EXPLANATORY NOTES


INTRODUCTION

1 This publication contains estimates of engineering construction activity in Australia by both public and private sector organisations. The estimates were compiled from the Engineering Construction Survey (ECS).

2 These estimates together with results from the Australian Bureau of Statistics (ABS) Building Activity Survey provide a complete quarterly picture of building and construction activity in Australia.


SCOPE AND COVERAGE

3 The ECS aims to measure the value of all engineering construction work undertaken in Australia. This value excludes the cost of land and repair and maintenance activity, as well as the value of any transfers of existing assets, the value of installed machinery and equipment not integral to the structure and the expenses for relocation of utility services. However, a contract for the installation of machinery and equipment which is an integral part of a construction project is included.

4 Where projects include elements of both building and engineering construction (for example, electricity generation, heavy industrial plant) every effort is taken to exclude the building component from these statistics.

5 From the September quarter 2002, engineering construction activity in the External Territories of Australia is included in these statistics. Jervis Bay is included in New South Wales, while Christmas Island and Cocos (Keeling) Islands are included in Western Australia.


STATISTICAL UNIT

6 In the Engineering Construction Survey, the statistical unit used to represent businesses, and for which statistics are reported, is the Australian Business Number (ABN) unit, in most cases. The ABN unit is the business unit which has registered for an ABN, and thus appears on the Australian Taxation Office (ATO) administered Australian Business Register. This unit is suitable for ABS statistical needs when the business is simple in structure. For more significant and diverse businesses where the ABN unit is not suitable for ABS statistical needs, the statistical unit used is the Type of Activity Unit (TAU). A TAU is comprised of one or more business entities, sub-entities or branches of a business entity within an Enterprise Group that can report production and employment data for similar economic activities. When a minimum set of data items is available, a TAU is created which covers all the operations within an industry subdivision (and the TAU is classified to the relevant subdivision of the Australian and New Zealand Standard Industrial Classification (ANZSIC)). Where a business cannot supply adequate data for each industry, a TAU is formed which contains activity in more than one industry subdivision and the TAU is classified to the predominant ANZSIC subdivision.

7 Further details about the ABS economic statistical units used in this survey, and in other ABS economic surveys (both sample surveys and censuses), can be found in Chapter 2 of the Standard Economic Sector Classifications of Australia (SESCA) 2002 (cat. no. 1218.0).


RELATIONSHIP WITH NATIONAL ACCOUNTS

8 Data on the value of work done on the construction of new residential buildings, alterations and additions to residential buildings, private sector non-residential buildings (from Building Activity, Australia (cat. no. 8752.0)) and the value of engineering construction activity (from the Engineering Construction Survey) are the major source data which are used to compile the national accounts estimates for private gross fixed capital formation on dwellings, and other buildings and structures. However, there are some adjustments to the survey data which are made in the process of compiling these national account series. Allowances are made for the value of building activity which is out of scope of the Building Activity Survey and the Engineering Construction Survey. Such activity includes work done on projects which fall below the size cut-offs used for the Building Activity Survey and also the value of work done which is undertaken without obtaining a building permit, either because such a permit is not required or because the requisite permit is not obtained. The national accounts estimates also make allowances for purchases (less sales) of buildings and other structures from (to) the public sector.


SAMPLE REVISION

9 The survey frames and samples are revised each quarter to ensure that they remain representative of the survey population. The timing for creating each quarter's survey frame is consistent with that of other ABS surveys. This provides for greater consistency when comparing data across surveys.


CLASSIFICATION

10 Ownership. Projects are classified as private sector or public sector according to the expected ownership of the project at the time of completion. When a project is undertaken as a Private Public Partnership (PPP), or other similar arrangement, these projects will be classified according to the expected ownership of the asset at the time of completion. Projects undertaken as PPP's may be classified as private sector although ownership of the asset could eventually reside with the public sector.

11 Sector. The public sector includes Commonwealth Departments and Authorities, State Departments and Authorities, Local Government Authorities, Water, Sewerage and Electricity Authorities and government owned businesses and Statutory Authorities. All remaining organisations are classified as private sector. This publication contains separate estimates for the private sector and:

Commonwealth Government
State and Territory Government
Local Government.

12 Type of construction. A project is classified to a category of construction without regard to end use. For example, a project involving coal handling equipment at an electricity generating plant is included under 'Heavy industry - Oil, gas, coal and other minerals' and not under 'Electricity generation, transmission and distribution'. Where a project involves more than one category of construction the project is included under the category which accounts for the major part of the contract in terms of value.


RELIABILITY OF THE ESTIMATES

13 Since the estimates for private sector and public sector organisations are based on a sample of organisations they are subject to sampling error; that is, they may differ from the figures that would have been obtained if information for all organisations for the relevant period had been included in the survey. A measure of the likely difference is given by the relative standard error (RSE) of each estimate. There are about 2 chances in 3 that a sample estimate will differ by less than one standard error from the figure that would have been obtained if all units had been included, and about 19 chances in 20 that the difference will be less than 2 standard errors. Approximate RSEs of the estimates are shown in tables 28 and 29.

14 An example of the use of RSEs is as follows. If the total value of work done during the quarter is $2,500m and the associated RSE is 0.5% then there are about 2 chances in 3 that the value which would have been obtained if there had been a complete collection would have been within the range $2,488m to $2,513m and about 19 chances in 20 that the value would have been within the range $2,475m to $2,525m.

15 Estimates that have an estimated relative standard error between 10% and 25% are annotated with the symbol ‘^’. These estimates should be used with caution as they are subject to sampling variability too high for some purposes. Estimates with an RSE between 25% and 50% are annotated with the symbol ‘*’, indicating that the estimate should be used with caution as it is subject to sampling variability too high for most practical purposes. Estimates with an RSE greater than 50% are annotated with the symbol ‘**’ indicating that the sampling variability causes the estimates to be considered too unreliable for general use.

16 The imprecision due to sampling variability, which is measured by the RSE, should not be confused with inaccuracies that may occur because of inadequacies in the source of information, imperfections in reporting by respondents, and errors made in the coding and processing of data. Inaccuracies of this kind are referred to as non-sampling error, and may occur in any enumeration whether it be a full count or only a sample. Every effort is made to reduce the non-sampling error to a minimum by the careful design of questionnaires, efforts to obtain responses for all selected organisations, and efficient operating procedures.

17 Caution is advised in respect of the value of work commenced (and consequently, the value of work yet to be done) reported by the public sector. It is known that data reported for value of work commenced are a combination of the following: annual works budget estimates which are reported as commencements in the September quarter (and in some cases may subsequently be undertaken by the private sector); genuine commencements as defined in the Glossary, and reported quarterly; commencements being reported as equal to the value of work done for the quarter; commencements of major stages in the case of long-term projects.


SEASONAL ADJUSTMENT

18 Since seasonally adjusted statistics reflect both irregular and trend movements, an upward or downward movement in a seasonally adjusted series does not necessarily indicate a change of trend. Particular care should therefore be taken in interpreting individual quarter to quarter movements.

19 From the June quarter 2003, the seasonally adjusted estimates are produced by the concurrent seasonal adjustment method which takes account of the latest available original estimates. The concurrent method improves the estimation of seasonal factors and, therefore, the seasonally adjusted and trend estimates for the current and previous quarters.

20 The revision properties of the seasonally adjusted and trend estimates have been improved by the use of autoregressive integrated moving average (ARIMA) modelling. ARIMA modelling relies on the characteristics of the series being analysed to project future period data. The ARIMA model is assessed as part of the annual reanalysis. For more information on the details of ARIMA modelling see feature article: Use of ARIMA modelling to reduce revisions in the October 2004 issue of Australian Economic Indicators (cat. no. 1350.0).

21 A more detailed review of concurrent seasonal factors will be conducted annually, generally prior to the release of data for the December quarter.


TREND ESTIMATES

22 Seasonally adjusted series can be smoothed to reduce the impact of the irregular component in the adjusted series. This smoothed seasonally adjusted series is called a trend estimate.

23 The trend estimates are derived by applying a 7-term Henderson moving average to the seasonally adjusted series. The 7-term Henderson average (like all Henderson averages) is symmetric but, as the end of a time series is approached, asymmetric forms of the average are applied. Unlike weights of the standard 7-term Henderson moving average, the weights employed here have been tailored to suit the particular characteristics of individual series.

24 While the smoothing technique described in paragraphs 22 and 23 enables trend estimates to be produced for recent quarters, it does result in revisions to the estimates for the most recent three quarters as additional observations become available. There may also be revisions because of changes in the original data and as a result of the re-estimation of the seasonal factors. For further information, see Information Paper: A Guide to Interpreting Time Series - Monitoring Trends, 2003 (cat. no. 1349.0) or contact the Assistant Director, Time Series Analysis on Canberra (02) 6252 6540 or email <timeseries@abs.gov.au>.


CHAIN VOLUME MEASURES

25 Chain volume estimates of the value of work done are presented in original, seasonally adjusted and trend terms in tables 1, 2, 3 and 4.

26 While current price estimates of value of work done reflect both price and volume changes, chain volume estimates measure changes in value after the direct effects of price changes have been eliminated and therefore only reflect volume changes. The direct impact of the Goods and Service Tax is a price change, and hence is removed from chain volume estimates. The deflators used to revalue the current price estimates in this publication are derived from the same price data underlying the deflators compiled for the dwellings and new other building components, and the new engineering construction component, of the national accounts aggregate ‘Gross fixed capital formation’.

27 The chain volume measures of work done appearing in this publication are annually reweighted chain Laspeyres indexes referenced to current price values in a chosen reference year. The reference year is updated annually in the September quarter publication. Each year’s data in the value of work done series are based on the prices of the previous year, except for the quarters of the latest incomplete year which are based upon the current reference year. Comparability with previous years is achieved by linking (or chaining) the series together to form a continuous time series. Further information on the nature and concepts of chain volume measures is contained in the ABS Information Paper: Introduction of Chain Volume Measures in the Australian National Accounts (cat. no. 5248.0).

28 The factors used to seasonally adjust the chain volume measures are identical to those used to adjust the corresponding current price series.


ACKNOWLEDGMENT

29 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 PRODUCTS

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

Building Activity, Australia cat. no. 8752.0
Building Approvals, Australia cat. no. 8731.0
Construction Work Done, Australia, Preliminary cat. no. 8755.0
Dwelling Unit Commencements, Australia, Preliminary cat. no. 8750.0.

ABS DATA AVAILABLE ON REQUEST

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