approach assumed that for each household group the two surveys used describe on average, the same type of households. If in reality, the households in the SIH were different from the households in the HES, there would be an impact on the accuracy of the derived national accounts aggregates such as gross saving. Further, some irregularly purchased items (for example, motor vehicles) in the HES can be impacted by small variations in the household sample that reported such expenditure, particularly in analysis of sub-populations. This in turn would have impacts on any derived national accounts aggregates.

(2) The robustness of the macro distributional information derived from the micro sources depends on the sample sizes of the surveys, when disaggregated survey estimates were used, in some instances, the micro distribution utilised for household groups had significant standard errors.

(3) Methods B and C described in this chapter, under section 'The distributional methodology of the household national accounts' step 4, were based on assumptions about similarities in distributional patterns between macro components. In some cases, the assumption may not be robust but were applied as a 'best' method available due to lack of source data. This issue was identified in particular at the OECD/EuroStat expert group, where some country experts did not support the distribution of imputed national account estimates such as FISIM, due to the appropriateness of indicators available for such distributions, and also the validity of the distribution an imputed estimate was questioned.

(4) The distribution of the out of scope population from micro surveys as described in chapter 3, under section 'The distributional methodology of the household national accounts' steps 1 and 5, were based on distributions derived from the 2011 census data. The derivations of these distribution were based on assumptions placed on the census data and in some cases when no census data was available, best estimates were imputed. The issue of the robustness of the applied models for some out of scope estimates were questioned. In particular, the assumption that the NPD individual equates to equivalent number of households. The overall addition of the number of households to the micro survey data due to the addition of including the out of scope population was approximately 4%, the biggest driver for the increase was the NPD household estimate. The NPD household count assumption was made as no information or methodology was available to distribute this population in any alternate way. It was also recognised that there would be a minor impact on the original equivalised distribution patterns provided by the micro sources due to the addition of the extra households into equivalised income and net worth micro distributions (see (5) below). However, the impact of the models and the underpinning assumptions for out of scope population was considered minimal on the overall distribution of the household national account estimates as the out of scope population impact on the national accounts income, consumption and wealth aggregates was around 1%.

(5) For both macro and micros sources, the preferred unit of analysis is the household. Since equivalised household income and net worth indicators can be viewed as measures of the economic resources available to each person in a household, their estimation from micro data sources in this publication is based on numbers of people rather than households. This is known as person weighting and ensures that people in large households are given as much weight in the distribution as people in small households. This means that the lowest income quintile represents the 20% of people in households with the lowest household income. For national accounts purposes it would be preferred that quintiles were based on equal proportions of households rather than persons, that is, the lowest income quintile represents the 20% of households with the lowest household income.

Table 4.6 below, shows the percentage of persons and households, in the equivalised income and net worth quintiles used in this study. The percentages of households in each quintile are shown, directly from micro sources and after the out of scope micro population is added.

	Lowest	Second	Third	Fourth	Highest
Income quintiles
Persons - micro sources	20	20	20	20	20
Households -micro sources	21	20	19	19	21
Households - After out of scope population adjustment	22	20	19	19	20
Net worth quintiles
Persons - micro sources	20	20	20	20	20
Households -micro sources	20	18	18	21	23
Households - After out of scope population adjustment	21	18	18	20	23

While the table indicates that the concordance between income quintiles for persons and households is generally quite close, the net worth quintiles for persons and households display slightly larger differences. In this study we recognise that the equivalised net worth quintiles while analytically useful do have some methodological issues that need to be addressed; please refer to the discussion on the derivation of the net worth quintiles (step 3 of this chapter).