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Introduction

11.1 The Australian System of National Accounts (ASNA) records the essential elements of the Australian economy: production, income, consumption (intermediate and final), accumulation of assets and liabilities, and wealth. As such, many different data sources are used to compile the ASNA. In many cases these data are infrequent, incomplete, lacking in scope or simply not on a national accounts basis. The following provides an overview of the sources and methods employed to convert these different data sources into a coherent set of national accounts. Chapters 12 to 28 provide substantial detail on the sources and methods used to compile the various components of the national accounts.


Input-output tables

11.2 Input-output tables provide a comprehensive picture of the supply and use of goods and services in the economy and the incomes generated from production. Conceptually, compilation of the GDP account is fully integrated with the compilation of the I-O tables.

11.3 In Chapter 9 a distinction was drawn between supply and use (S-U) tables and analytical (symmetric) input-output tables. The strategy adopted by the ABS in relation to the compilation of I-O tables involves a two stage process whereby a series of S-U tables, in both current prices and in the prices of the previous year, are compiled annually. These tables constitute benchmarks for the annual and quarterly GDP accounts. The analytical I-O tables are compiled as the second stage of this process at the time the S-U tables for a particular year are deemed to be final.

11.4 The industrial classification used for the 1994-95 I-O tables is based on the 1993 edition of the Australian and New Zealand Standard Industrial Classification (ANZSIC). However, in some respects it departs from the usual application of ANZSIC. For I-O tables it is desirable that an industry corresponds as closely as possible to the production of products primary to that industry. Although some I-O industries have a one-to-one relationship with ANZSIC classes, it is not practicable to have an I-O industry for each ANZSIC class. For further details of the Australian Input-Output Industrial Classification (IOIC) and the Australian Input-Output Product Classification (IOPC) see Chapter 12 and Appendix 1.

11.5 In the I-O tables, industrial output is calculated on an individual industry basis. Generally the output of industries can be defined as the production of goods and services for use as inputs into industries, exports or into final demand. Data for estimating an individual industry's output are obtained from a variety of sources. The main data sources for estimating individual industries' outputs are ABS economic collections such as the Economic Activity Survey, the Services Industry Survey and the Agricultural Survey. Other sources of data include income tax data (provided by the Australian Taxation Office), public accounts, annual reports and other economic collections.

11.6 Primary inputs consist of compensation of employees, gross operating surplus plus gross mixed income, taxes on products (net), other taxes on production (net), complementary imports and competing imports. The main data sources for estimating compensation of employees are the Survey of Employment and Earnings and the Labour Force Survey. Each component of compensation of employees is estimated in aggregate for the whole economy, then apportioned to the 107 industries in the I-O tables.

11.7 Gross operating surplus plus gross mixed income of industries is the residual obtained by subtracting from the value of output: all intermediate inputs; taxes on production (net); and compensation of employees. The gross operating surplus of the producers of government services is defined to be equal to the producer's consumption of fixed capital.

11.8 Accurate data for total other taxes on production (net) are available, but there is little information on their distribution by industry. They are mainly allocated using ABS economic collections and public finance information, and sometimes the nature of the tax itself determines its allocation.

11.9 Imports represent the value of goods and services purchased from foreign residents. The imports of goods, which are based on international merchandise trade statistics, are adjusted in accordance with balance of payments concepts of scope, coverage, timing and valuation.

11.10 Intermediate inputs into an industry consist of goods and services used in the process of production. Under the Australian input-output methodology, in any particular year some flows will be estimated by reference to basic data sources and included in the intermediate usage matrix as modifications. Other flows will be estimated using the RAS procedure (1). The Manufacturing Survey, Economic Activity Survey, Department of Defence Annual Reports and ABS government finance data are sources from which modifications are made to input structures. However, more than 25 per cent of the intermediate inputs to all industries are derived from basic data.
(1) A detailed discussion of the estimation of intermediate inputs using the Australian input-output methodology is provided in the ABS Occasional Paper: The RAS Method for Compiling Input-Output Tables: ABS Experience.

11.11 Various sources are used for the expenditure categories of household final consumption expenditure, government final consumption expenditure, gross fixed capital formation and changes in inventories; statistics relating to exports are obtained from international merchandise trade and balance of payments statistics.

11.12 Statistics relating to employment are obtained from the ABS Labour Force Survey.


Deriving annual benchmarks and quarterly estimates from supply and use tables

11.13 The S-U tables provide annual benchmarks for all aggregates included in the gross domestic product account from 1994-95 for current price estimates and from 1995-96 for chain volume estimates up until the year prior to the latest complete financial year. For each financial year three editions of supply and use tables are compiled in current prices and in the prices of the previous year as more complete information becomes available for their construction (see Chapter 12). Current price and chain volume estimates, therefore, are also revised progressively in line with the revisions to the S-U tables.

11.14 Initial quarterly current price and chain volume estimates are benchmarked to the annual S-U tables using an 'optimal' benchmarking procedure. This procedure seeks to minimise amendments to the quarterly growth rates while ensuring that quarterly estimates sum to their annual counterparts. This procedure is explained in more detail in Chapter 10. The quarterly current price and chain volume components of final consumption expenditure and gross fixed capital formation are derived at the State level using a bottom-up approach. The initial quarterly current price State estimates are adjusted on a pro rata basis to agree with the benchmarked national data. The State volume estimates are then derived from the adjusted current price data. In the case of gross fixed capital formation, the volume estimates are subject to an additional adjustment to ensure consistency with the benchmarked national chain volume estimates.

11.15 Estimates for the latest financial year are obtained by aggregating the quarterly estimates. The quarterly estimates are moved forward from the latest annual benchmarks according to movements in quarterly indicator series. In some cases these series are the same as those used in constructing annual S-U tables. In most cases the quarterly indicators are closely related, but some only provide a general indication of movements in the aggregate being estimated.

11.16 Unlike their current price counterparts, seasonally adjusted chain volume estimates are benchmarked to the annual estimates. This is done because seasonal adjustment is conducted on unchained (and hence unbenchmarked) data, and there is a need to benchmark quarterly chain volume estimates linked on a quarter to annual chain volume estimates. See Chapter 10 for further details.

11.17 While quarterly current price estimates are compiled using the income and expenditure approaches, chain volume estimates are compiled using the expenditure and production approaches. The expenditure-based estimates are generally derived by deflating their current price counterparts using prices indexes. The major exception is exports of goods - see Chapter 18 for further details.

11.18 The production view of GDP in chain volume terms shows gross value added at basic prices by industry and the item 'taxes less subsidies on products'. With the exception of agriculture, output or input indicators are used for all industries to extrapolate and interpolate annual benchmarks in order to derive quarterly chain volume estimates.


Final consumption expenditure

11.19 SNA93 provides for three main expenditure aggregates for final consumption expenditure: household final consumption expenditure; final consumption expenditure of NPISHs; and government final consumption expenditure. Separate estimates of final consumption expenditure of NPISHs are not currently compiled by the ABS. Their expenditure is included instead with that of households.

11.20 Household final consumption expenditure (HFCE) consists of current expenditure by persons, and the output of goods and services by non-profit institutions serving households. HFCE is a large aggregate covering a wide range of goods and services. The Classification of Individual Consumption by Purpose (COICOP) is an international standard for dissecting HFCE by purpose or function. In the Australian national accounts HFCE is aligned, as far as possible, with COICOP. The Retail Censuses have in the past provided the main data for compiling benchmark estimates for most of the goods components of HFCE. The census data are adjusted for retail sales which are out of scope of the censuses. Also, where appropriate, an estimate of business purchases is deducted.

11.21 There is a need to validate and confront the estimates that make up the national accounts by benchmarking to annual supply and use tables because many independent data sources are used to compile the estimates of household final consumption expenditure. In many cases these collections are undertaken infrequently, so that in some periods extrapolations may be necessary, using less than complete data. The ABS confronts these estimates with those produced in compiling annual supply and use tables.

11.22 Current price and volume estimates of HFCE, expressed in the prices of the previous year, are derived for each COICOP commodity group for each State. The elemental volume estimates are aggregated to form chain volume estimates for the published national and State statistics. For almost all commodities the volume estimates are derived by revaluing their current price counterparts with the corresponding commodity-specific and State-specific component of Consumer Price Index (Cat. no. 6401.0).

11.23 Government final consumption expenditure (GFCE) is mainly the output of producers of general government goods and services, less revenue from any sales or charges in respect of that output. Annual and quarterly estimates for Commonwealth and State governments are based on public account ledgers, budget papers, Auditors'-General Reports and supplementary Commonwealth and State departmental documents. For local government, estimates are based on annual and quarterly ABS questionnaires of local government authorities, as well as data from the Commonwealth Grants Commission and the Department of Local Government.

11.24 As there are no market prices for government service output, derivation of volume estimates involves current prices being revalued using price indexes relating to the inputs to the general government sector. The major input into this sector is labour, and therefore public sector/industry (State and national) wage rate indexes from Wage Cost Index (Cat. no. 6345.0) are used extensively in deriving the appropriate price indexes.


Gross capital formation

11.25 In SNA93, gross capital formation comprises three categories of investment:

• gross fixed capital formation;

• changes in inventories; and

• acquisitions less disposals of valuables.

• goods for sale, whether from own production or purchased for resale;

• work in progress; and

• raw materials and stores.

11.32 Capital stock estimates provide information about the stock of capital available in an economy at a particular point in time. Three measures of capital stock can be distinguished:

• gross capital stock is obtained by valuing each asset in use at the current price of a new asset of the same type, regardless of its age;

• net (or economic) capital stock is the net present value of the future capital services provided by an asset; and

• productive capital stock is derived as the written down value of each asset in accordance with its decline in efficiency due to age.

• Consumption of fixed capital (COFC) represents the value of a capital asset that is 'used up' in a particular period. The real consumption of fixed capital of an asset in a period is the difference between the real economic value of the asset at the beginning and at the end of the period.

• Capital services reflect the amount of 'service' each asset provides during a period. For each asset, the services provided in a period are directly proportional to the asset's productive capital value in the period. As an asset ages and its efficiency declines so does the productive capital value and the services the asset provides. In equilibrium, the value of capital services is equal to the sum of COFC during the period and a rate of return on the net capital stock of assets.

• the average length of asset lives;

• the extent to which assets are retired before, on or after the average asset life for that asset—the asset life distribution;

• the age-price function of assets (used to derive net capital stock estimates and estimates of consumption of fixed capital);

• the age-efficiency function of assets (used to derive productive capital stock estimates); and

• price indexes for the entire time span of gross fixed capital formation (GFCF).

11.39 In any given period, some of the output of an economy may be acquired by non-residents, and similarly, some of the goods and services acquired by residents may have been produced by non-residents. These transactions are classified as exports and imports of goods and services, respectively.

11.40 The exports and imports of goods and services shown in the national accounts are identical to those provided in the balance of payments statistics. The publication Balance of Payments and International Investment Position: Australia, Concepts, Sources and Methods (Cat. no. 5331.0) provides an extensive description of the concepts, sources and methods used to compile statistics for exports and imports.

11.41 The main data source for exports and imports of goods is the ABS's International Trade Statistics (ITS), which are derived from information reported to the Australian Customs Service. The annual estimates are obtained by summing the quarterly estimates.

11.42 The principal sources of information on exports and imports of transport services are the International Trade Statistics and the Survey of International Trade in Services (SITS), with adjustments derived from other sources. Travel services are derived using three data models, while the principal source for other services is again the SITS.

11.43 The chain volume estimates of imports of goods and services are derived almost exclusively by deflating current price values using detailed price indexes. All but two of the goods components are deflated using price indexes derived from those underlying the price indexes published in Import Price Index, Australia (Cat. no. 6414.0). The chain volume estimates of exports of goods and services are derived by quantity revaluation for most primary commodities and by deflation for manufactured goods and for services.


Compensation of employees

11.44 The value of entitlements earned by employees from their employers for services rendered includes wages and salaries received by employees in cash and in kind (e.g. provision of food, accommodation or motor vehicles), and employers' social contributions such as superannuation contributions and workers' compensation premiums.

11.45 Annual estimates for wages and salaries for Australia, and by State, are an aggregation of the quarterly estimates. Industry estimates for Australia are derived annually from the balanced S-U tables, except for the latest financial year, for which estimates are obtained by extrapolation using movements based on the quarterly data sources.

11.46 Quarterly estimates (from the September quarter 1983) are based on the Survey of Employment and Earnings (SEE) which collects employment and earnings data from a sample of both private employers and public sector units. The SEE is an employer-based survey. It provides data on the number of jobs held and on earnings derived from jobs held. However, due to certain deficiencies, the SEE tends to understate total employment and earnings.

11.47 The Labour Force Survey (LFS) on the other hand, is based on a sample of dwellings, and provides information on the number of people in jobs. The LFS provides a more complete estimate of the number of wage and salary earners than the SEE does. As a result, the employment and earnings estimates obtained from the SEE are used in conjunction with the LFS estimates (and various other sources) to obtain an estimate of total wages and salaries on a quarterly basis.


Gross operating surplus and gross mixed income

11.48 Both gross operating surplus (GOS) and gross mixed income (GMI) measure the surplus accruing from processes of production before deducting any explicit or implicit interest charges, land rent or other property incomes payable on the financial assets, land or other tangible non-produced assets required to carry on the production. Gross operating surplus and gross mixed income are defined as gross value added minus compensation of employees, minus taxes on production and imports payable, plus subsidies receivable. Gross operating surplus represents the gross income derived by corporations, both financial and non-financial, dwellings owned by persons and general government. In the case of general government, GOS represents only consumption of fixed capital. Gross mixed income represents the gross income derived by unincorporated enterprises.

11.49 Estimates of GOS and GMI are compiled by institutional sector, namely: private non-financial corporations; public non-financial corporations; unincorporated enterprises; dwellings owned by persons; general government; and financial corporations.

11.50 From 1994-95 the S-U tables provide annual benchmark estimates for GOS and GMI in total for all types of institutional units.

11.51 Benchmark estimates for private non-financial corporations are derived by subtracting the estimates of GOS plus GMI for all other types of institutional units from total GOS plus GMI. To provide quarterly estimates of the GOS of private non-financial corporations, the annual benchmarks are allocated to quarters using data from the publication Company Profits, Australia (Cat. no. 5651.0).

11.52 Estimates for public non-financial corporations are compiled from annual financial statements included with the annual reports of the corporations, and Auditors'-General Reports. A quarterly survey of large public non-financial corporations is conducted to obtain revenue and expenditure data.

11.53 Estimates of the gross mixed income of unincorporated enterprises are derived separately for the farm and non-farm sectors. Annual gross mixed income by industry for non-farm unincorporated enterprises is derived from Taxation Statistics supplemented by information from the ABS and other sources. Gross mixed income of farm unincorporated enterprises is derived as the difference between total farm GOS and the GOS of private farm corporations and quasi corporations. Total farm GOS is derived using a production approach; it is measured as gross value of agricultural production less the costs incurred. The gross value of agricultural production is estimated from data collected in the ABS annual Agricultural Commodity Survey together with additional data from various marketing organisations, wholesalers, brokers and auctioneers. Before costs are deducted, an allowance is also made for subsidies not included in the gross value of agricultural production (e.g. drought relief), and a production valuation adjustment (PVA) is deducted. The PVA is required for wheat and wool because the gross value of agricultural production is based on realised future sales prices, which may be different from average current period prices (the basis required for the national accounts). The PVA is calculated directly using quantity data and the difference between average current period prices and the prices underlying the calculation of the gross value of production. Costs are obtained from a variety of sources, including the ABS Agricultural Finance Survey (AFS), the Australian Bureau of Agricultural and Resource Economics (ABARE) publication Australian Commodities Forecasts and Issues and the Agriculture, Australia (Cat. no. 7113.0). Quarterly estimates of the GMI of non-farm and farm unincorporated enterprises are obtained by moving the annual benchmarks using various indicators or on trend.

11.54 GOS for ownership of dwellings is derived as gross rent less operating expenses (but before the deduction of consumption of fixed capital). An imputation of rent to owner-occupied dwellings enables the services provided by dwellings to their owner-occupiers to be treated consistently with the marketed services provided by rented dwellings to their tenants. The sources and methods used to estimate gross rents of tenanted dwellings and to impute gross rents to owner-occupied dwellings are described in Chapter 14. Operating expenses related to dwelling GOS include municipal rates, building insurance, repairs and maintenance, consumption of financial services and the commissions of real estate agents charged for the management of rental properties. General municipal rates, and repairs and maintenance, are benchmarked from the periodic Household Expenditure Survey. The benchmarks are extrapolated using a combined indicator based on the estimated number of dwellings (the same estimate as for total dwelling rent) and movements in appropriate component price indexes from the CPI. Estimates for building insurance are derived from annual data published by the Australian Prudential Regulation Authority (APRA). The item 'consumption of financial services' comprises the imputed service charge component of interest payable on loans used to finance the purchase of dwellings by persons. Real estate agents' management fees are derived using data from the ABS 1980 Housing Occupancy Survey and agents' fee schedules, and extrapolated using estimates of gross rents of tenanted dwellings as an indicator. Municipal rates are allocated to quarters according to information about receipts of local government rates. The remaining expenses are estimated by linear trend. GOS related to the ownership of dwellings by the public sector and non-financial corporations are deducted to give GOS dwellings owned by persons. The quarterly estimate of GOS for dwellings owned by private and public corporations is allocated to quarters on trend.

11.55 GOS of general government is equivalent to the value of consumption of fixed capital on general government assets because, by convention, the value of general government gross output is measured as the cost of producing that output, including consumption of fixed capital. GOS is calculated as gross output less the costs incurred in producing that output (but before deducting consumption of fixed capital), leaving consumption of fixed capital as the residual (i.e. an assumption is made in calculating the value of gross output that the net operating surplus is zero).

11.56 For financial corporations and quasi corporations the approach used to measure GOS is to include an imputed service charge in addition to any actual charges made by these corporations, plus gross non-land rent and service income, plus a capitalised software adjustment, minus expenses and imputed financial service charges.

11.57 Estimates of GOS for financial intermediaries are derived in aggregate. Various ABS and other data sources are used to prepare the estimates of GOS for financial intermediaries. The principal data sources are the monthly Reserve Bank of Australia Bulletin, ABS annual Economic Activity Survey returns for banks, annual reports of individual financial enterprises, State Auditors'-General Reports and monthly, quarterly and annual ABS surveys conducted to produce statistics on the operations of various types of financial intermediaries.

11.58 Separate estimates are compiled for the GOS of non-life insurance corporations (based on information about premiums and claims), and of life insurance corporations and pension funds (based on administration expenses and explicit charges). These estimates of GOS are mainly sourced from data contained in the reports of APRA, State Auditors'-General, State insurance offices and the ABS surveys of labour costs and superannuation funds.

11.59 Linear trend interpolation and extrapolation are used to obtain quarterly estimates for the GOS of financial corporations as at present there are no ABS surveys which provide direct quarterly estimates. It is expected that in future the ABS will be able to use quarterly data compiled by APRA from its new and redeveloped collections from financial corporations to prepare quarterly estimates of GOS for this sector.


Taxes less subsidies on production and imports

11.60 Taxes on production and imports include:

• taxes that are payable on goods and services when they are produced, delivered, sold, transferred or otherwise disposed of by their producers;

• taxes and duties on imports payable when goods enter the economic territory or when services are delivered to residents by non-residents; and

• other taxes on production such as taxes on ownership or use of land, buildings, or other assets used in production, or on the labour employed, or on labour costs.

11.63 Income flows may be divided into primary income and secondary income. Primary income comprises compensation of employees (see above), gross operating surplus and gross mixed income (see above), taxes less subsidies on production and imports (see above), and property income. Secondary income flows relate entirely to current transfers of income from one institutional sector to another (other than those included in primary income) and include current taxes on income, wealth, etc., social contributions and benefits, and miscellaneous current transfers.

11.64 Property income represents transfers of income resulting from the use of financial assets, and of tangible non-produced assets such as land and sub-soil assets. It includes interest, dividends, imputed property income, rent on natural assets and reinvested earnings on direct foreign investment. Annual estimates of property income are derived by constructing matrices of the various flows of property income between the various sectors and subsectors of the economy. Sufficient quarterly data are not available to enable a detailed matrix approach to be used for the compilation of quarterly estimates. Quarterly estimates of property income received and paid by general government are obtained from the ABS government finance system. Property income receivable from and payable to non-residents is obtained from balance of payments statistics. The principal data source used to compile quarterly estimates of household property income is the monthly Reserve Bank of Australia Bulletin.

11.65 Current taxes on income, wealth etc. comprise two components: income taxes; and other current taxes on income, wealth etc. These taxes are part of secondary income receivable by the general government sector and are a component of secondary income payable by other sectors. Income tax payable by corporations is derived using net tax assessed on companies from Taxation Statistics. Income tax payable by individuals, partnerships and trusts is obtained from the Commonwealth Department of Finance and Administration ledgers. Quarterly estimates are derived from Commonwealth Department of Finance and Administration ledgers. Other current taxes on income, wealth etc. consist mainly of payments by households to obtain licences to own or use vehicles, boats or aircraft, and for licences to hunt, shoot or fish. All other licences are treated as purchases of services rendered by general government to households. Revenue for licences collected from households is included in current taxes on income, wealth, etc., while licence revenue from businesses is included in taxes on production and imports. Quarterly estimates are derived from the Commonwealth Department of Finance and Administration and State government monthly and quarterly statements of receipts and expenditure.

11.66 Social contributions and social benefits are current transfers receivable by households to provide for needs that arise from certain events or circumstances such as sickness, unemployment, education, etc. There are two kinds of social benefits: social insurance benefits; and social assistance benefits. Social insurance benefits, in the Australian context, only relates to workers' compensation. Social assistance benefits include old age pensions, unemployment benefits, etc. Annual estimates of workers' compensation are compiled using data from the annual ABS Economic Activity Survey, the periodic Major Labour Costs Surveys and from APRA. Social assistance benefits are obtained from the ABS government finance system. Quarterly estimates of workers' compensation are compiled by allocating annual estimates for the private and public sectors separately using wages and salaries as the indicator. Quarterly estimates of social assistance benefits are compiled using information from administrative sources such as the Commonwealth Department of Finance and Administration Quarterly Ledgers, and State government monthly and quarterly statements of receipts and expenditure.

11.67 Net non-life insurance premiums are defined as non-life insurance premiums less the non-life insurance service charge. Annual estimates for net premiums and claims for non-life insurance (excluding health insurance funds) are compiled using data published in the APRA publication Selected Statistics on the General Insurance Industry. Annual estimates for net non-life insurance premiums and non-life insurance claims for health insurance funds are compiled using data published in the Private Health Insurance Administration Council publication Operations of the Registered Health Benefits Organisations. Quarterly estimates of net non-life insurance premiums and non-life insurance claims are compiled by applying a linear trend formula to the annual estimates.

11.68 Miscellaneous current transfers include the items: current transfers to non-profit institutions; current transfers from the Commonwealth Government to State and local government; current international cooperation'; and other current transfers. Annual estimates of current international cooperation are obtained from Commonwealth Department of Finance and Administration ledgers. Estimates of miscellaneous current transfers between general government and the other institutional sectors are obtained from ABS government finance statistics. Other current transfers to and from non-residents are obtained directly from balance of payments statistics. Quarterly estimates of miscellaneous current transfers between general government and the other institutional sectors are compiled using information from administrative sources such as the Commonwealth Department of Finance and Administration quarterly ledgers, and State government monthly and quarterly statements of receipts and expenditure. Current transfers to and from non-residents are obtained directly from balance of payments statistics.

11.69 Social transfers in kind are individual goods and services provided to individual households by general government units. The goods and services may be produced by the government units or purchased by them. Estimates of social transfers in kind are obtained from ABS government finance statistics.

11.70 For the purposes of deriving the imputed flows relating to general government unfunded superannuation schemes, a notional superannuation 'fund' is created which is treated as a financial asset of the household sector and a liability of the general government sector. A model is used to calculate these estimates (details of this model are provided in Appendix A to Chapter 22). The model is applied to annual data up to 1997-98. With the introduction of accrual accounting in the general government sectors for the Commonwealth and the States and Territories, direct estimates for these flows are now being made for most jurisdictions. Quarterly estimates for the imputed employer contributions and imputed property income flows are derived using appropriate indicators.


Capital transfers

11.71 A capital transfer is one in which:

• the ownership of an asset (other than cash or inventories) is transferred from one unit to another; or

• cash is transferred to enable the recipient to acquire another asset; or

• the funds realised by the disposal of an asset are transferred.

11.76 The current price estimates of gross value added by industry are only produced annually. For the years from 1994-95 these estimates have been derived in an input-output framework and are in balance with the expenditure estimates.

11.77 Quarterly chain volume measures of gross value added by industry are derived by interpolating and extrapolating annual benchmarks using quarterly indicator series. Both the annual benchmarks and the quarterly indicators are calculated as chain volume measures. The specific statistical procedures used to calculate chain volume measures are outlined in Chapter 10.

11.78 Quarterly chain volume indicators of gross value added are derived using three different methods. The output indicator method is the one most commonly used by the ABS. It involves extrapolating reference year estimates of current price gross value added using movements in a volume indicator of output. In a few cases the output indicator is just a single output statistic, but in most cases it is a composite of several output statistics. Another method is double deflation; it requires that, before chaining, volume measures of intermediate input are subtracted from volume measures of output, both valued in the prices of the previous year. This method is used for Agriculture. The third method, the input indicator method, involves extrapolation using a measure of labour input such as hours worked, and is used mainly to obtain estimates for general government dominated industries such as Government administration and defence, Education and Health and community services.


Financial accounts

11.79 The financial accounts record information about transactions in financial assets and liabilities.

11.80 In theory, data for compilation of the financial accounts and the financial components of the balance sheet could be obtained from both parties to every financial transaction and position, i.e. a creditor's view and a debtor's view. Advantage is taken of the fact that financial transactions of numerous transactors, such as households, are mostly channelled through a much smaller number of other units, such as banks and other financial institutions. Therefore, for example, the financial transactions and position of households can be determined by obtaining information from other institutions that engage in financial transactions with households.

11.81 Most of the sources of data used in the compilation of the financial components of the national accounts are derived from statistical surveys conducted by the ABS. Of particular importance are the Survey of Financial Information (SFI) and the Survey of International Investment (SII), both of which are conducted quarterly. Other data sources are used to supplement the ABS sources, particularly in estimating for certain types of financial corporations and in deriving valuation adjustments.

11.82 Compilation methods for stocks (levels) involve gathering balance sheet information from various sources and selecting the most reliable estimates. As noted above, a choice is often possible because different data sources provide alternative or counterpart measures of the same item. For example, most borrowing by State-owned non-financial corporations will be reported by the State central borrowing authorities or Treasuries as assets and by the non-financial corporations themselves as liabilities. The data will not generally agree because the ABS does not survey all State-owned non-financial corporations. In this case, the data from the central borrowing authorities and Treasuries are therefore used to estimate both the asset and liability aspects of these borrowings. Financial transactions on the other hand are derived by taking the difference between closing and opening levels of balance sheet items, and eliminating the component of change which is caused by valuation effects such as exchange rate movements and price fluctuations.


Balance sheets

11.83 A balance sheet is a statement, drawn up at a particular point in time, of the values of assets owned by, and the financial claims against, the owner of those assets.

11.84 Valuation of the assets in the balance sheet should be on the basis of current observable market prices, as this is the basis on which decisions by economic agents are made. In the absence of observable market prices, current prices are approximated for balance sheet purposes in two ways:

• market prices may be approximated by accumulating and revaluing acquisitions less disposals of the asset in question over its lifetime; or

• market prices may also be approximated by the present, or discounted, value of future economic benefits expected from any given asset.

11.87 The ABS produces annual indexes of labour, capital and multifactor productivity for the market sector, and annual labour productivity indexes (gross value added per hour worked) for each industry division within the market sector.

11.88 Measures of real output per unit of labour are conventionally referred to as measures of labour productivity. The measure of output used by the ABS in its estimates of productivity is gross value added in chain volume terms. This is defined as output less intermediate inputs. The measure of input used is hours worked.

11.89 Measures of real output per unit of capital are conventionally referred to as measures of capital productivity. The measure of output used by the ABS in its estimates of capital productivity is the flow of capital services. They are calculated by weighting chain volume measures of the productive capital stock of different asset types together by their rental prices. Rental prices can be regarded as the 'wages' of capital.

11.90 Labour and capital productivity measures only attribute to one factor of production - labour or capital - the changes in efficiency attributable to all factors of production. This limitation has given rise to the development of a more comprehensive measure, multifactor productivity (MFP). MFP takes account of several factor inputs at the same time, and is largely a measure of the effects of technical progress, improvements in the work force, improvements in management practices, economies of scale, and so on.


State accounts

11.91 Australian National Accounts: State Accounts (Cat. no. 5220.0) contains annual estimates of gross State product and its principal expenditure and income components. Australian National Accounts: Quarterly State Details (Cat. no. 5206.0.40.001) contains quarterly estimates of State final demand and its components, international trade for imports and exports of goods, and compensation of employees by State and Territory.

11.92 The annual current price estimates of gross State product (GSP) are produced by summing the income components of gross State product. State by industry estimates of compensation of employees (COE) are derived from essentially the same data sources as those used for the national estimates. Estimates of gross operating surplus (GOS) plus gross mixed income (GMI) by State and industry, are generally derived by allocating the national industry estimates of GOS plus GMI by State. Taxes and subsidies on production and imports relating to the State and local general government sector are allocated directly to the State in which they are collected or paid. Taxes and subsidies on production and imports relating to the Commonwealth Government are allocated to States at a detailed level using the most appropriate indicators available for each tax or subsidy.

11.93 Quarterly current price estimates of COE, which are prepared for all industries combined, are derived as the sum of State estimates of the components described for the national estimates in Chapter 19. The method used to compile COE by quarter is also described there. Household final consumption expenditure by State is calculated by dissecting the Australian estimate for each of the components described in Chapter 14. Gross fixed capital formation for the private sector is largely derived from the same sources which are used for the Australian estimates, although a higher degree of approximation is required. Allocation of capital expenditure for general government is based on certain assumptions as well as population and employment data.

11.94 It is not possible to derive estimates of GSP using the expenditure approach because of a lack of data for some components, most importantly interstate trade in goods and services. Likewise, not all the data required to support the production approach are currently available. The only approach for which data are available is the income approach, but this approach does not lend itself to volume estimation. It is not possible to satisfactorily deflate such incomes because they do not comprise readily identifiable price and quantity elements. While it is not possible to construct chain volume estimates of GSP by deriving chain volume estimates of the various expenditure components at a detailed level, it is possible to deflate the total current price income based estimate of GSP if a suitable aggregate deflator is constructed. This aggregate deflator is derived by using all the available expenditure components of GSP to derive current price and chain volume estimates and then calculating the quotient. See Chapter 28 for details.