1.7 EXPENDITURE
EXPENDITURE ESTIMATES
The HES produces estimates of average household expenditure on goods and services and selected other payments.
Acquisitions, payments and consumption approaches
Expenditure can be measured according to the following approaches.
- In the acquisitions approach, the full cost payable by the household of acquiring a good or service within a given period is collected. The full cost is collected regardless of whether the household actually paid for or consumed the good or service within the period.
- In the payments approach, the payments made by the household within a given period are collected. Payments include payments on outright purchases, deposits and loans for goods and services regardless of whether the goods and services were acquired or consumed during the period.
- In the consumption approach, an indicator of consumption is collected and a dollar value is derived. Consumption values are collected according to the use of a good or service during the given period regardless of whether the good or service was acquired or paid for during the period.
The HES has primarily adopted an acquisitions approach.
For many items, such as perishable foods, which are normally acquired, paid for and completely used within a relatively short period of time, the three approaches will provide nearly identical results. For other items such as durable items and items purchased on credit that are not fully consumed or paid for during the recall or reporting period, the situation is different. Estimates for individual households will vary according to the approach adopted. For groups of households, however, the estimates will ‘average out’ to a large extent, so that the estimates for groups of households can be said to be indicative of payments and consumption as well as acquisitions.
For example, the HES collects expenditure on acquisitions of washing machines over the three months prior to the HES interview. Say that we have a group of 1,000 households, and on average, 96% of them have washing machines. Of those who have washing machines, on average, over ten years, they fully consume their machine, acquire a new one and pay $700 for the machine in five equal instalments of $140.
Using the acquisitions approach, the number of households expected to report expenditure over a three month period is equal to 96% of 1,000 (i.e. 960) households divided by the number of three month periods in ten years (i.e. 40) which equals 24 households. Each of these households would have spent $700 and so aggregate expenditure would be equal to 24 multiplied by $700 which equals $16,800 every three months. This is divided by the number of weeks in three months (13) and by the number of households in the sample (1,000), to give average household expenditure of $1.29 per week.
Using the payments approach, the number of households expected to report expenditure over a three month period is equal to five times 96% of 1,000 households (since payments are made five times by each household) divided by the number of three month periods in ten years which equals 120 households. The payment of each of these households is equal to the total cost of the machine ($700) divided by the number of payments (5) which equals $140. Aggregate expenditure is equal to 120 households multiplied by $140 which equals $16,800 every three months. This is divided by the number of weeks in three months (13) and by the number of households in the sample (1,000), to again give average household expenditure of $1.29 per week.
Using the consumption approach, 96% of 1,000 households would report their ownership in the three month period. The value of consumption is assumed to be equal to the cost of using the washing machine over three months (which is equal to $700 divided by the number of three month periods in ten years, which equals $17.50). Aggregate expenditure is equal to 960 households multiplied by $17.50 which equals $16,800 every three months. This is divided by the number of weeks in three months (13) and by the number of households in the sample (1,000), to again give average household expenditure of $1.29 per week.
Recall periods and timing of expenditure
The total period covered by expenditure estimates is a function of the recall or reporting period at the time of interview and the timing of interviewing. For the HES, interviewing is conducted throughout the 12 months of the reference year, that is, the financial year to which the survey nominally relates (for example, 2003-04). For most types of expenditure, data are taken from diaries in which survey respondents record their expenditure over a two week period, beginning the day after interview. Diary derived estimates therefore refer almost entirely to expenditure during the reference year.
Estimates for infrequently purchased or more expensive items are derived from the household questionnaire (see section 2.3 'Data collection and data item description'), which collects expenditure information for goods and services on a recall basis. These less frequently occurring items are collected over periods longer than the two week diary reporting period so that sufficient numbers of households report expenditure to enable the calculation of reliable expenditure estimates. For example, in 2003-04, survey respondents were asked to recall how much they spent on furniture and appliances over the last 3 months, on motor vehicle registration over the last 12 months, and on house purchases over the last 3 years. For other items, such as insurance, rent and utilities bills, survey respondents are asked for the value of their last payment and the length of time to which it related.
The household expenditure classification referred to in section 2.3 'Data collection and data item description' indicates the items collected in the household questionnaire and their associated recall periods. In general, longer periods are used for items which are expensive, are acquired infrequently or are acquired at irregular intervals. Shorter periods are used for items which are purchased more frequently or are less significant and therefore not well remembered.
The use of different recall periods means that estimates for different expenditure items, in some cases, refer to different periods. The estimates of average expenditure on motor vehicle registration, for example, cover the 12 months prior to the beginning of interviewing to the end of interviewing (July 2002 to June 2004 for the 2003-04 HES). For house purchases, the period is three years prior to the beginning of interviewing to the end of interviewing (July 2000 to June 2004 for the 2003-04 HES). Household questionnaire derived estimates therefore refer to varying periods prior to the reference year as well as during the reference year.
Studies which use HES data tend to assume that all expenditure estimates refer only to the reference year itself. This is generally true for diary derived estimates but is a valid assumption for estimates derived from the household questionnaire only if expenditure prior to the reference year was the same as during the reference year.
For household questionnaire estimates, if the volumes or prices of purchases were lower during the period prior to the reference year, then average expenditure over the preceding period plus the reference year will be less than average expenditure over the reference year only. Similarly, if prices or volumes were higher during the preceding period, the HES estimate will overestimate average expenditure in the reference year. The longer the preceding period (which is equal to the length of the recall period), the greater the likelihood of discrepancy. In cases where expenditure is expected to have changed, researchers may wish to acknowledge or adjust for these differences.
Weekly household expenditure
Estimates of weekly expenditure do not refer to any given week but are weekly equivalents. They are derived by dividing reported expenditure for all members of the household by the number of weeks in the relevant recall or reporting period, as discussed above. For household questionnaire items, recall periods vary from the last three years to the last three months, and for some items the last payment is reported. For diary items, the reporting period is two weeks.
Expenditure for private purposes
The HES provides estimates of expenditure on goods and services used for private purposes. It therefore excludes expenditure for business and other investment purposes. Operating expenses of unincorporated businesses are either not collected or are deducted from reported expenditure. If survey respondents report business expenditure, it is picked up in questions in the household questionnaire or space provided in the diary, in which there is an opportunity to report amounts which ‘have been or will be charged to a business’. If amounts have been or are going to be charged to a business, then these are deducted from expenditure during processing.
Deduction of refunds and trade-ins
The HES measures net or ‘out of pocket’ private expenditure on durable goods, non-durable goods and services for private purposes. Estimates therefore do not refer to the full costs of goods and services used but only the costs payable by the household for goods and services used.
In the case of a refund which is received or expected, the amount of the refund is deducted from expenditure to produce a net figure. For expenditure on visits to general practitioners, for example, Medicare and private health insurance refunds are deducted.
In the case of trade-ins, these amounts are also deducted from expenditure to produce a net figure. For example, if the cost of a motor vehicle is partially financed by a trade-in of another, the amount of the trade-in is deducted from the cost of the acquired vehicle.
In the case of the sale of land, houses and motor vehicles, the sale price net of outstanding loans is deducted from expenditure and in the case of houses and motor vehicles, amounts of successful insurance claims are deducted from expenditure. Deductions are made even if there is no expenditure on that item by the household. Sales and claims made in the recall period for items which are not replaced during that period are included to compensate for sales and claims made outside the recall period for items replaced during the recall period.
Where trade-ins, sales and insurance claims exceed the costs of acquisitions of the same expenditure item, expenditure is recorded as negative. For example, if someone sells a luxury motor vehicle and buys a less costly model, the amount of expenditure recorded in the HES would be negative.
Expenditure in-kind
Expenditure in-kind refers to items provided free or at a reduced cost by employers to employees for their own private use or withdrawn from own business for household consumption. It may also refer to items consumed by the household that have been produced by the household itself (for example, vegetables), or provided by another household. Generally, the aggregate estimates of expenditure on goods and services in the HES excludes expenditure in-kind. The only exception are incidental items of expenditure in-kind such as food and motor vehicle fuel reported in the diaries. They averaged $1.30 per week per household in the 2003-04 HES. However expenditure in-kind items such as provision of vehicles, housing, and assistance with telephone calls were collected and are available separately (see the data item list referred to in section 2.3 'Data collection and data item description').
Classification of expenditure
Expenditure is classified according to the Household Expenditure Classification (HEC) - see section 2.3 'Data collection and data item description'.
Most of the approximately 600 items included in the classification relate to expenditure on goods and services, which is the primary focus of the HES. The classification also includes ‘selected other payments’ which comprise income tax, repayments on mortgage principal for the household’s place of residence, other housing costs of a capital nature such as internal renovations, and superannuation and life insurance.
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