12 Miscellaneous goods and services
12.1 Personal care
Description
14.209 Included in this item are personal outlays on hairdressing and beauty salon services, perfume, cosmetics, soap products and other toiletries.
Sources and methods
14.210 Results from the Household Expenditure Survey and Retail Census are used to provide benchmark values for these items. The census results are adjusted for sales which are out of scope of the census such as sales by organisations selling directly to the public. Various indicators are used to extrapolate annual and quarterly estimates.
Volume estimates
14.211 Current price estimates of purchases of personal care services by Australian residents in Australia are revalued using the relevant components of the CPI.
14.212 Current price estimates of purchases of personal care services by Australian residents overseas are revalued using a composite index of overseas CPIs.
14.213 Chain volume estimates of purchases of personal care services are derived by aggregating the elemental volume components above.
12.2 Personal effects
Description
14.214 Included in this item are personal outlays on jewellery, watches and clocks purchased from retail outlets; and other personal effects including articles for babies, travel goods and miscellaneous personal articles.
Sources and methods
14.215 Results from the Household Expenditure Survey and Retail Census are used to provide benchmark values for these items. The census results are adjusted for sales which are out of scope of the census such as sales by organisations selling directly to the public.
Volume estimates
14.216 Current price estimates of purchases of personal effects by Australian residents in Australia are revalued using the relevant components of the CPI.
14.217 Current price estimates of purchases of personal effects by Australian residents overseas are revalued using a composite index of overseas CPIs.
14.218 Chain volume estimates of purchases of personal effects are derived by aggregating the elemental volume components above.
12.3 Insurance
Description
14.219 Included in this item is the service charge paid by householders for insurance. Premiums paid for casualty insurance of householders' effects, motor vehicle insurance, health insurance, and life insurance and superannuation can be seen to comprise a service charge for insuring, a payment for the risk of insuring and, for life insurance and superannuation funds, an element of saving. The insurance service charge for non-life insurance is calculated as premiums paid plus premium supplements (see the next paragraph) less expected claims incurred. Expected claims are derived by using a centred five year moving average of claims incurred. The insurance service charge for life insurance and superannuation funds is equal to the administrative expenses of operating the funds. Profits of non-mutual funds are also included in the insurance service charge.
14.220 Premium supplements represent the income earned on the investment of insurance technical reserves (prepaid premiums and reserves against outstanding claims). As the technical reserves are considered to be assets of the insurance policy holders, the investment income receivable by insurance enterprises must be shown in the accounts as being paid by the insurance enterprises to the policy holders. However, in practice this income is retained by the insurance enterprises. It is therefore treated as being paid back to the insurance enterprises in the form of premium supplements that are additional to actual premiums payable under the terms of the insurance policies. In the case of workers' compensation it is the worker who is regarded as the policy holder for the purposes of attributing the imputed property income earned on the insurance companies' technical reserves, not the employer. Although the employer is legally the policy holder for workers' compensation, for national accounts purposes the employer is deemed to be acting on behalf of the employee in paying workers' compensation premiums. Consequently, workers' compensation premiums are included as part of employers' social contributions, which is a component of compensation of employees. (See also the discussion of rerouted transactions in Chapter 7.)
Sources and methods
Casualty insurance of householders' effects
14.221 This is the service charge for insuring householders' furniture and effects, generally called home contents insurance. Insurance of the dwelling itself is excluded from HFCE as it is considered to be part of the intermediate consumption of the industry Ownership of dwellings.
(a) Annual estimates
14.222 Premiums and claims for casualty insurance of householders' effects are obtained from Selected Statistics on the General Insurance Industry, published by the Australian Prudential Regulation Authority. Expected claims are derived by using a centred five year moving average of claims incurred.
14.223 Premium supplements are added together with personal premiums to give the total value of premiums. Premium supplements are calculated using the proportion of casualty insurance of householders' effects business to total casualty insurance business, multiplied by total investment earnings on casualty insurance technical reserves.
14.224 Personal premiums paid plus premium supplements less expected personal claims incurred gives the value of the service charge which is included in HFCE.
14.225 Data from the Australian Prudential Regulation Authority are generally available with a lag of about one year, so that the insurance service charge for the most recent year is estimated using a linear trend extrapolation method.
(b) Quarterly estimates
14.226 Quarterly estimates of the insurance service charge for casualty insurance of householders' effects are made using a linear trend interpolation and extrapolation method.
Motor vehicle insurance
14.227 Motor vehicle insurance service charges cover both compulsory third party (personal injury) insurance, and comprehensive and third party property insurance on motor vehicles.
(a) Annual estimates
14.228 Premiums and claims for motor vehicle property and compulsory third party (personal injury) insurance are obtained separately from Selected Statistics on the General Insurance Industry, published by the Australian Prudential Regulation Authority. In order to estimate premiums paid and claims incurred by households for insurance, total premiums paid and claims incurred in each category are multiplied by the proportion of personal vehicles to business and government vehicles. Expected claims are derived by using a centred five year moving average of claims incurred.
14.229 Premium supplements are added together with personal premiums to give the total value of premiums for both motor vehicle property and compulsory third party (personal injury) insurance. Premium supplements for each type of motor vehicle insurance are calculated using the proportion of each type of insurance business to total casualty insurance business, multiplied by total investment earnings on casualty insurance technical reserves.
14.230 Personal premiums paid plus premium supplements less expected personal claims incurred gives the value of the service charge which is included in HFCE.
14.231 Data from the Australian Prudential Regulation Authority are generally available with a lag of about one year, so that estimates are extrapolated for the most recent year. Premiums for the latest year are estimated using a CPI motor vehicle insurance series in combination with the number of registered vehicles owned by households.
(b) Quarterly estimates
14.232 Quarterly estimates of compulsory third party (personal injury) insurance premiums are made using a composite indicator based on the estimated number of registered motor vehicles owned by households in the quarter and a price index for this type of premium obtained from the CPI. The corresponding annual expected claims incurred are allocated to quarters using the composite indicator used for premiums. The quarterly insurance service charge is the difference between quarterly premiums, including premium supplements, and expected claims incurred.
14.233 Quarterly estimates of the motor vehicle property insurance service charge are derived in a similar manner to that described for compulsory third party insurance. The estimate of premiums is made using the estimated number of registered motor vehicles owned by households in the quarter multiplied by an estimate of the premium payable on the average comprehensive motor vehicle insurance policy for a personal vehicle, adjusted to allow for vehicles without comprehensive insurance. The corresponding annual expected claims incurred are allocated to quarters using the composite indicator used for premiums. The quarterly insurance service charge is the difference between quarterly premiums, including premium supplements, and expected claims incurred.
Health Insurance
14.234 The insurance service charge for health insurance is calculated in the same way as for casualty insurance of householders' effects. Personal premiums paid plus premium supplements less expected personal claims incurred gives the value of the service charge which is included in HFCE.
14.235 Information about premiums paid and claims incurred by households from health insurers is obtained from Operations of Registered Health Insurance Organisations published annually by the Commonwealth Department of Health and Aged Care. Expected claims are derived by using a centred five year moving average of claims incurred.
14.236 Premium supplements are added together with personal premiums to give the total value of premiums. Premium supplements are calculated from the investment earnings on insurance technical reserves of health insurance funds.
14.237 The Medicare levy paid by individuals is considered to be an element of income tax levied by the Commonwealth Government. As such, it is not included in household final consumption expenditure.
Other non-life insurance by households as consumers
14.238 This is the service charge for various classes of insurance which are taken out by households, but which have not been explicitly discussed elsewhere in this chapter. Included are travel, consumer credit, marine hull, and sickness and accident.
(a) Annual estimates
14.239 Premiums and claims for the relevant classes of insurance business are obtained from Selected Statistics on the General Insurance Industry, published by the Australian Prudential Regulation Authority. The households' share of both premiums and claims for each class of business are estimated using available information and subjective judgement. Expected claims are derived by using a centred five year moving average of claims incurred.
14.240 Premium supplements are added together with personal premiums to give the total value of premiums. Premium supplements are calculated using the proportion of households' premiums for the relevant classes of business to total casualty insurance premiums, multiplied by total investment earnings on casualty insurance technical reserves.
14.241 Personal premiums paid plus premium supplements less expected personal claims incurred gives the value of the service charge which is included in HFCE.
14.242 Data from the Australian Prudential Regulation Authority are generally available with a lag of about one year, so that the insurance service charge for the most recent year is estimated using a linear trend extrapolation method.
(b) Quarterly estimates
14.243 Quarterly estimates of the insurance service charge for other non-life insurance are made using a linear trend interpolation and extrapolation method.
Life insurance and superannuation
14.244 Premiums paid by policy holders to life insurance offices are considered to include an insurance service charge element. The insurance service charge is calculated as the sum of wages, administrative expenses (excluding interest paid) and profits of life insurance offices. A further adjustment is made to exclude rental expenses incurred in generating property income from administrative expenses. Dividends paid are used as an indicator of profits earned by life insurance offices. A significant proportion of life insurance and superannuation premiums/contributions is actually paid by employers on behalf of their employees. However, for national accounts purposes these premiums are included in employers' social contributions, which is a component of compensation of employees. The employee pays the insurance service charge (a component of HFCE) and invests in life insurance and superannuation funds (recorded in the households financial account). (See also the discussion of rerouted transactions in Chapter 7.)
14.245 The same treatment is applied where superannuation funds bear administrative costs.
14.246 Benchmark data on the operations of life insurance offices and superannuation funds are published annually by the Australian Prudential Regulation Authority, generally with a lag of about one year, so that estimates are extrapolated for the most recent year. Quarterly estimates are interpolated and extrapolated from annual benchmarks using a linear trend method.
Workers' compensation insurance
14.247 The SNA93 recommendation is to include workers' compensation insurance premiums in compensation of employees as part of employers' social contributions. The SNA has always recommended this treatment. However, the ABS did not adopt this treatment in the past because the view was taken that the compulsory nature of workers' compensation payments in Australia implied that it was more appropriate for the insurance service charge to be borne by employers than by employees. The insurance service charge measures the value of services provided by the insurance enterprises in arranging payments of claims in exchange for the receipts of premiums. While Australia's institutional arrangements are unchanged with regard to the compulsory nature of workers' compensation insurance, SNA93 is explicit in its recommendation that the compulsory nature of the schemes is not a sufficient condition for adopting a different treatment. The insurance service charge for workers compensation insurance paid by employers is now included in household final consumption expenditure for all periods, in line with SNA93 recommendations.
Volume estimates
14.248 Current price estimates of purchases of insurance services (consisting of household effects, motor vehicle insurance, health insurance, life insurance, and workers compensation) by Australian residents in Australia are each revalued using the implicit price deflator derived from an output indicator used for volume estimates of the gross value added of the insurance industry (see Chapter 24 for further details) and its current price counterpart.
14.249 Current price estimates of purchases of insurance by Australian residents overseas are revalued using a composite index of overseas CPIs.
14.250 Chain volume estimates of purchases of insurance services are derived by aggregating the elemental volume components above.
12.4 Financial services n.e.c.
Description
14.251 The scope of this item is household expenditure, both actual and imputed, on services provided by financial institutions other than insurers. Three broad categories of expenditure are covered.
14.252 The first relates to the charges that households pay explicitly to financial institutions for services rendered. Examples are account-keeping fees; commission on money orders, travellers' cheques and overseas drafts; entry and management fees paid to growth funds and unit trusts; brokerage on share trading; and financial advisers' charges.
14.253 The second covers taxes on production and imports levied by general government on financial transactions undertaken by households. Examples are financial institutions duty, and stamp duty incurred by trading in financial instruments. The stamp duty payable on the transfer of titles to residential property is treated as part of the transfer costs of ownership of dwellings (which are included in gross fixed capital formation), and as such is not part of HFCE.
14.254 The last component is the indirectly charged service charges of banks and other similar financial intermediaries.
14.255 In the national accounts the production of financial services of banks and other financial intermediaries is allocated to the users of those services, both depositors and borrowers. Because interest is 'property income' (i.e. income earned on a non-produced asset) it is not treated as an income or expense item in the derivation of an industry's gross product or value added. Consequently, financial intermediaries would generally be shown to have a negative value added. To overcome this apparent anomaly, a method of estimating gross output has been developed to more realistically measure the services that financial intermediaries provide to borrowers and depositors. An imputation is made for the value of the services provided by financial intermediaries, which is referred to as Financial Intermediation Services Indirectly Measured (FISIM). It is estimated by reference to the difference in interest rates offered to borrowers and depositors and the average levels of outstanding loans and deposits. The payment for financial service is implicit in either or both of the higher interest paid by borrowers or the lower interest received by depositors. That part of this service which relates to personal loans to households to finance household consumption and household deposits held by financial intermediaries is regarded as being paid by persons and included in HFCE. FISIM relating to mortgages on dwellings owned by persons is not include in HFCE, but is treated as a component of intermediate consumption in the calculation of GOS for dwellings owned by persons.
Sources and methods
Annual estimates
14.256 The total value of explicit charges paid by the customers of financial institutions is estimated using information from ABS collections from financial corporations. It is assumed that all explicit charges for unit trusts are borne by households. For other financial intermediaries, the proportion of the total paid by households has been assumed to be constant for recent years. This assumption is periodically reviewed.
14.257 Information about total taxes on production and imports paid on financial transactions is obtained directly from Commonwealth and State budget papers. The proportion of the total passed on by the financial institutions to households in the form of associated charges is estimated for each State and Territory. The proportion has been assumed to be constant for recent years. This assumption is reviewed periodically.
14.258 The total value of explicit charges paid by households is calculated using data from the following sources: annual reports of the various financial institutions, the various ABS collections from financial corporations, data collected by the Reserve Bank under the Banking Act, State Auditors'-General Reports, the ABS Public Finance Section and Taxation Statistics.
14.259 FISIM is estimated as the difference between the interest rates on loans and deposits and a pure or reference rate of interest, multiplied by the level of loans and deposits, respectively. Conceptually, the reference rate must lie between the loan and deposit rates, and so a margin or price for each loan and deposit can be established. In practice, the reference rate of interest is assumed to be midway between the average interest rates on loans and on deposits. FISIM is thus equal to the average balance on loans or deposits multiplied by the relevant interest margin. To calculate the amount of FISIM paid by households, interest rates charged by financial institutions on consumer loans and interest rates paid on households' deposits are compared with the reference interest rate to calculate the margins. These margins are then multiplied by the average balance on loans and deposits.
Quarterly estimates
14.260 Linear trend interpolation methodology is used to transform into quarterly estimates the annual estimates of explicit charges levied by banks, taxes on production and imports passed on to households, FISIM, and the insurance service charges.
14.261 Explicit charges of stockbrokers are estimated using quarterly turnover on Australian stock exchanges as the indicator.
Volume estimates
14.262 Current price estimates of purchases of financial services (consisting of indirectly charged services of financial institutions, explicitly charged services provided by financial institutions, and taxes levied on financial transactions) by Australian residents in Australia are each revalued using the implicit price deflator derived from an output indicator used for volume estimates of the gross value added of the finance industry (see Chapter 24 for further details) and its current price counterpart. Current price estimates of sharebroking services are revalued by a share price index.
14.263 Current price estimates of purchases of financial services by Australian residents overseas are revalued using a composite index of overseas CPIs.
14.264 Chain volume estimates of purchases of financial services are derived by aggregating the elemental volume components above.
12.3 + 12.4 Insurance and other financial services
Volume estimates
14.265 Chain volume estimates of purchases of insurance and other financial services are derived by aggregating the elemental volume components above.
12.5 Other goods and services
Description
14.266 As the name implies, the scope of this item is personal outlays on goods and services not included in the other categories. Also included is current expenditure of non-profit institutions serving households in spheres such as religion, philanthropy, scientific or other research, and industrial relations.
14.267 Examples are household expenditure on:
- dry cleaning and laundry services;
- professional services (other than health care services which are classified to HFCE on Health (06);
- domestic services rendered by housekeepers, cooks, gardeners, and child minders (but not by pre-schools, which are covered by HFCE on Education services (10));
- photographic services such as film processing and studio services;
- hire services for domestic items such as linen and washing machines (but hire of television sets and video cassette recorders is covered by HFCE on Cultural and entertainment services (09.4.2));
- repair and maintenance services not identified elsewhere; and
- services provided to students at post-secondary institutions by their sports and student unions.
14.268 Finally, this item covers the current expenditure of non-profit organisations serving households and not elsewhere covered, such as churches, charities, conservation groups, trade unions and professional associations.
Sources and methods
Personal outlays on miscellaneous services
14.269 The estimates of household expenditure on dry cleaning, child care, photographic services, domestic services, personal freight, personal advertising, and miscellaneous services have been benchmarked for 1988-89 and 1993-94 using data from the Household Expenditure Surveys. A variety of indicators is used to interpolate and extrapolate other annual and quarterly estimates.
14.270 For dry cleaning and laundering, the quarterly indicators are mean resident population and the dry cleaning subgroup of the CPI. The indicators for hire services are mean resident population and average weekly earnings.
14.271 The estimates of household expenditure on child care services are benchmarked using Child Care, Australia (Cat. no. 4402.0), and interpolated and extrapolated using a combination of average weekly earnings and estimates of the number of children less than ten years old. The estimates of other domestic services are benchmarked using data on the wages of domestic servants and payments for other domestic services, and are moved forward using average weekly earnings and mean resident population.
14.272 An estimate is included for household expenditure on removalists' services, but it is based on partial information and is extrapolated using a variety of annual and quarterly indicators such as freight revenue of transport companies, and housing completions.
14.273 Expenditure on funerals is estimated using quarterly information about the number of deaths taken from Australian Demographic Statistics (Cat. no. 3101.0) together with an estimate of the average cost of a funeral.
14.274 Household expenditure on professional services other than health care services is estimated from total business income shown in Taxation Statistics. A percentage of business income of individuals, partnerships, trusts and companies from legal, accountancy, other business and community services is used to estimate household expenditure on professional services. In respect of 1994-95, 27 per cent of lawyers' income, 12 per cent of accountants' income, 0.02 per cent of other business income and 2.8 per cent of community services income were estimated to be derived from households.
14.275 Total expenditure on personal advertising is based on HES data and extrapolated using a composite indicator of mean population and average weekly earnings.
14.276 Household expenditure on photographic services is benchmarked on HES data and extrapolated using the CPI series for photographic services.
14.277 Miscellaneous services are based on HES estimates for hire of tools and hire of household durables, as well as miscellaneous services not included elsewhere. Average weekly earnings are used as an indicator series.
14.278 Repair and maintenance services not included elsewhere are based on HES estimates for service and repair of household equipment. Average weekly earnings are used as an indicator series.
Current expenditure of non-profit institutions
14.279 It is assumed that the current expenditure of non-profit institutions that receive most of their funds in the form of government grants (such as welfare services) is approximately equal to the value of the current income (grants and donations) they receive. Annual and quarterly information about grants paid to these institutions is available from the ABS Public Finance Section. Annual information about donations to charitable institutions claimed as tax deductions is available from Taxation Statistics.
14.280 Non-profit institutions such as churches are mostly funded by unrequited transfers from households. Their compensation of employees is taken as the measure of their current expenditure. The benchmark is the product of the number of persons in religious orders (provided by the Census of Population and Housing) and an estimate of their average earnings. It is extrapolated using movements recorded in the Survey of Employment and Earnings for ANZSIC Group 961 Religious organisations as the indicator.
14.281 It is assumed that expenditure of trade unions and professional associations is equal to the value of the dues and membership fees they receive. This information is available annually from Taxation Statistics with a lag of about two years. Quarterly estimates are obtained by interpolation and extrapolation using a variety of broad activity indicators.
Volume estimates
14.282 Current price estimates of purchases of other services by Australian residents in Australia are revalued using the CPI and a combination of indexes from Wage Cost Index (Cat. no. 6345.0).
14.283 Current price estimates of purchases of other services by Australian residents overseas are revalued using a composite index of overseas CPIs.
14.284 Chain volume estimates of purchases of other services are derived by aggregating the elemental volume components of the above.
12.1 + 12.2 + 12.5 Other goods and services
Volume estimates
14.285 Chain volume estimates of other goods and services are derived by aggregating the elemental volume components for these subcategories.
Total 12: Miscellaneous goods and services
Volume estimates
14.286 Chain volume estimates of miscellaneous goods and services are derived by aggregating the elemental volume components for insurance and other financial services and other goods and services.
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