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INTRODUCTION

1 This publication contains state and territory estimates of gross domestic product (referred to as gross state product (GSP)) and its components, in current price and chain volume terms, for the years 1993-94 to 2001-02. Where ‘state’, is referred to in the text, it also encompasses the two territories. The estimates in this publication are consistent with those published for Australia in the 2001-02 issue of Australian System of National Accounts (cat. no. 5204.0). For further details of the concepts, sources and methods used in compiling the estimates in this publication refer to Australian System of National Accounts: Concepts, Sources and Methods (cat. no. 5216.0). The latest edition was released in December 2000 and is accessible on the ABS web site (starting at the home page select: Statistics-About Statistics-Concepts and classifications-ABS concepts, sources, methods and statistical frameworks-5216.0). A paper edition of the manual is also available.

2 State estimates are essentially a dissection of the Australian estimates contained in 5204.0. While it is possible in some cases to build up estimates using the same data sources as those used for the Australian estimates, it is quite often necessary to derive dissections using a variety of allocators. These may be directly related to the aggregate being allocated (for example, economic survey data) or only indirectly related (for example, population and household income distributions).

3 Quarterly state estimates of state final demand (SFD) and its components are released quarterly in the publication Australian National Accounts: National Income, Expenditure and Product (cat. no. 5206.0). The data are available for chain volume measures and in current prices and are presented in trend, seasonally adjusted and original forms.


CONCEPTUAL BASIS

4 Australia’s national accounts statistics are based on the latest international standard for national accounting-the System of National Accounts, 1993 (SNA93). SNA93 was produced by five international organisations involved in the use of economic statistics and the promotion of international statistical standards-United Nations, Organisation for Economic Co-operation and Development, International Monetary Fund, World Bank and Commission of the European Communities.

5 While national estimates are based on the concepts and conventions embodied in SNA93, no such detailed standard is available for sub-national (regional/state) accounts. In the main, the national concepts are applicable to state accounts, but there remain a number of conceptual and measurement issues that either do not apply or are insignificant at the national level. Most problems arise for the Transport and storage, Communication services, and Finance and insurance industries, and in the treatment of central government. In such cases, conventions need to be established which reflect data availability and/or the needs of users.


CONCEPTS, DEFINITIONS, SOURCES AND METHODS

6 Extensive revisions to Australian System of National Accounts: Concepts, Sources and Methods (cat. no. 5216.0) were required to reflect the implementation of SNA93 in the Australian national accounts and other changes to sources and methods which have occurred over recent years. 5216.0 outlines major concepts and definitions, describes sources of data and methods used to derive annual and quarterly estimates for major aggregates at current prices and in chain volume terms, and discusses the accuracy and reliability of the national accounts. In addition, it includes documentation on input-output tables, financial accounts, capital stock, productivity measures, balance sheets, and state accounts. For detailed information about the nature and extent of the conceptual changes introduced with the implementation of SNA93 reference should be made to the following information papers: Implementation of Revised International Standards in the Australian National Accounts (cat. no. 5251.0), Introduction of Chain Volume Measures in the Australian National Accounts (cat. no. 5248.0), and Upgraded Australian National Accounts, 1998 (cat. no. 5253.0).


ESTIMATES OF GSP AND ITS COMPONENTS

7 Estimates of GSP in current prices are produced by summing factor incomes, i.e. compensation of employees, gross operating surplus (GOS) and gross mixed income (GMI), plus taxes less subsidies on production and imports. While wages and salaries can be readily collected by state, this is not always the case for other components of compensation of employees or for GOS plus GMI, which often cannot be measured satisfactorily within business accounting systems at the individual location. Most of the ABS economic collections which provide data for the estimates in this publication have used the ‘management unit’ as their basic collection unit. A management unit is the largest unit within an enterprise group (a group of legal entities under common ownership and control) which controls its productive activities and for which accounts are kept. The operations of some management units cut across state borders, and conventions have to be adopted in order to allocate GOS plus GMI to states.

8 For the Transport and storage and Communication services industries, estimates of GOS plus GMI by state can be substantially affected by the conceptual basis adopted for allocation. For example, in the case of the modal transport industries (i.e. all transport industries except Services to transport), possible ways of attributing production could include tonne (or person) kilometres travelled in a state; economic activity attributed to the base of operations only; or a mixture of both. As state economic activity for interstate modal transport activities cannot be uniquely defined, it may even be preferable that they should be regarded as extra-territorial and excluded entirely from state production. However, the approach adopted in this publication is to use activity indicators to allocate interstate transport services to states.

9 Numerous data sources are used to apportion Australia level GOS plus GMI to states. Where available, economic survey data are used to apportion GOS for corporations. For those industries for which economic survey data are not available, a variety of allocators is used to extrapolate or estimate state dissections of GOS. Indicators include state details of wages and salaries, employment, household final consumption expenditure, movements in unincorporated enterprises’ GMI, freight shipped from Australian ports, and airport passenger embarkations/disembarkations (the latter two indicators are specific to the transport industry). Taxation statistics are used to apportion GMI for non-agricultural unincorporated enterprises in some industries, and economic survey data are used for other industries. Production-based estimates of agricultural GOS plus GMI are derived using the same data sources and methodology as are used for the Australian estimates. Although the GOS of state and local government non-financial corporations is directly available from the ABS public finance system, GOS for Commonwealth government non-financial corporations is allocated mainly using indirect indicators.

10 While state by industry estimates of wages and salaries are obtained from the same data sources as those used for the Australian estimates, the estimates of the other components of compensation of employees are essentially allocations of the Australian total. State by industry estimates of employers’ superannuation contributions are derived using wages and salaries by state by industry as an allocator. State by industry estimates of workers compensation premiums are based on labour costs data collected by the ABS. It should be noted that there is a minor difference between compensation of employees as published in the total factor income tables and as published in the household income accounts for both the Australian and state estimates. The difference arises in situations where a household supplies labour to a production establishment that is in a different domestic territory (state/county) from the household.

11 Estimates of taxes less subsidies on production and imports are derived by adding values for taxes received and subsidies paid by state and local governments and the Commonwealth government. Data are available from the ABS public finance system, although Commonwealth government values are not generally available by state. Indicators are used to allocate the goods and services tax, excise tax, customs duties and major subsidies to the state where the economic activity took place.


STATE EXPENDITURE ESTIMATES

12 In addition to estimates of GSP and their income components, this publication contains state estimates for a number of expenditure components and international exports and imports of goods and services in both current prices and chain volume terms. The difference between the sum of these components and GSP is known as the balancing item. The balancing item reflects: changes in inventories; interstate trade in goods and services; and the expenditure statistical discrepancy.

Current price estimates

13 State estimates of household final consumption expenditure and private gross fixed capital formation are derived largely from the same sources used for the Australia-level estimates. In the case of household final consumption expenditure, data sources for major components such as household goods, dwelling rent, purchase of motor vehicles, fares, and purchases of gas, electricity and fuel are available by state. Some components of expenditure on recreation and culture rely on the extrapolation and interpolation of less frequent Household Expenditure Survey data. Where actual data are not available, indirect indicators such as household disposable income are used to allocate the Australia-level estimate.

14 State estimates of private gross fixed capital formation in dwellings and other buildings and structures are derived using data from the ABS Building Activity Survey and the Engineering Construction Survey, while expenditure on equipment is derived from the Survey of Private New Fixed Capital Expenditure. Ownership transfer costs are derived from stamp duty data supplied by the various states, ABS surveys of real estate agents and lawyers, and various other data such as the number of real estate property transfers by state. Essentially, these are the same data sources used to prepare the Australia-level estimates.

15 State estimates of gross fixed capital formation in livestock are based on data from the ABS Agricultural Census, the Survey of Livestock Slaughtering and Australian Bureau of Agricultural and Resource Economics surveys. State estimates of exploration expenditure are derived from the ABS Survey of Actual and Expected Private Mineral Exploration. State estimates of capital expenditure on software and artistic originals are based on a variety of allocators, including some indirect ones.

16 Final expenditures of state and local governments can be readily allocated by state, and the same public finance source that is used to derive Australian estimates is also used to derive state estimates.

17 The treatment of national government final expenditures in regional accounting is rather problematic. National government includes the Commonwealth government and the universities, with the major allocation difficulties arising from the Commonwealth government component. Alternative treatments are to attribute final expenditures to the region in which the expenditure was incurred, or to the region in which the beneficiaries reside, or even to consider the Commonwealth government as a consumer unit is extra-territorial and therefore to exclude it from all regions. For practical reasons the first approach has been adopted in this publication, although it still requires extensive use of indirect indicators. An implication is that a large proportion of the consumption of Commonwealth government services is included in SFD for the Australian Capital Territory, increasing the balancing item for that territory. If data had been available to allocate Commonwealth final consumption expenditure to end users, the balancing item for the Australian Capital Territory would be a much smaller negative (or even a positive value) because the provision of much of the services produced would be regarded as an interstate export instead. Estimates for Commonwealth government expenditures in the states on both an annual and quarterly basis therefore have to be treated with considerable caution.

18 The non-defence component of Commonwealth government final consumption expenditure is apportioned to states using data on gross earnings from the ABS Survey of Employment and Earnings. Defence salaries and recurrent expenditure are allocated using defence employment by state, while defence weapons and their delivery platforms are allocated according to population.

19 For Commonwealth general government gross fixed capital formation, Australia-level estimates are first subdivided into expenditure on other buildings and structures, and expenditure on machinery and equipment. The Australia-level other buildings and structures component is generally allocated to the states based on Commonwealth government construction expenditures by state as an indicator. Expenditure on machinery and equipment is allocated using Commonwealth general government employment by state. State estimates of capital expenditure on intangible fixed assets are based on a variety of allocators, including some indirect indicators.

20 For Commonwealth public corporation gross fixed capital formation, a variety of allocators is applied at the individual corporation level. Direct allocation is possible in a few cases where corporations operate wholly in one state. For some corporations state-level direct indicators are available from either the ABS Engineering Construction Survey or from published accounts. For other corporations, indirect allocations are used-for example, purchases of ships are allocated using general freight activity through ports in each state.

21 State estimates of international exports and imports of goods are on a recorded trade basis. No timing adjustments have been made to convert the data to a balance of payments basis and therefore the data differ slightly from the export and import estimates contained in 5204.0. Exports of goods data are on a state of origin basis, that is the state in which the final stage of manufacture or production occurs. For most exports this should correspond to the required basis for state allocation, that is, the state of final resident ownership. The estimates differ from those published in International Merchandise Trade, Australia (cat. no. 5422.0) because re-exports, which are not published on a state basis in 5422.0, are allocated to the states by commodity and included in the state figures in this publication. Those commodities subject to a confidentiality restriction, which are not available by state in 5422.0 are allocated to the states by commodity in proportion to each state's total exports and re-exports and included in the state export figures in this publication.

22 State estimates of international imports of goods are on the basis of the state in which the imports were released from Australian Customs Service control. In most cases this corresponds to the state of initial resident ownership, which is the required basis of state allocation. No information is available on which to base an adjustment for goods released from Customs’ control in a state other than that in which their owner resides.

23 International trade in services data are consistent with balance of payments estimates of exports and imports of services. State allocation has been made primarily on the basis of a series of indicators for transportation, travel and communication services. For other services (about 25% of all trade in services) allocation is based on the location of the business reporting the information, which serves as a proxy for state of origin/consumption of that service.

Chain volume estimates

24 Chain volume estimates of government and household final consumption expenditure for Australia are derived by aggregating the volume estimates for the states using a bottom-up approach. The state volume estimates are derived using state-specific price indexes. Much use is made of components of the capital city consumer price indexes and state wage cost indexes.

25 Chain volume estimates of private gross fixed capital formation for Australia are derived by aggregating the volume estimates for the states using a bottom-up approach. State-specific price indexes are used to derive the volume estimates for capital formation in dwelling and non-dwelling construction. National price indexes are used to derive the volume estimates for capital formation in machinery and equipment and intangibles, although account is taken of the different industry compositions within each state-industry patterns of capital formation by asset type vary.

26 Quarterly chain volume estimates of public gross fixed capital formation for Australia are derived by aggregating the volume estimates for the states using a bottom-up approach. State-specific price indexes are used for gross fixed capital formation in non-dwelling construction, but national price indexes are used to derive the volume estimates for the remainder. Annual chain volume estimates of public gross fixed capital formation by state are derived by aggregating the quarterly estimates and then constraining these estimates to be consistent with the national estimates.

27 Detailed estimates of current price exports of goods on a recorded trade basis at the two-digit level of the Standard International Trade Classification Revision 3 (SITC Rev 3) are revalued, generally using national rather than state-specific deflators, to produce volume estimates of these components. There is an assumption that the national deflators will usually provide a reasonable measure of change in price at the state level. Revaluation at the two-digit (division) level of SITC Rev 3 is a compromise giving a reasonable level of disaggregation by commodity type without increasing the magnitude of the revaluation exercise too significantly. In a very limited number of cases more specific deflators are used to replace the national deflator at the SITC Rev 3 division level. This occurs in those cases where the composition of a particular division is known to be variable between states and the division includes commodities with price movements which deviate significantly from the division average. Mineral and agricultural commodities are the most significant in this regard. The state estimates are benchmarked to the national estimates.

28 A similar approach is adopted for imports of goods, with national deflators being used. The level of revaluation corresponds broadly to the commodity subgroup level of the balance of payments merchandise imports end-use classification of imports, i.e. two-digit Broad Economic Classification (BEC) by three-digit level of the SITC Rev 3. The state estimates are benchmarked to the national estimates.

29 Chain volume estimates of exports and imports of international trade in services have been calculated using the same methodology and deflators as applied at the Australian level. About 10 categories of imports and exports of services are identified and calculation of chain volumes is carried out at this level.


CHAIN VOLUME MEASURES OF GSP

30 The chain volume measures of GSP presented in this publication are derived by revaluing current price, income-based estimates of GSP, using deflators which are compiled using the available data on the composition of expenditures on state production and movements in associated prices. For a more complete description of why this approach has been adopted, and details of the data sources and the methods used, see Chapter 28, Australian National Accounts: Concepts, Sources and Methods (cat. no. 5216.0).

31 A lack of data means that it is not possible to derive estimates at the state level equivalent to the aggregate Australian expenditure-based estimates of gross domestic product. While the components of SFD and estimates of international merchandise trade and international trade in services by state are available, there are no complete data on interstate trade in goods and services; or changes in inventories. Hence, an expenditure-based GSP volume measure cannot be derived by a similar methodology to that adopted at the Australian level.

32 In order to make maximum use of the incomplete expenditure data and limited price data available at the state level, an approach is adopted which essentially involves deriving the best possible current price and chain volume estimates of expenditure that encompass as much as possible of GSP. For each state, current price estimates of identified components of international and interstate trade and changes in inventories are combined with the current price estimates of SFD and, similarly, the chain volume measures of those components are combined with the chain volume measures of SFD. The quotient derived by dividing the aggregate chain volume measure into the aggregate current price estimates is a Paasche (current-weighted) price index. It is this price index which is used to revalue the current price estimates of GSP.

33 It is crucial to identify separately those components for which the deflators deviate significantly from the average, since the method adopted effectively attributes the weighted average deflator to the unidentified components. There is an assumption underlying the approach adopted in deriving the aggregate state deflators that, because of price competition, the available national price indicators are reasonably indicative at the state level. This is a less distorting assumption if the price indicators are weighted together at a reasonable level of commodity disaggregation, and implies deriving the current price and chain volume estimates at as fine a level as possible.

34 Despite the fact that as broad a range of information as possible is used in this estimation procedure, the aggregate current price and chain volume estimates of expenditures used in the derivation of the state deflator are not considered to be complete measures. They merely serve to produce the best deflators and therefore the most reliable chain volume measures of GSP that the available data and resources allow. For this reason, they are regarded as experimental estimates.


REAL GROSS STATE DOMESTIC INCOME

35 The chain volume measures of GSP measure the volume of goods and services produced in each state. If the terms of trade for a state change significantly (i.e. the prices for a state's exports and imports change at different rates) then chain volume GSP will not accurately reflect the change in real purchasing power of the income generated within a state. For this reason a new measure, real gross state domestic income (RGSDI), has been developed which measures chain volume GSP adjusted for changes in the terms of trade. This new measure was introduced in a feature article published in the March quarter 2002 issue of Australian National Accounts: National Income, Expenditure and Product (cat. no. 5206.0).

36 To obtain an estimate of RGSDI, the following adjustment is made to the volume measure of GSP, prior to chaining:

• exports of goods and services at current prices are deflated by the implicit price deflator for imports of goods and services;
• the actual volume estimates of exports are then deducted from this value;
• the resultant terms of trade adjustment is then added to the volume measure of GSP, and
• the measures of RGSDI in the prices of the previous year are then chained to give chain estimates of RGSDI.