60 years of national accounts statistics in Australia

Every day, millions of transactions take place in the Australian economy. Households receive incomes, and spend them on housing, food, transport, clothing, communication, and other goods and services. Governments collect taxes, and make payments to welfare recipients. Banks borrow and lend, and pay and receive interest. Businesses produce and sell goods and services. Businesses, governments and households employ labour, build assets, borrow and save. Australians trade goods and services with the rest of the world, and borrow and invest offshore.

The national accounts explain how the Australian economy operates, and how it evolves over time, by measuring, classifying and aggregating these transactions. The national accounts are much more than just Gross Domestic Product. They include a full set of flow accounts for each sector of the economy (income, capital and financial), input-output tables, supply and use tables, state-based estimates, balance sheets and reconciliation accounts, and productivity estimates.

Publication of the September quarter 2019 national accounts marks 60 years since the national accounts time series began in September quarter 1959. This article explains the journey since then, outlining the significant expansions and enhancements to Australia’s national accounts along the way.

The ABS has compiled official estimates of national income and expenditure since 1945, when estimates were published for the years 1938-39 to 1944-45. Until 1963 they were published annually as papers issued by the Treasurer as part of the Commonwealth Government Budget Papers. Quarterly national accounts estimates were published for the first time in December 1960, with a time series commencing in the September quarter 1958 through to September 1959.

A number of important changes in the structure and presentation of the national accounts and in the conceptual basis and definitions of key aggregates were introduced in 1963 in a new annual publication called Australian National Accounts: National Income and Expenditure, 1948-49 to 1961-62 (cat. no. 5204.0). Constant price estimates of the main expenditure aggregates were presented for the first time.

In Australian National Accounts: National Income and Expenditure, 1971-72 (cat. no. 5204.0), published in 1973, the structure of the accounts was revised to accord more closely to the international standard described in the United Nations publication A System of National Accounts (1968). This publication, also known as the 1968 SNA, is generally considered the start of the modern era of national accounting. The practice of following national accounts standards issued by the United Nations continues in Australia today.

The state accounts (cat. no. 5220.0) are a geographic disaggregation into states and territories of the national accounts. Experimental accounts were published in 1984, followed by the first official estimates in 1987. The state accounts introduced the concept of Gross State Product, a metric that allows economic performance to be compared across states. The current State Accounts time series stretches back to 1989-90.

The ABS has produced capital stock and multifactor productivity estimates since the 1980s. These were produced in separate publications that were eventually combined into the annual national accounts publications. Industry level multifactor productivity estimates were first published in 2007, which were extended to the KLEMS approach in recent years. This was followed by State level capital stock estimates, first published in 2017.

1993 saw a significant update to the previous 1968 SNA. The core reasons for the international statistical community to update the standards were:

• to harmonise the concepts underpinning a variety of related economic accounts (including balance of payments statistics, Government Finance Statistics, and Monetary and Financial Statistics);
• to introduce accruals-based standards for economic accounts; and
• to expand the scope of national accounts statistics to articulate a complete and fully-integrated presentation of stocks and flows within and across economies.

Australia implemented the 1993 SNA recommendations in 1998, as the culmination of a 5 year enhancement program for the national accounts. Information papers explaining the changes and their statistical impact were published at the time [1] [2].

The introduction of accruals-based accounting meant that transactions were no longer recorded when cash changed hands, but when the underlying economic value was exchanged or transferred between parties. This was accompanied by changes to the overall presentation of the accounts, and the terminology used to describe concepts.

A number of imputations were brought into the accounts. Key areas involved estimation of unfunded superannuation expenses, a change in concepts underpinning the estimation of output of the finance and insurance industry, and recording foreign direct investment for multinational corporations. A full set of financial accounts and balance sheet statistics for each sector of the economy were integrated with production and income flows.

Intellectual property such as mineral exploration, computer software and artistic originals became assets, and were capitalised in the accounts rather than expensed.

Supply-use tables were incorporated into the Australian national accounts with the publication of the annual national accounts for 1997-98, and were compiled on a 1993 SNA basis. These tables are the building blocks for the national accounts because they ensure GDP is balanced for all three approaches (production, expenditure and income). They also provide the annual benchmarks (levels) from which the quarterly estimates are compiled. They provide detailed information about the supply and use of products in the Australian economy, and the structure of, and interrelationships between, Australian industries. Supply and use tables are published annually with the first year being 1994-95.

As recommended in the 1993 SNA, chain volume measures (CVMs) were introduced into the Australian national accounts in 1998. CVMs are volume indexes that are reweighted annually by the ABS so the base year for each year's growth is the year immediately before it. Since volume growth for any given year is expressed in terms of the price relativities of the previous year, CVMs minimise the 'substitution bias' inherent in constant price measures and provide a better indication of volume growth.

For ease of interpretability, CVMs are expressed in dollar terms, and are set equal to the current price measures in the reference year by construction. Similar to a price index, the statistical value of CVMs is in accurately measuring growth, not levels.

In contrast to the 1993 SNA, the 2008 SNA was an incremental enhancement designed “to maintain the systems relevance in a fast evolving world economy" and "resolve ambiguities” in the 1993 SNA. The main areas of clarification were around the increasingly globalised nature of production, and the increasing importance of intangible assets. Information Papers were published at the time [3] [4] to explain the changes and their anticipated impact on the Australian accounts. In 2009, Australia was the first country in the world to implement the 2008 SNA.

Some of the key changes introduced in the 2008 SNA were:

• treating expenditure on research and development as an asset (rather than as intermediate consumption);
• treating expenditure on defence weapons platforms as assets (rather than as final government expenditure);
• including reinvested earnings of investment funds (to align with the SNA93 treatment of foreign direct investment);
• including defined benefit superannuation schemes; and
• incorporating employee stock options within the scope of compensation of employees.

ABS also took the opportunity to introduce some recommendations from the 1993 SNA that had not been previously implemented. These were:

• introducing expenditure on ownership transfer costs as an asset; and
• introducing orchard growth as a productive activity that gives rise to an asset.

The ABS simultaneously introduced an updated industry classification. Published in 2006, the Australian and New Zealand Standard Industrial Classification (ANZSIC06) replaced the previous 1993 classification to provide a more contemporary view of the economy. Key changes were:

• highlighting ‘emerging’ economic activities, particularly around digital production such as internet publishing and broadcasting;
• introducing a new industry division focusing on information media and telecommunications; and
• subdividing the previous ‘property and business services’ industry division to provide more detail around activities such as rental and hiring, professional and technical services, and administrative and support services.
   

In the wake of the Global Financial Crisis in 2008-09, policymakers and international institutions highlighted the absence of, or lack of timeliness in, key data items that may have assisted in formulating an international policy response. The Data Gaps Initiative, sponsored by the International Monetary Fund and the G-20, was an effort to encourage industrialised nations and those with internationally important financial systems to compile and publish macroeconomic aggregates for all sectors of the economy on a quarterly basis.

In response, the ABS developed a full set of quarterly income and capital accounts for each sector. It complemented these with a quarterly household balance sheet, and a quarterly table highlighting the dynamics between household income, consumption, saving and wealth. These accounts describe the financial health and inter-linkages of the various sectors of the economy, showing how income arises from production, how it flows across sectors, and how it is ultimately used for investment or saving. They were published for the first time in September quarter 2014 [5].

The value of national accounts statistics is enhanced by the fact that whenever a new statistical standard is introduced, the ABS reviews and backcasts data points to reflect the new standard. This makes the statistics comparable over time, even though the standards change.

An example of this was the introduction of ANZSIC06 in 2009, which required national accounts compilers to review earlier estimates collected on the ANZSIC93 basis and convert them to ANZSIC06. Other examples include the calculation of chain volume measures throughout the time series to replace the previous constant price measures, and the conversion of pre-1966 estimates to dollars from pounds.

The ABS’ national accounts research program aims to continually review data sources and compilation methods to reflect a constantly changing economy. Some examples include research into the size and nature of the informal economy [6], highlighting aspects of digitalisation of the economy [7], and estimating the value of low value imports of goods through online shopping [8].

The ABS is currently looking at enhancing measures of non-market activity in the national accounts, particularly in the health and education industries, as well as ways to extract greater statistical value from supermarket scanner data.

Satellite accounts are a useful way to shed light on a particular topic from a macroeconomic perspective. The ABS publishes an annual Tourism Satellite Account (cat. no. 5249.0), and periodically publishes satellite accounts for other topics of interest. Past satellite accounts have focused on the non-profit institutions sector, information and communication technology, and transport.

The Australian economy has just completed 28 years of continuous annual growth, and is 7 times bigger than it was when quarterly measures first commenced in September quarter 1959. The national accounts clearly reflects stories such as booms and recessions and changes in industry composition over the time series.

The national accounts continue to inform government officials, business leaders, media and the wider general public as to the health of the Australian economy.