TECHNICAL NOTE OFF-JUNE YEAR ADJUSTED ESTIMATES

INTRODUCTION

1 The data collected in the Economic Activity Survey (EAS) generally represent the 12 month period ended 30 June. However, where businesses are unable to provide data on this basis, an alternate, or off-June year accounting period is used. As a result, in some instances estimates may reflect trading conditions occurring outside of the published reference year. The 'Off-June Year adjusted estimates by ANZSIC subdivision' data cube provides a view of the EAS data adjusted to a June year end for all businesses.

2 The methodology uses data collected through the Quarterly Business Indicators Survey (QBIS) to model the impact of off-June year reporting on selected ANZSIC industry subdivisions. Using QBIS data, 'off-June year' factors are generated that, when applied to EAS data, result in a set of estimates adjusted for off-June year reporting. These estimates are presented by ANZSIC division and subdivision. The data items are wages and salaries, total income, total expenses and industry value added (IVA), presented for the reference years 2010-11 to 2012-13. This information was previously published as an experimental series in Information Paper: Experimental Estimates for Australian Industry Adjusted for Off-June Year Reporting (cat. no. 8169.0).


THE OFF-JUNE YEAR REPORTING PROBLEM

3 The 2012-13 EAS had a reference period ending 30 June 2013; that is, the aim of the EAS was to measure economic activity over the 12 months from 1 July 2012 to 30 June 2013. Analysis of data from EAS shows that the majority of businesses report for this reference period, but for some industries a substantial proportion report for some other reference period. Off-June year reporting is more prevalent in industries with a high degree of foreign ownership, such as Mining, Manufacturing and Wholesale trade, as many countries use different accounting periods to Australia. Considering the 2012-13 EAS, the types of 'off-June year' reporting periods typically observed were:

• reporting period ending 31 December 2012;
• reporting period ending 31 March 2013; and
• reporting period ending 30 September 2013.

4 Table 4.1 gives an estimate of the percentage of the population likely to report on a financial and off-June year basis, and their contribution to total IVA, based on the 2011-12 EAS. The prevalence of off-June year reporting does not vary much from year to year. However, although businesses reporting for an off-June year financial period may be in the minority, their contribution to overall estimates of IVA can be substantial. An example is the Mining industry, with 3% of businesses in the December quarter reporting for a non-standard financial year, contributing 58% of total IVA.

TABLE 4.1 PREVALENCE OF OFF-JUNE YEAR REPORTING IN EAS 2011-12, AND THE CONTRIBUTION OF THESE BUSINESSES TO IVA
		ESTIMATE OF PERCENTAGE OF POPULATION BY REPORTING PERIOD(a)		ESTIMATE OF PERCENTAGE CONTRIBUTION TO IVA BY REPORTING PERIOD(a)
		Financial year reporters	Off-June year reporters	Financial year reporters	Off-June year reporters
		%	%	%	%
2011-12
	B Mining	97	3	42	58
	C Manufacturing	99	1	66	34
	D Electricity, gas, water and waste services	99	1	80	20
	E Construction	100	-	93	7
	F Wholesale trade	99	1	67	33
	G Retail trade	100	-	95	5
	H Accommodation and food services	99	1	87	13
	I Transport, postal and warehousing	100	-	88	12
	J Information Media and Telecommunications	99	1	78	22
	L Rental, hiring and real estate services	100	-	93	7
	M Professional, scientific and technical services	100	-	86	14
	N Administrative and support services	100	-	87	13
	P Education and training (private)	94	6	39	61
	Q Health care and social assistance (private)	100	-	99	1
	R Arts and recreation services	99	1	91	9
	S Other services	100	-	90	10
	Total selected industries	100	-	78	22
- nil or rounded to zero (including null cells)
(a) Includes all businesses in scope of the off-June year adjusted estimates, except for non-employing entities below a certain turnover threshold. Other businesses with less than 20 employees are included in the financial year reporter category.

SCOPE OF THE OFF-JUNE YEAR ADJUSTMENT

5 The scope of the 'Off-June year adjusted estimates by ANZSIC subdivision' data cube is based on the EAS, with further constraints imposed to match the scope of the QBIS. For a detailed explanation of the scope and methodology of these surveys, see the Explanatory Notes in this release of Australian Industry (cat. no. 8155.0) and in Business Indicators (cat. no. 5676.0). In brief, the scope of the off-June year adjusted estimates consists of all businesses on the Australian Bureau of Statistics Business Register (ABSBR) operating in the Australian economy during the reference period, except for:

• in most industries, organisations classified to Standard Institutional Sector Classification of Australia (SISCA) Sector 3 General government. The one industry for which general government units are included is Water supply, sewerage and drainage services (ANZSIC Subdivision 28, within Division D Electricity, gas, water and waste services);
• businesses classified to ANZSIC Division A Agriculture, forestry and fishing;
• businesses classified to ANZSIC Division K Financial and insurance services;
• businesses classified to ANZSIC Subdivision 77 Public order, safety and regulatory services;
• businesses classified to ANZSIC Subdivision 96 Private households employing staff.

6 These divisions and subdivisions are not included in the QBIS and as such no adjustments could be applied to the businesses classified to these industries.

7 No adjustments are applied to data reported by Off June reporters with employment of 20 or less.

8 While Education and training and Health care and social assistance (ANZSIC Divisions P and Q, respectively) are conceptually in scope of these analyses, QBIS does not collect information on sales and service income or other expenses for these ANZSIC divisions. Thus no adjustment has been applied to these data items for these industries.
METHODOLOGY

9 The estimates published in the 'Off-June Year adjusted estimates by ANZSIC subdivision' data cube were derived by the following process:

• For each EAS ANZSIC subdivision in scope, subdivision off-June year factors were determined for each data item and each of the off-June year reporting types;
• QBIS units with incorrectly reported or unrepresentative data in the ANZSIC subdivision were removed from the subdivision factors;
• Significant EAS units that were also selected in the QBIS collection were assessed for appropriateness to receive an individualised (unit) off-June year factor (instead of receiving a subdivision factor);
• Off-June year reporting EAS businesses were then assigned either a unit factor (if deemed appropriate) or its respective ANZSIC subdivision off-June year type factor. New values were calculated for these businesses, representing an estimate of how the business would have reported for the standard financial year (that is, 1 July to 30 June). Final aggregated data was then produced on a standard financial year basis.

Creating subdivision off-June year factors

10 It was necessary to create twenty-seven separate factors for each in scope ANZSIC subdivision, as demonstrated in Table 4.2.

TABLE 4.2 THE 27 OFF-JUNE YEAR MODELLING FACTORS REQUIRED FOR EACH ANZSIC SUBDIVISION
	Sales and service income	Wages and salaries	Other expenses	Closing inventories of raw materials	Opening inventories of raw materials	Closing work-in-progress inventories	Opening work-in-progress inventories	Closing inventories of finished goods	Opening inventories of finished goods
ANZSIC Subdivision	Dec 12	Dec 12	Dec 12	Dec 12	Dec 12	Dec 12	Dec 12	Dec 12	Dec 12
ANZSIC Subdivision	Mar-13	Mar-13	Mar-13	Mar-13	Mar-13	Mar-13	Mar-13	Mar-13	Mar-13
ANZSIC Subdivision	Sep-13	Sep-13	Sep-13	Sep-13	Sep-13	Sep-13	Sep-13	Sep-13	Sep-13

11 The factors were formulated from a subset of businesses sampled in the QBIS which met the following criteria:

• For sales and service income, wages and salaries and other expenses factors: Reported a non-zero value for these data items for the seven relevant quarters which cover all possible types of reporting periods. For example, for 2012-13 the relevant quarters are March 2012 through September 2013. This condition eliminated businesses which either started up or closed down during the period;
• For inventory factors: Reported a non-zero value for sales and service income and inventories for eight relevant quarters (December 2011 through September 2013 to ensure an opening inventory value;
• Did not report a value for the above items in one quarter greater than 10 times that of an adjacent quarter. This condition eliminated businesses with extreme values; and
• Had an employment size of 20 or more. This removed small businesses, whose data are not expected to be impacted by off-June year reporting in the EAS.

12 Where there were five or less contributing QBIS businesses in an ANZSIC subdivision, it was considered that the number of observations was insufficient for producing the off-June year factors. In those cases the off-June year factors were produced at ANZSIC division level.

13 Sales and service income, other expenses and inventories factors were not generated for Education and training and Health care and social assistance (ANZSIC Divisions P and Q respectively), as the information is not collected by the QBIS (see Scope and Population above). For the same reason, inventory factors could only be generated for Mining, Manufacturing, Wholesale trade, Retail trade and Accommodation and food services (ANZSIC Divisions B, C, F, G and H respectively).

14 Subdivision level factors were not applied (by design) for off-June year reporters in Electricity, Gas, Water and Waste Services (ANZSIC Division D).
15 For each data item, quarterly weighted QBIS data reported by the subset of businesses established above were summed to give an aggregate value for each in scope ANZSIC subdivision. These aggregate quarterly values were then used to create factors that model the impact of off-June year reporting for each of the four data items, by each in scope subdivision. To calculate each factor, a ratio of the summed data from the four quarters of the standard financial year is divided by the summed annualised data from the four quarters of the relevant off-June year reporting period, as described by Equation 4.1.


where Q is quarterly QBIS data aggregated by industry subdivision for the subset of businesses identified above.
16 Since inventories are stock variables (that is, represent a quantity existing at a particular point in time) the formulae for deriving inventories factors differed slightly, as described by Equation 4.2.


Factors were produced for opening and closing inventories, by type of inventory. The types of inventories specified were raw materials, work-in-progress and finished goods inventories.

17 The factors generated in these equations give an indication of the variability in trading conditions between off-June year reporting periods and the standard Australian financial year. A factor of 1 indicates no variability, implying there is no effect of off-June year reporting on estimates published in Australian Industry (cat. no. 8155.0). Conversely, the further a factor lies from 1, the greater the impact of off-June year reporting on industry estimates.
18 An example of the calculation of factors for Subdivision 14, Wood product manufacturing is provided below. Quarterly sales and service income estimates derived from in-scope QBIS data (see Table 4.3) were used to produce off-June year factors (see Example 4.1) which were applied to EAS estimates of sales and service income.


Quality assurance of subdivision off-June year factors

19 To validate ANZSIC subdivision off-June year factors (derived from the QBIS data), the following processes were used:

• Subdivision factors that were more than two standard deviations from the across-economy mean of that particular data item and off-June year type were identified.
• The QBIS data reported by the top contributors were assessed for consistency between reporting quarters or valid explanation for any differences. Based on these investigations, a decision was made to include or exclude the 'top contributor' unit's data from contributing to the off-June year factor. Top contributors to the factors were identified. To do this, units were individually removed and the factor was re-derived. If the absolute difference from the original to the re-derived factors was more than 0.02 for sales, wages and expense factors and 0.05 for inventory factors, then the unit was considered a top contributor.
• By using this methodology, top contributor units were isolated for one of two reasons; either their data showed a significantly different trend to the rest of their industry (ANZSIC subdivision) or their data (consistent or inconsistent) heavily influenced the magnitude of the factor.
• A unit's data was generally excluded from the subdivision factor if there was evidence to suggest that the business had undergone activities/events that could not be considered representative of the rest of the industry subdivision. In instances where no evidence exists on which to base the decision to include or exclude a unit's data in the derivation of the factor, the default decision was to include the unit's data in the derivation of the off-June year factor.

Creating unit off-June year factors

20 Unit factors were derived similarly to subdivision factors. The difference between the unit and subdivision factor is that a business' unit factor is derived by using its reported QBIS data only (where the subdivision factor uses all in-scope QBIS data for that subdivision).


Quality assurance of unit off-June year factors

21 Assessment was made on the consistency between reported EAS data and reported QBIS data for the relevant four quarters to ensure that the data was correct. Where there was consistency between the two data sources, the unit received a unit factor. Where consistency did not exist between EAS and QBIS data the unit received the subdivision factor. In assessing a business' suitability for a unit off-June year factor, suitability of QBIS data was also reviewed for inclusion in subdivision factors, based on the criteria described above (see Quality assurance of subdivision off-June year factors above).


Applying factors to EAS data

22 The quality assured off-June year factors were then applied to the relevant off-June year reporting EAS units. If an EAS unit was deemed suitable for a unit factor, its reported EAS data was adjusted by its unit factor. Where an EAS unit was not deemed suitable or assessed to receive a unit factor, its corresponding ANZSIC subdivision's factor for its particular off-June year type was applied to reported EAS data.
23 The off-June year factors are applied to only selected data items from the EAS. The adjusted items are shown in Table 4.4, as well as the factors which were used to adjust them. Note that not all components of the published items have been adjusted, due to a lack of available QBIS data from which to create appropriate factors.

TABLE 4.4 QBIS FACTORS AND ADJUSTED EAS DATA ITEMS
Published data item	Adjusted components of published data items	QBIS factor used	Industries adjusted
Wages and salaries	Wages and salaries	Wages and salaries	All selected industries(a)
Total income	Sales and service income	Sales and service income	All selected industries(a) except Divisions P and Q
Total expenses	Wages and salaries Employer contributions into superannuation Workers' compensation premiums Fringe benefits tax Payroll tax	Wages and salaries	All selected industries(a)
	Purchases of materials Purchases of finished goods Other intermediate input expenses	Other expenses	All selected industries(a) except Divisions P and Q
	Wages and salaries Employer contributions into superannuation Workers' compensation premiums Fringe benefits tax Payroll tax	Wages and salaries(b)	All selected industries(a)
	Sales and service income	Sales and service income	All selected industries(a) except Divisions P and Q
Industry value added(b)	Purchases of materials Purchases of finished goods Other intermediate input expenses	Other expenses
	Opening inventories - finished goods	Opening inventories - finished goods
	Closing inventories - finished goods	Closing inventories - finished goods
	Opening inventories - work-in-progress	Opening inventories - work-in-progress	Divisions B, C, D, F, G, H
	Closing inventories - work-in-progress	Closing inventories - work-in-progress
	Opening inventories - raw materials	Opening inventories - raw materials
	Closing inventories - raw materials	Closing inventories - raw materials

(a) Excludes Division A Agriculture, forestry and fishing, Division K Financial and insurance services and Division O Public administration and safety. See 'Scope of the Off-June Year Adjustment' for more details.
(b) Labour costs are a component of IVA for non-market producers only. See Glossary for more information.
DATA QUALITY

24 When interpreting the estimates in this publication, it is important to take into account reasons that may affect the reliability of the estimates. The quality of the estimates can be limited by:

• the validity of the assumptions underpinning the modelling; and
• the accuracy of the data used in the production of estimates.

25 The methodology is also limited by restrictions in the scope of the industries adjusted. Off-June year adjustments have not been applied to Agriculture, forestry and fishing and Public administration and safety (ANZSIC Divisions A and O respectively) as the QBIS does not collect information from these industries and factors were not able to be produced. Data collected in EAS suggest that the effect of off-June year reporting is minor in these industries. Financial and insurance services (ANZSIC Division K) has also been excluded from these estimates.


ASSUMPTIONS UNDERPINNING THE MODEL

26 The modelling methodology used to create the estimates presented in this publication is based on the following assumptions:

• Businesses with employment size of 20 or less are relatively minor contributors to the off-June year reporting issue.
• Data items in the same off-June year adjustment group change consistently between quarters.
• Contribution of data items not in scope of off-June year adjustment to quarterly movements of the derived items is insignificant (data items either very small and very stable).
• Where subdivision factors are applied, businesses that report for a given off-June year financial period are assumed to face trading conditions similar to other businesses in the same subdivision.