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FEATURE ARTICLE: FORTHCOMING CHANGES TO THE CALCULATION OF CONTRIBUTIONS TO GROWTH IN THE NATIONAL ACCOUNTS
For current price estimates, components are additive to totals and therefore the contributions to growth are also additive. For volume estimates, chain linked series are referenced to the latest base year, and the coinciding of the reference year and base year generates additivity in the subsequent periods. This allows the contribution by a component to the growth of GDP between two periods to be readily obtained. When these conditions are not met (i.e. for all years prior to the reference year) there is no additivity in the volume estimates, and the further away the estimates are from the base year, the less additive the contributions to growth calculations become.
The current method will continue to be applied to measures in current price terms and for volume estimates where a current price quarterly estimate does not exist, such as components of GDP compiled using the industry value added approach.
THE NEW METHOD
The new method to calculate contributions to growth for a given aggregate 'A' can be expressed as:
100 * ((PYAt - PPAt) / PPAt) x (PPAt / PPGDPt)
This method involves calculating a current period quantity in prices of the previous period and the corresponding quantity in the previous period in prices of the previous period. These are calculated for all components, aggregated and then chained. These are then weighted by the share of the value of the aggregate in the previous period as a proportion of GDP in the previous period.
The new contributions to growth method takes advantage of the fact that these two quantity components (PYAt and PPAt) are additive for any aggregate and that the movement of the chain volume estimate of the aggregate is equivalent to the ((PYAt - PPAt) / PPAt) calculation.
Additivity for contributions to growth exists for the years where the statistical discrepancy is zero, effectively 1995-96 onwards, by using GDP expressed in the prices of the previous year. For the period 1986-87 to 1994-95, where the statistical discrepancy is not zero, the result is close to additive but not exact because the statistical discrepancy cannot be expressed in prices of the previous year. Additionally, quarterly contribution to growth estimates will not add to GDP growth due to the existence of a statistical discrepancy between the three quarterly measures of GDP. Nonetheless, the introduction of the new method results in significantly improved additivity on a quarterly basis compared to the current method
The contributions of the components to the growth in volume of GDP, particularly the expenditure components, are widely used. The introduction of the additive methodology will assist users in understanding the relative importance of individual GDP components to overall GDP growth as well as variations in relative importance over time. The new method also ensures the ABS now aligns with recommendations from the International Monetary Fund and the OECD on calculating contributions to growth.
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