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EXPLANATORY NOTES


INTRODUCTION

1 This publication, Australian Industry, 2003-04 (cat. no. 8155.0), presents estimates of the economic and financial performance of Australian industry in 2003-04.

2 The estimates presented have been derived using a combination of directly collected data from the annual Economic Activity Survey (EAS), conducted by the Australian Bureau of Statistics (ABS), and business income tax (BIT) data provided by businesses to the Australian Taxation Office (ATO). To produce estimates at the state and territory level, this combined dataset was then matched to a number of other ABS direct collections to obtain further state/territory dissections. These state and territory estimates, as well as the national ANZSIC class estimates (in Chapter 3), are considered to be experimental, and should be used with care. To assist analysis, please refer to Technical Note 2.

STATISTICAL UNITS USED

3 Statistical units are those entities from which statistics are collected, or about which statistics are compiled. In ABS economic statistics, the statistical unit is generally the business. All businesses in the EAS are recorded on the ABS Business Register (ABSBR).

4 The ABS uses an economic statistics units model on the ABSBR to describe the characteristics of businesses, and the structural relationships between related businesses. Within large and diverse business groups, the units model is used also to define reporting units that can provide data to the ABS at suitable levels of detail.

5 This units model allocates businesses to one of two sub-populations:

• The vast majority of businesses are simple in structure and are allocated to the population which is maintained by the ATO. These are termed (by the ABS) ABN units.
• The remaining businesses are in the ABS maintained population, and are termed type of activity units, or TAUs.

7 For details about the ABSBR and how ABN units and TAUs contribute to the industry statistics in this publication, see Technical Note 1.

SCOPE AND COVERAGE

8 The businesses that contribute to the statistics in this publication are classified:

• by institutional sector, in accordance with the Standard Institutional Sector Classification of Australia (SISCA), which is detailed in Standard Economic Sector Classifications of Australia (SESCA) (cat. no. 1218.0)
• by industry, in accordance with the Australian and New Zealand Standard Industrial Classification (ANZSIC), 1993 edition (cat. no. 1292.0).

• in most industries, entities classified to SISCA Sector 3 General government. This exclusion particularly affects data presented for Education and Health and community services (ANZSIC Divisions N and O, respectively), in that the estimates relate only to private sector businesses. For the same reason, data for ANZSIC Division M Government administration and defence are also excluded. However, SISCA Sector 3 General government businesses classified to Mining, Manufacturing and Electricity, gas and water supply (ANZSIC Divisions B, C and D, respectively) are included. The industry most affected is Electricity, gas and water supply (ANZSIC Division D), where the estimates include data for (for example) relevant local government TAUs.
• entities classified to ANZSIC Division K Finance and insurance.

11 The ANZSIC-based industry statistics presented in this publication are compiled differently from activity statistics. Each ABN unit or TAU on the ABSBR has been classified (by the ATO and the ABS respectively) to a single industry class irrespective of any diversity of activities undertaken. The industry class allocated is the one which provides the main source of income.

12 Some businesses engage, to a significant extent, in activities which are normally carried out by different industries. For example, a predominantly mining business may also undertake significant amounts of manufacturing. Similarly, a mining business may produce significant volumes of goods which are normally produced in different mining industries. Where a business makes a significant economic contribution to industries classified to different ANZSIC subdivisions, the ABS includes the business in the ABS maintained population, and 'splits' the TAU's reported data between the industries involved. Significance is determined using total income.

13 A TAU's reported data will be split if the inclusion of data relating to the secondary activity in the statistics for the industry of the primary activity distorts (by overstating or understating) either the primary or secondary industry statistics at the ANZSIC subdivision level by:

• 3% or more, where the industries of the primary and secondary activities are in the same ANZSIC division
• 2% or more, where the industries of the primary and secondary activities are in different ANZSIC divisions.

• the availability of such businesses (or units within them) for inclusion in the annual economic collections
• the delineation of the units, within those groups, for which data are to be reported.

SAMPLING

16 A sample of 20,268 businesses was selected for the directly collected part of the 2003-04 EAS collection. Each business was asked to provide data obtained primarily from financial statements, mainly by mail out questionnaires. The survey population (excluding large or otherwise significant businesses) was then matched to ATO BIT files. Key financial data, from these files, representing approximately 2,115,000 businesses were then used to supplement the ABS's directly collected information. For details, see Technical Note 1.

17 State/territory of operation is not taken into account in selecting the EAS sample. As a result, sampling error may be greater for some states/territories than for others. To some extent, any increase in sampling error will have been offset by the use of ATO BIT data, which provides an increase in sample size across each state/territory. The sampling error at the state/territory level may become more significant at the ANZSIC division and subdivision levels, depending on the number of businesses that each business in the sample represents in that particular state/territory. For further details, see Technical Notes 2 and 3.

REFERENCE PERIOD

18 The period covered by each collection is, in general, the 12 months ended 30 June. Where businesses are unable to supply information on this basis, an accounting period for which data can be provided is used for data other than that relating to employment. Such businesses make a substantial contribution to some of the estimates presented in this publication. As a result, the estimates can reflect trading conditions that prevailed in periods outside the twelve months ended June in the relevant year.

19 Financial data presented incorporate all units in scope of the EAS collection that were in operation at any time during the year. They also include any temporarily inactive units, i.e. those units which were in the development stage or which were not in operation, but which still existed and held assets and liabilities and/or incurred some non-operating expenses (e.g. depreciation, administration costs).

RELIABILITY OF ESTIMATES

20 For information about this subject, see Technical Notes 2 and 3.

INDUSTRY PERFORMANCE MEASURES

21 This publication presents a wide range of data that can be used to analyse business and industry performance.

22 Differences in accounting policy and practices across businesses and industries can lead to some inconsistencies in the data input to the statistics. Although much of the accounting process is subject to standards, there is still a great deal of flexibility left to individual managers and accountants in the accounting policies and practices that they adopt. For example, the way profit is measured is affected by management policy about such issues as depreciation rates, bad debt provisions and write off, and goodwill write off. The varying degree to which businesses consolidate their accounts may also affect any industry performance measures calculated.

23 A range of performance measures, usually referred to as ratios, can be produced from the data available from businesses' financial statements. The performance measures presented in this publication comprise:

• profitability ratios, which measure rates of profit on income
• debt ratios, which indicate the ability of businesses to meet the cost of debt financing
• investment ratios, which indicate the capacity of business to invest in capital assets
• labour measures, which relate output and labour costs.

25 The above limitations are not meant to imply that analysis based on these data should be avoided, only that they should be borne in mind when interpreting the data presented in this publication.

INDUSTRY VALUE ADDED

26 Industry value added is the measure of the contribution by businesses in each industry to gross domestic product. This publication presents, for the first time, the components of industry value added (table 2.3) for all industries that are within the scope of the collection.

27 The presentation of industry value added in this table is relevant to those businesses that are classified as 'market' producers, that is, businesses which sell their output at economically significant prices. Industry value added is derived in a different way for non-market producers. The industries in which non-market producers make the most significant contribution to industry value added are Health and community services (private) and Personal and other services. See the Glossary item for detailed definitions.

STATE AND TERRITORY EXPERIMENTAL ESTIMATES

28 For details of the process used to derive state/territory proportions from EAS data, refer to Technical Note 1 paragraphs 22-28.

NEW BUSINESSES

29 Data in this publication have been adjusted to allow for lags in processing new businesses to the ABSBR. The effect of these adjustments is generally 1% or less for most ANZSIC industry divisions and for most states and territories.

EMPLOYMENT DATA

30 Employment estimates (and related ratios) have been excluded from this issue, as work continues on the modelling of ATO BIT data intended to provide employment estimates for non-sampled ABN units. Employment estimates for 2003-04 have already been released for the Mining, Manufacturing and Electricity, Gas and Water Supply industries in their respective publications, but further investigation is needed in order to improve the reliability of employment estimates from this survey for the remaining industries, for which the sample sizes are much smaller. When these problems are resolved, estimates for all industries will be made available.

31 Businesses are allocated to the employment size categories in table 2.1 based on reported values of employment in the case of those units that are directly collected, and based on a modelled estimate of employment for those units whose contribution is sourced from BIT data. This modelling is regarded as sufficiently reliable to categorise businesses by broad categories of employment size, but requires further development before it can be regarded as sufficiently reliable to generate estimates of employment by industry.

COUNTS OF OPERATING BUSINESSES

32 The numbers of operating businesses presented in this publication are intended to represent counts of businesses which are operating at 30 June in the relevant year and which satisfy the scope criteria (as set out above) for inclusion in these statistics. The counts of businesses at 30 June 2004 differ from those released in Australian Bureau of Statistics Register, Counts of Businesses - Summary Tables, June 2004 (cat. no. 8161.0.55.001) due primarily to scope differences. Included in the scope of EAS but not in the Business Register (ABSBR) counts are the following categories of units: General government units classified to Mining, Manufacturing, or Electricity, gas and water supply; non-profit institutions; charitable institutions; social and sporting clubs; trade unions and other associations; and units classified as other incorporated entities. EAS counts exclude units that were 'live' on the ABSBR at time of selection for the survey but were found to be not operating during the reference period. They are also adjusted for delays in processing new businesses to the ABSBR. The allocation of units to size classifications also differs between the two sources. EAS uses the reported or modelled employment at 30 June 2004. Employment recorded on the ATOMP component of the ABSBR is derived from the "number of payees", which is defined as the estimated number of individuals to which payments are made. This number is likely to be greater than the EAS measure.

ACKNOWLEDGMENT

33 ABS publications draw extensively on information provided freely by individuals, businesses, governments and other organisations. Their continued cooperation is very much appreciated: without it, the wide range of statistics published by the ABS would not be available. Information received by the ABS is treated in strict confidence as required by the Census and Statistics Act 1905.

RELATED PUBLICATIONS

34 Users may also wish to refer to the following publications:

Australian Bureau of Statistics Register, Counts of Businesses - Summary Tables, June 2004, cat. no. 8161.0.55.001, released on 7 October 2005
Australian Labour Market Statistics, cat. no. 6105.0 - Quarterly publication
Australian National Accounts: National Income, Expenditure and Product, cat. no. 5206.0 - Quarterly publication
Australian National Accounts: State Accounts, 2004-05, cat. no. 5220.0, released on 9 November 2005 - Annual publication
Australian System of National Accounts: Concepts, Sources and Methods, 2000, cat. no. 5216.0, released on 21 December 2000 - Irregular publication
Business Indicators, Australia, cat. no. 5676.0 - Quarterly publication
Electricity, Gas, Water and Sewerage Operations, Australia, 2003-04, cat. no. 8226.0, released on 21 December 2005 - Annual publication
Experimental Estimates: Regional Small Business Statistics, Australia, 1995-96 to 2000-01, cat. no. 5675.0, released on 2 February 2004 - Irregular publication
Information Paper: ABS Statistics and The New Tax System, cat. no. 1358.0, released on 26 April 2000 - Irregular publication
Information Paper: Improvements in ABS Economic Statistics [Arising from The New Tax System], cat. no. 1372.0, released on 6 May 2002 - Irregular publication
Information Paper: Improvements to Australian Bureau of Statistics Quarterly Business Indicators, cat. no. 5677.0, released on 6 July 2001 - Irregular publication
Job Vacancies, Australia, cat. no. 6354.0 - Quarterly publication
Labour Costs, Australia, 2002-03, cat. no. 6348.0.55.001, released on 11 June 2004 - Irregular electronic publication
Labour Price Index, Australia, cat. no. 6345.0 - Quarterly publication (renamed from Wage Cost Index, Australia)
Manufacturing Industry, Australia, 2003-04, cat. no. 8221.0, released on 5 July 2006 - Annual publication
Mining Operations, Australia, 2003-04, cat. no. 8415.0, released on 22 June 2006 - Annual publication
Private New Capital Expenditure and Expected Expenditure, Australia, cat. no. 5625.0 - Quarterly publication
Producer Price Indexes, Australia, cat. no. 6427.0 - Quarterly publication
Research and Experimental Development, Businesses, Australia, 2003-04, cat. no. 8104.0, released on 28 September 2005 - Annual publication
Wage Cost Index, Australia, cat. no. 6345.0 - renamed, from September Quarter 2004 issue. See Labour Price Index, Australia
Year Book Australia, 2006, cat. no. 1301.0, released on 20 January 2006 - Annual publication

36 Current publications and other products released by the ABS are listed in the Catalogue of Publications and Products (cat. no. 1101.0). The Catalogue is available from any ABS office or the ABS web site <https://www.abs.gov.au>. The ABS also issues a daily Release Advice on the web site which details products to be released in the week ahead.

ADDITIONAL DATA

37 Further data about Australian industry, derived from the annual Economic Activity Survey, are available in the spreadsheet released in conjunction with this publication. This spreadsheet now includes data previously released in the following electronic products (which are now discontinued):

• Australian Industry: States, Territories and Australia, Industry Subdivision - Experimental Estimates, Data Report (cat. no. 8155.0.003) and
• Australian Industry: Summary of Industry Performance, Australia, Data Report (cat. no. 8155.0.55.002).

ABS DATA AVAILABLE ON REQUEST

39 As well as the statistics included in this and related publications, the ABS may have other relevant data available on request and for a charge. Inquiries should be made to the National Information and Referral Service on 1300 135 070.

40 Information is also available online via a selection of industry-specific theme pages. To access these theme pages, go to the ABS web site home page <https://abs.gov.au>. Open the Industry link shown under Themes (located in the left-side navigator 'Quick links'), then select one of the links shown under Industry.

ROUNDING

41 Where figures have been rounded, discrepancies may occur between totals and the sums of the component items. Due to data being adjusted for lags in processing new businesses to the ABSBR (see Explanatory Notes paragraph 31), this 'rounding rule' also applies to counts of businesses.

42 Proportions, ratios and other calculated figures shown in this publication have been calculated using unrounded estimates and may be different from, but are more accurate than, calculations based on the rounded estimates.