Improvements to preliminary NOM estimation

The legislative changes in the Federal Financial Relations Act 2009 provided the opportunity for the ABS to publish ERP, for 31 December each year, at a later date. After consultation with major stakeholders in 2009, the ABS now provides quarterly ERP at the end of each scheduled month of release (March, June, September and December). A new schedule is provided in Table 4.3 later in this chapter.

This change has also made possible the use of one additional quarter of travellers movement data allowing the methodology used for preliminary NOM estimation to be improved. Using the additional one quarter of movement data (the quarter after the reference period) has enabled two key changes to the methodology:

• changing from a 'two year ago' to a 'one year ago' propensity model; and
• reducing the pool of travellers using the propensity model.

Changing from a 'two year ago' to a 'one year ago' propensity model

Under the 12/16 rule, it can take up to 16 months after the reference quarter to determine an individual traveller's ERP status of being counted in or out of Australia's population. Since full movement histories are not available within the required time frame, preliminary NOM estimates are modelled using the migration adjustments from final NOM for an earlier period. Previously, adjustments were made based on the corresponding quarter two years earlier. The final NOM from two years earlier was used as the method needed to allow a full 16 months of data to accumulate before the final NOM could enable production of exact migration adjustments for a corresponding quarter. With the previous release schedule for ERP (prior to 2010), only 12 months of movement data were available. This was insufficient to produce exact migration adjustments for the corresponding quarter one year earlier. To be able to produce an 'exact one year ago' model would require a full 16 months of data to accumulate to be able to calculate final NOM estimates and the migration adjustments necessary for use in the propensity model. Currently it would require an additional four months of movement data post reference period.

However, by using an additional three months (one quarter) of movement data post reference period, 15 months of movement records become available for the propensity model. Analysis showed that 15 months of movement data provide enough information to produce migration adjustments for the corresponding quarter one year earlier. The analysis revealed that using the full 16 months of movement records in an 'exact one year ago' propensity model only very marginally improved results (i.e. less than 1%) when compared to using 15 months of movement data in an 'approximate one year ago' model.

The 'approximate one year ago' propensity model uses a combination of 'one year ago' and 'two year ago' propensities. First, the 15 months of movement data available are used to resolve the ERP status of as many travellers as possible (almost all travellers) for the corresponding quarter one year earlier. Second, the model uses this group of travellers to calculate 'one year ago' propensities that are then used for the majority of travellers with similar characteristics in the current reference quarter. Each quarter there is a small number of travellers whose ERP status remains indeterminate after processing the 'one year ago' propensities. For this small group, a 'two year ago' propensity is calculated and then applied to travellers with similar characteristics in the current reference quarter.

For example, if processing September quarter 2009 (July, August and September 2009), using one additional quarter of movement data (October, November and December 2009) means the ERP status can be resolved for almost all travellers in the corresponding quarter one year earlier (September quarter 2008) using the 12/16 rule. Therefore, final NOM and migration adjustments necessary for the propensity model can be calculated for almost all of these travellers, including all travellers in the first two months in the quarter (e.g. July and August 2008). July 2008 has 16 months of movement records available at November 2009, August 2008 has 16 months of movement records available at December 2009, whereas September 2008 only has 15 months of movement records available at December 2009. However, the ERP status of many travellers in the last month (e.g. September 2008) can also be resolved with only 15 months of movement records available (e.g. as at December 2009). For example, any overseas traveller who has already recorded a duration of stay in Australia for more than 12 months is considered in Australia's population as it would no longer be possible for them to be counted out of the population. Conversely, any overseas traveller who has recorded a duration of stay away from Australia for more than four months is considered out of Australia' population as it would no longer be possible for them to be counted in the population. For those travellers whose ERP status is still unresolved, a 'two year ago' propensity (e.g. from September 2007) is calculated and then used.

With the need to provide timely preliminary NOM estimates, the ABS now uses the 'approximate one year ago' model as there is very little improvement made (i.e. less than 1%) by waiting one additional month to complete the full 16 months to produce exact migration adjustments for the corresponding quarter one year earlier.

Reducing the pool of travellers using the propensity model

Many travellers' ERP status can be determined in a much shorter time frame than the full 16 months. With the availability of this additional one quarter of movement data and applying the conditions of the 12 out of 16 month rule, many of the travellers' ERP statuses can be resolved. For example, if processing the September quarter (July, August and September) using one additional quarter of movement data (October, November and December), then for the months of July and August a minimum of four months extra movement data have become available. July has four extra months of movement data by the end of November; and August has four extra months of data available by the end of December. In essence, any overseas traveller who has reached a recorded duration of stay out of Australia of four months or more is then considered out of Australia's population as it would no longer be possible for them to be in Australia for more than 12 out of 16 months. This reduces by around half, the number of travellers for which the propensity model needs to be applied to when estimating preliminary NOM.


Results of improvements to preliminary NOM estimation

For the purposes of this chapter, the 'one year ago' model refers to the 'approximate one year ago' propensity model that has been applied to a reduced pool of travellers.

As would be expected, the use of a 'one year ago' model is likely to be more closely aligned with capturing current changes in traveller behaviour than the 'two year ago' model. Investigations undertaken by the ABS have shown that substantial improvements are made in the estimation of preliminary NOM by the use of a 'one year ago' model compared with a 'two year ago' model.

For 2006-07, the difference between the original preliminary NOM estimation based on the 'two years ago' model and final NOM was 55,500 persons. In contrast, the difference between the new preliminary NOM estimation based on the 'one year ago' model and final NOM was 24,900 persons, a 55% improvement on the 'two year ago' model.

A similar improvement was also recorded for 2007-08, with a difference between the original preliminary NOM estimation based on 'two years ago' model and final NOM of 63,600 persons. The difference between the new preliminary NOM estimation based on the 'one year ago' model and final NOM was 32,500 persons, a 49% improvement on the 'two year ago' model.

Although there is fluctuation from quarter to quarter, a substantial improvement was made for each quarter between 2006-08 as is seen in Table 4.1.

4.1 Comparison between Preliminary NOM models, 'two year ago' model & 'one year ago' (with reduced pool of travellers) model - Australia - 2006-08
	NOM Prelim 2(a)	NOM Prelim 1(b)	NOM Final(c)	Diff btw Prelim 2 & Final		Diff btw Prelim 1 & Final		Improvement made using Prelim 1(e)
Ref Qtr	no.	no.	no.	no.	%(d)	no.	%(d)	%
Qtr3 2006	45 619	50 821	56 940	11 321	20	6 119	11	46
Qtr4 2006	38 358	44 701	50 618	12 260	24	5 917	12	52
Qtr1 2007	56 963	68 869	76 071	19 108	25	7 202	9	62
Qtr2 2007	36 430	43 498	49 195	12 765	26	5 697	12	55
2006-07	177 370	207 889	232 824	55 454	24	24 935	11	55
Qtr3 2007	47 143	58 639	62 810	15 667	25	4 171	7	73
Qtr4 2007	43 748	47 722	55 991	12 243	22	8 269	15	32
Qtr1 2008	71 787	80 835	93 462	21 675	23	12 627	14	42
Qtr2 2008	51 037	57 610	65 069	14 032	22	7 459	11	47
2007-08	213 715	244 806	277 332	63 617	23	32 526	12	49
(a) NOM Prelim 2 is based on a propensity model using migration adjustments for the corresponding quarter two years earlier.
(b) NOM Prelim 1 is based on a propensity model using migration adjustments for the corresponding quarter one year earlier with a reduced pool of travellers.
(c) Final NOM estimates have been used in compiling Australia's official estimated resident population (ERP) for 2006-07 and 2007-08.
(d) As a percentage of final NOM for the corresponding reference period.
(e) Improvements made as a percentage when the preliminary estimate using the '1 year ago' model (with a reduced pool of travellers) is compared to the '2 year ago' model.

Comparing estimates produced by the two models at the state and territory level showed substantial improvements for the larger states when using the 'one year ago' model (see Figure 4.2). For the smaller states and territories, improvements were seen annually but some fluctuations were experienced on a quarterly basis. Much of this fluctuation can be the effect of very small numbers being calculated for the smaller states and territories. For example, Tasmania, the Northern Territory and the Australian Capital Territory together represented less than 2% of Australia's total preliminary NOM estimate in 2006-07.

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