ANALYSIS OF RESULTS


INTRODUCTION OF 2008-09 SUPPLY AND USE TABLES

Since financial year 1994-95, the ABS has compiled a time series of Supply-Use (SU) tables to generate balanced annual estimates of GDP to replace those generated by summing four quarterly estimates. This results in the the Statistical Discrepancy for all years between 1994-95 and 2008-09 inclusive being zero. Periods prior to financial year 1994-95 have a non-zero Statistical Discrepancy as historical SU tables have not been compiled. Similarly, estimates for the latest period (in this case financial year 2009-10) have a Statistical Discrepancy until SU tables for these periods are constructed.

SU tables show the total supply in terms of domestic output and imports as well as the uses of goods and services in terms of intermediate consumption, final consumption, gross fixed capital formation and exports. They also provide information on the generation of income from production.

The primary purpose of the SU tables is to undertake detailed data validation to ensure the consistency of statistics on flows of goods and services obtained from a large number of data sources. These sources include industrial surveys, household expenditure inquiries, investment surveys, foreign trade statistics, etc. In this regard, errors arising from independent source data used to compile the quarterly estimates of GDP can be identified and corrected. When this process is undertaken, independent estimates of GDP(E), GDP(P) and GDP(I) can be confronted through a systematic framework to generate balanced estimates of GDP.

In the case of financial year 2008-09, the following key revisions were made following confrontation undertaken in the SU framework:

• Mining industry Gross Operating Surplus: Confrontation in the SU framework demonstrated estimates of Mining Industry output as published in the 2008-09 issue were understated when compared with estimates of intermediate and final usage of these products. In this regard, a $25 billion upwards revision to Mining Industry Value Added has been made in this issue. Examples of source data arising subsequent to the 2008-09 issue include production data from State mines departments and Australian Industry (ABS Catalogue 8155.0) showing the value of mining products produced, estimates of own account capital formation and intermediate consumption of the Mining and Electricity Industry;
• Ownership of Dwellings: Revisions have been made to the Ownership of Dwellings Industry for all periods after financial year 2001-02 inclusive to incorporate updated data arising from the 2006 Census of Population and Housing. Symmetric revisions have been applied to Dwelling Rent within Household Final Consumption as well as Value Added and Gross Operating Surplus within the Ownership of Dwellings Industry;
• Exports of Goods and Services Volumes: Updates to the relative share of goods, most notably coal and iron ore, within the calculation of chain volume movements for this series have occurred. Symmetric revisions have been made to both change in inventories and value added for industries such as Professional, Scientific and Technical Services to construct balanced estimates of GDP;
• Taxes less Subsidies on Production and Imports: Revisions have been made to taxes data to incorporate audited annual financial data published in Government Finance Statistics, Australia (ABS Catalogue 5512.0); and
• Household Final Consumption Expenditure: Additional data sources such as audited GST revenue published in Taxation Revenue, Australia (ABS Catalogue 5506.0) have been confronted against estimates of Household Final Consumption Expenditure to generate published revisions for reference period 2008-09.

Data from the SU Tables is also used to construct Australian National Accounts: Input-Output Tables (ABS Catalogue 5215.0.55.001), which present structural detail underlying the Australian economy and weighting patterns for Producer Price Indexes, Australia (ABS Catalogue 6427.0).

SU tables are an integral component of the Australian System of National Accounts that are used to generate balanced measures of GDP, implement historical revisions and facilitate construction of Input-Output tables. Further information regarding the construction of SU tables can be obtained by contacting Chris Hinchcliffe on (02) 6252 6908.


OVERVIEW OF AUSTRALIAN ECONOMY IN 2009-10

The Australian economy expanded by 2.3% in 2009-10. Real net national disposable income grew by less than GDP (up 0.1% in 2009-10), reflecting a decline in the Terms of trade (down 4.8%). This is the first year since 1998-99 that Australia has experienced a deterioration in the Terms of trade.

The Household saving ratio was 8.8% for 2009-10, down from 9.8% in 2008-09. The index of Market sector(footnote 1) labour productivity increased by 2.3%.

From an expenditure perspective, the major contributor to GDP growth in 2009-10 was Final consumption expenditure, increased 2.0% and contributed 1.4 percentage points. Gross fixed capital formation increased 2.5% and contributed 0.7 percentage points to GDP growth. Government final consumption expenditure increased 1.8% and Household final consumption expenditure increased 2.1%. The major detractor from GDP growth was Total private gross fixed capital formation which decreased 2.5% and contributed -0.6 percentage points to GDP growth in 2009-10, driven by declines in Machinery and equipment investment (down 4.9%) and Non-dwelling construction (down 7.1%). This was offset by growth in public gross fixed capital formation, which increased 24.9%. The level of inventories grew $1.8 billion through 2009-10 and added 0.2 percentage points to GDP growth.

From an industry perspective, increases were recorded in the value added of a number of industries in 2009-10 with Mining (6.2%) the largest followed by Professional, scientific and technical services (3.8%), Health care and social assistance (3.6%), Wholesale trade (3.3%) and Financial and insurance services (3.0%). Relatively few industries saw declines for the year. Those that did include Agriculture (-1.5%), Accommodation and food services (-2.1%) and Other services (-1.1%).

In the Income components of GDP in 2009-10, there was growth in Compensation of employees of 2.1% and in Gross operating surplus (GOS) of 1.8%. The growth in GOS was driven by growth in Public Non-financial corporations (5.9%) and Dwellings owned by persons (10.0%) while Financial corporations GOS growth was negative (-2.4%) and Private Non-financial corporations were flat.

The annual movements for the chain price indexes for GDP and Domestic final demand were 0.6% and 1.5% respectively in 2009-10. The gap in price movements was mainly due to changes in the prices paid for imports and the prices received for exports.

The Net worth of Australia is defined as the difference between Total assets and Total liabilities. Australia's Net worth at 30 June 2010 was estimated to be $7,683.0 billion in current prices, an increase of $696.2 billion (10.0%) since 30 June 2009.


GDP

Following the fall in GDP in volume terms in 1990-91, there have been 19 years of consecutive growth. In 2009-10 GDP increased by 2.3%. For some analytical purposes it is important to understand the impact of population growth on movements in GDP. In 2009-10, GDP per capita increased by 0.3% following a decline in 2008-09. Growth rates in GDP and GDP per capita are presented in the following graph.

RNNDI

Another measure of national economic activity is Real net national disposable income (RNNDI). This measure adjusts the volume measure of GDP for the Terms of trade effect, Real net income from overseas and Consumption of fixed capital (depreciation). In 2009-10, RNNDI (up 0.1%) grew by less than GDP, reflecting a decrease of 4.8% in the Terms of trade (see International Trade, page 14).

Household saving

The Household saving ratio is another key aggregate in the national accounts. Household saving cannot be measured directly. It is calculated by deducting Household final consumption expenditure from Household net disposable income.

The Household saving ratio began trending downwards in the mid 1970s, and was negative from 2003-04 to 2004-05, implying that households spent more than they earned during that period. In 2005-06 the Household saving ratio became positive again (0.1%) and this has continued to 2009-10, with the ratio at 8.8% for the year.

Caution should be exercised in interpreting the Household saving ratio in recent years, because major components of household income and expenditure may be subject to significant revisions.

EXPENDITURE ON GDP

Final consumption expenditure increased 2.0% in 2009-10, and contributed 1.4 percentage points to GDP growth.

Household final consumption expenditure (HFCE) increased 2.1 and contributed 1.1 percentage points to GDP growth in 2009-10. In recent years household consumption has contributed between 0.1 percentage points and 2.9 percentage points to GDP growth. The main contributor to growth in HFCE in 2009-10 was Rent and other dwelling services (up 2.9%). See Table 53 for more details.

Government final consumption expenditure increased 1.8% in 2009-10. It contributed 0.3 percentage points to growth in GDP. In recent years, Government final consumption has contributed between 0.3 percentage points and 0.7 percentage points to GDP growth.

Growth in Private investment decreased 2.5% in 2009-10, compared to a -0.4% decrease in 2008-09. Private investment contributed -0.6 percentage points to GDP growth, down from -0.1 percentage points in 2008-09. Investment in Machinery and equipment, and Non-dwelling construction both decreased, -4.9% and -7.1%, respectively in 2009-10, and detracted 0.3 and 0.5 percentage points from growth to GDP, respectively.

Investment in Alterations and additions increased 3.7% in 2009-10, while New and used dwellings fell 0.7%. Total dwelling investment increased 1.1% and contributed 0.1 percentage points to GDP growth.

Public gross fixed capital formation increased 24.9% in 2009-10 after increasing 6.7% in 2008-09. Investment by public corporations rose 13.1% and investment by general government increased by 31.3% in 2009-10. Public investment contributed 1.3 percentage points to GDP growth in 2009-10.

Growth in the domestic economy as measured by Gross National Expenditure (GNE)(footnote 2) showed an increase in 2009-10 of 2.4%. The difference between GNE and GDP is due to a positive contribution from Net exports and a negative contribution from the Statistical discrepancy. For more information on net exports please refer to the section on International Trade, page 14.

INDUSTRY

In 2009-10, the industry with the largest share of GDP (at basic prices excluding ownership of dwellings) was Finance and Insurance services with a share of 10.6%. Manufacturing was the second largest industry with a share of 9.3%. Prior to 2006-07 Manufacturing was the largest industry. Mining has increased as a share of GDP from 5% throughout the 1990s to 8.4% in 2009-10, it is now the third largest industry.

INCOME FROM GDP

The wages share of total factor income remained relatively stable during the 1990s. The highest recorded value of the wages share of total factor income was 62.8% in 1974-75. In more recent times, the wages share has been trending down to be 54.9% in 2007-08 and 53.2% in 2009-10.

The profits share (based on Gross operating surplus for Financial and Non-financial corporations) of Total factor income reached 27.8% in 2009-10 down from the highest share recorded in 2008-09 of 28.5%. The profits shares recorded since the late 1980s are at a distinctly higher level than those at any time since 1959-60. The profit share measure should not be interpreted as a direct measure of 'profitability' for which it is necessary to relate profits to the level of capital assets employed.

National net saving was positive in 2009-10 at $93.2 billion. The Household saving ratio generally increased from 1959-60 to a peak in 1973-74 of 18.5%. The series then gradually decreased, eventually reaching its lowest point at -1.4% in 2004-05 (a net saving level of -$10.1 billion). Since 2004-05 Household net saving has again been increasing and in 2009-10 household saving was 8.8%. Household net saving was $67.2 billion.

When analysing household saving it is useful to consider Household net worth, currently at $5,794.8 billion at 30 June 2010. For more information please refer to Balance Sheets, page 12.

In 2009-10, Financial corporations net saving was $21.6 billion. General government net saving was -$31.3 billion and net saving for Non-financial corporations was $35.8 billion.

PRICES IN THE NATIONAL ACCOUNTS

Chain Price Indexes are used to measure price changes. The annual movements in GDP and Domestic final demand chain price indexes for 2009-10 were 0.6% and 1.5% respectively. This gap in price movements was mainly caused by changes in prices paid for imports and the prices received for exports. Prices of Exports of goods and services showed a decrease of 14.3%, driven by decreases in Coal (down 45.3%) and Mineral Ores (down 12.5%) in 2009-10.

Prices of Imports of goods and services showed a decrease of 10.9%. This was driven by falls in Consumption goods (down 7.2%), Capital goods (down 13.5%) and Intermediate goods (down 13.6%).

The chain price indexes for the other major components of GDP, Household final consumption expenditure and Gross fixed capital formation, were 2.2% and -0.9% respectively, during 2009-10. See Table 7 for more details.


PRODUCTIVITY

Multifactor productivity (MFP) statistics in this issue are presented for the first time in line with the new definition of the market sector (16 industries - ANZSIC divisions A to N, R and S) introduced in the 2008-09 issue of ASNA following the implementation of new international standards. As such, these productivity measures are based on significant changes in coverage and do not represent updated estimates to past releases. The current estimates are not directly comparable to those published in past releases due to significant changes in coverage.

The additional services industries included are divisions L Rental, Hiring & Real Estate Services; M Professional, Scientific & Technical Services; N Administrative & Support Services; and S Other Services. While their inclusion results in much improved coverage of the total Australian economy, the time span available for constructing meaningful productivity indicators is shortened. Estimates of chain volume value added for the market sector commence in 1994-95, coinciding with the availability of improved output indicators for the four new industry divisions that have been added to the market sector.

Adding more service industries to the headline productivity measures has resulted in lower MFP growth rates relative to past releases, as some service industries tend to have relatively lower MFP growth rates. However the results need to be treated with caution since MFP is harder to measure for service industries. There are additional difficulties in compiling robust MFP statistics for these industries. The ABS is committed to on-going research to address these measurement challenges.

The market sector MFP estimates presented in Table 22 provide output growth rates and the contributions of the four sources of growth: capital, hours worked, labour quality and MFP. For the period 1998-99 to 2007-08, output has grown at an average of 3.5% annually. The average annual contributions to output growth from the component inputs are: capital 2.3%, hours worked 1.0%, labour quality 0.2%, and MFP 0.0%. Since 2003-04, MFP has been trending downward, with the strong growth in capital input being the major driver of the measured productivity decline.

Market sector MFP estimates on an hours worked basis was flat in 2009-10, reflecting a 2.1% increase in GDP for the market sector and an increase of 2.1% in total labour and capital inputs. Hours worked fell 0.2% in 2009-10, resulting in a labour productivity increase of 2.3%. Capital services continued to grow strongly in 2009-10, increasing 4.7%. The increase in Capital services, combined with an increase in market sector GDP resulted in a fall of 2.5% in capital productivity.

Labour productivity measured on a quality adjusted hours worked basis increased by 2.0% in 2009-10. This was due to a positive change in labour quality, leading to a relatively stronger quality adjusted hours worked index. The quality adjustment added 0.3 percentage points to hours worked.


Productivity growth cycles

A common method of examining changes in productivity over an extended period involves identifying and dividing the data into productivity 'growth cycles' (see Glossary). Productivity growth cycle peaks are determined by comparing the original MFP estimates with their corresponding long-term trend estimates. The peak deviations between these two series are the primary indicators of a growth-cycle peak, although general economic conditions at the time are also considered. The analysis of productivity growth cycles is presented in Table 23.

The expanded coverage (but shortened time span) allows productivity indicators of sufficient quality for two growth cycles: 1998-99 to 2003-04 and 2003-04 to 2007-08. For the 1998-99 to 2003-04 cycle, strong output growth in the market sector (averaging 3.5% per annum) outweighed the corresponding growth in observed inputs, labour and capital (averaging 2.5% per annum), resulting in an average annual increase in MFP of 1.0%. By comparison, for the 2003-04 to 2007-08 cycle, output growth was similar (averaging 3.4% per annum). However, total inputs were considerably stronger (averaging 4.2% per annum), resulting in MFP declining by an average of -0.8% per annum. See Table 23 for more details.

Users interested in productivity measures over a longer time span can still access previous historical estimates via the Productivity data cube ABS Cat.5260.0.55.002 (to be released in December 2010). The longer time span is presented for the 12 selected industries aggregate, as well as the results for individual industries (ANZSIC divisions A to K and R). Results for new divisions L, M, N and S over the shorter time span are also presented alongside the market sector aggregates.


BALANCE SHEETS

Australia's Net worth at the end of June 2010 was estimated to be $7,683.0 billion in current prices, an increase of $696.2 billion (up 10.0%) since 30 June 2009. Major contributions to this increase came from Land (up $613.1 billion) and Dwellings (up $73.5 billion). These were offset by Subsoil assets (down $32.1 billion). Transactions in assets (both capital and financial) and liabilities contributed $94.2 billion to the change in Net worth, and holding gains contributing $554.3 billion.

Australia's Net international investment position as at 30 June 2010 was a Net foreign liability of $763.5 billion, up $59.8 billion (up 8.5%) on the position a year earlier.

Australia's real net worth rose 2.4% over the year ended 30 June 2010, from 2.5% growth for the previous year.

Balance sheets are produced in current prices for each institutional sector in the economy. Of these, the household sector had the highest net worth at $5,794.8 billion at 30 June 2010, an increase of $731.2 billion (up 14.4%) from the previous year.


INVESTMENT AT CURRENT PRICES

Investment represents about a quarter of the level of GDP. Understanding which sectors are investing and expanding their future economic capacity provides an insight into the underlying dynamics within the economy.

As a proportion of GDP, investment by Non-financial corporations fell during the 1970s and was reasonably stable up to the 1990s. It has generally been above 10% and in 2009-10 investment by Non-financial corporations was 13.9% of GDP. Household investment as a proportion of GDP declined steadily between 1959-60 and 1974-75 but has since remained steady at around 10% of GDP. In 2009-10 the ratio to GDP was 9.4%. General government investment as a proportion of GDP peaked at 5.4% in 1967-68 and has generally fallen since then. It was 4.2% of GDP in 2009-10. The highest ever level of Financial corporations investment, expressed as a proportion of GDP, was recorded in 1989-90 (1.8%). It has generally fallen since then and was 0.6% of GDP in 2009-10.

In terms of the different asset types, in 2009-10 private Machinery and equipment investment represented the largest percentage share at 22.0% of total gross fixed capital formation, compared to 21.4% for private Non-dwelling construction.

Over the last 10 years, private Machinery and equipment has fallen from around 29.4% to 22.0% in 2009-10 as a share of total gross fixed capital formation (GFCF). The relative shares of investment in other asset types have remained relatively stable over the last 10 years, except private non-dwelling construction which increased from 14.1% to 21.4% as a result of mining investment activity.


INTERNATIONAL TRADE

The growing importance of international trade to the Australian economy is illustrated by the following graph which shows the ratios of exports and imports of goods and services to GDP in current prices since 1959-60. In 2009-10 the imports ratio was 20.2% and the exports ratio was 19.8%.

Since 2000-01 volumes of Imports have grown more strongly, up 98.4%, compared to 23.2% growth in volume of Exports. The slower growth in Exports was mainly driven by weak growth in rural goods exported.

While in volume terms Imports have been growing faster than Exports, the prices received for Exports have been growing faster than the prices paid for Imports. The Terms of trade represents the relationship between the prices of exports and imports. An increase (decrease) in the Terms of trade reflects Export prices increasing (decreasing) at a faster rate than Import prices.

The strong growth in Terms of trade over the past ten years reflected over 38.2% growth in Export prices and a fall in Import prices of 12.6%. See Prices in National Accounts on page 10 for more details on Export and Import prices. In 2009-10, the Terms of trade decreased by 4.8%.

Net exports represent the difference between Exports and Imports. Net exports detract from GDP growth when the change in the volume of Imports has been greater than the change in the volume of Exports. Between 2000-01 and 2007-08 Net exports detracted from GDP growth, in most part from increasing Imports.

Following 2000-01, when the contribution of Net exports to GDP growth was 2.1 percentage points, the contribution of Net exports fell to -2.2 percentage points in 2007-08. There was a turnaround in 2008-09 with a positive contribution of 1.4 percentage points. In 2009-10 Net exports contributed 0.1 percentage points to GDP growth.

In addition to the trade in goods and services, the flow of funds between Australia and overseas is an important component of the relationship with the rest of the world. Australia has generally been a net borrower of funds from overseas. In the national accounts, this situation is reflected by a negative value for net lending to non-residents. The last time Australia was a net lender of funds to the rest of the world was in 1972-73. The ratio of net borrowing from overseas to GDP in 2009-10 was 4.3%, up from 3.1% in 2008-09.

1 The market sector of the economy consists of the following industries : Agriculture, forestry & fishing, Mining, Manufacturing, Electricity, gas, water & waste services, Construction, Wholesale trade, Retail trade, Accommodation & food services, Transport, postal & warehousing, Information media and telecommunications, Finance & insurance services, Rental, hiring & real estate services, Professional, scientific & technical services, Administrative and recreation services, Arts and recreation services and Other services. <back
2 The total expenditure within a given period by Australian residents on final goods and services. <back