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Introduction

3.86. In addition to examining the bias of estimates and the direction and magnitude of revisions to initial estimates, it is useful to consider whether all revisions are worthwhile in the sense that they improve the accuracy of an estimate. An indication of this is given in the graphs included in Appendix 1 where the value of an aggregate, at various intervals after its initial estimate, is related to the latest estimate of that aggregate (the latest estimate is assumed to be the best available approximation of the true value). Table 11 and Table 12 provide complementary information by quantifying the proportion of revisions which reduces the error in monthly (Table 11) and quarterly (Table 12) estimates. Error in this context is measured as the difference between the latest estimate of an aggregate and a preliminary estimate produced one year or less after the initial estimate. As with Table 10, the analysis in Table 11 and Table 12 provides information on counts of revisions rather than monetary values and therefore is limited in that a revision that, say, halves an error has the same weighting as a minor amendment that alters the error only marginally.

	11 PROPORTION OF REVISIONS TO MONTHLY ESTIMATES THAT REDUCES ERROR RELATIVE TO LATEST ESTIMATE: JANUARY 1986 TO JUNE 1994 (a)
				Within-first-year revisions (b)			One-year revisions (c)
				Reduce error	Increase error (d)	Proportion that reduces error	Reduce error	Increase error (d)	Proportion that reduces error
	Aggregate			no.	no.	%	no.	no.	%
	Current account
		Merchandise exports		373	160	70	90	4	96
		Merchandise imports		181	103	64	82	7	92
		Balance on merchandise trade		376	180	68	86	10	90
		Services credits		337	293	54	59	37	62
		Services debits		327	301	52	57	39	59
		Income credits		358	324	53	68	29	72
		Income debits		452	270	63	78	19	81
		Unrequited transfers credits		160	19	89	79	2	98
		Unrequited transfers debits		125	73	63	57	25	70
		Balance on current account		529	432	55	77	19	80
	Capital account
		Official sector transactions		244	208	54	59	29	62
			General government transactions	242	207	54	60	28	63
			Reserve Bank transactions	16	2	89	14	-	100
	(a) The latest estimate is that consistent with the January 1995 issue of 5301.0. (b) Counts of successive monthly revisions to an estimate, occurring within the first 12 months after the initial estimate, according to whether each revision moves the revised estimate closer to, or further away from, the latest estimate of that aggregate. (c) Counts of the difference between the initial estimate of an aggregate and the estimate after 12 months classified according to whether the revision moves the revised estimate closer to, or further away, from the latest estimate for that aggregate. (d) Includes revisions that ‘overshoot' i.e. they worsen the error but in the opposite direction.

Do monthly revisions reduce error?

3.88. Looking at the monthly data in Table 11, it can be seen that the proportion of revisions that reduces error within the first year (that is moves an estimate closer to its latest value) varies between items. Services debits and income credits were the worst items, with only 52% and 53%, respectively, of revisions moving the estimates closer to their latest values. The corollary to this is that, for each of those items, about half the revisions made during the first year in fact worsened the accuracy of the estimate. General government capital transactions and services credits performed little better, each with only 54% of revisions in the right direction. Examination of Graphs A.5, A.7 and A.8 confirms this picture for income credits and services where it can be seen that the median estimate during the first year both rises and falls.

3.89. Table 11 shows both that there are relatively few revisions to monthly Reserve Bank capital transactions made within the first year, and that these almost always reduce error. It also shows that the cumulative revisions after one year always reduce error, correcting the two within-year revisions that moved the estimate in the wrong direction. This supports the evidence examined earlier which suggested that estimates of this item are very reliable.

3.90. For all items, the majority of cumulative revisions after one year reduced error, although the proportion was low for services credits (62%) and for services debits (59%). This suggests that for those items substantial revisions remained to be applied after the end of the first year. The cumulative effect of revisions to current account items constitute the revisions to the balance on current account which, over the course of the first year of estimation, generally reduced error (80% of one-year revisions reduced error). The pattern for one-year revisions to official sector capital transactions shows 69% of revisions reduced error.

Do quarterly revisions reduce errors?

3.91. Table 12 provides a similar analysis for quarterly statistics. The unrequited transfers debits series has the lowest proportion of revisions within the first year in the right direction (52%). As with monthly statistics, the quarterly services and income items also have low proportions of revisions within the first year that reduce error relative to the latest estimate. In the case of services credits, just over half the revisions within the first year reduce error (54%) and less than half of the oneyear cumulative revisions reduce error (43%). This pattern is evident in the Appendix 1 graph for services credits (Graph A.21) which suggests minor negative revisions follow many of the more significant positive revisions towards the final estimates.

	12: PROPORTION OF REVISIONS TO QUARTERLY ESTIMATES THAT REDUCES ERROR RELATIVE TO LATEST ESTIMATE: MARCH QUARTER 1986 TO JUNE QUARTER 1994 (a)
					Within first year revisions (b)			One year revisions (c)
					Reduce error	Increase error (d)	Proportion that reduces error	Reduce error	Increase error (d)	Proportion that reduces error
	Aggregate				no.	no.	%	no.	no.	%
	Current account
		Merchandise exports			81	22	79	29	2	94
		Merchandise imports			48	19	72	25	3	89
		Balance on merchandise trade			79	28	74	30	1	97
		Services credits			66	57	54	13	17	43
		Services debits			66	55	55	20	11	65
		Income credits			77	53	59	22	9	71
		Income debits			76	47	62	25	6	81
		Unrequited transfers credits			79	46	63	28	3	90
		Unrequited transfers debits			43	6	88	25	2	93
		Balance on goods and services			32	29	52	18	7	72
		Balance on current account			71	58	55	19	12	61
	Capital account
		Official sector transactions			60	39	61	24	6	80
			General government transactions		60	39	61	24	6	80
				Foreign investment in Australia	59	30	66	25	4	87
				Australian investment abroad	37	25	60	14	11	56
			Reserve Bank transactions		9	4	69	4	-	100
				Foreign investment in Australia	1	1	50	-	-	-
				Australian investment abroad	8	3	73	4	-	100
			Non-official sector transactions		74	50	60	19	12	61
				Foreign investment in Australia	70	47	60	24	6	80
				Australian investment abroad	76	44	63	27	4	87
		Balance on capital account			70	51	61	12	13	48
	(a) The latest estimate is that consistent with the December quarter 1995 issue of 5302.0 (b) Counts of successive monthly revisions to an estimate, occurring within the first 12 months after the initial estimate, according to whether each revision moves the revised estimate closer to, or further away from, the latest estimate of that aggregate (c) Counts of the difference between the initial estimate of an aggregate and the estimate after 12 months classified according to whether the revision moves the revised estimate closer to, or further away, from the latest estimate for that aggregate. (d) Includes revisions that ‘overshoot' i.e. they worsen the error but in the opposite direction.