Australian Industry methodology

The 2018-19 survey continued to use generalised regression estimation, first introduced in the 2006-07 survey. This estimation method enabled maximum use of observed linear relationships between data directly collected from businesses in the survey and auxiliary information.

When the auxiliary information is strongly correlated with data items collected in a survey, the generalised regression estimation methodology will improve the accuracy of the estimates. The auxiliary variables used in this survey were turnover and wages sourced from the BAS data of 2,171,780 businesses (including the direct collect sample).

For the purpose of compiling the estimates in this publication, data for businesses as recorded on the ABS Business Register (ABSBR) contributed via one of three categories (or 'streams') in accordance with significance and collection-related characteristics.

The following table illustrates the ways in which Australian businesses contributed to the estimates in this release.

The CE stream consisted of directly collected survey data for those units recorded on the ABSBR as being economically significant units and units significant to small state estimates.

The generalised regression estimation stream comprised directly collected data for those sampled units which were not in the CE stream and had turnover, in aggregate, above the bottom 2.5 percentile of BAS sales for that subdivision, or were identified as employing businesses (based on ATO information).

The BAS stream comprised data for those non-employing businesses whose turnover, in aggregate, was below the bottom 2.5 percentile of BAS sales for that ANZSIC subdivision.

Data for the BAS stream was produced using a technique that used BAS turnover to model income from sales of goods and services and BAS non-capitalised purchases to model purchases. The modelling parameters were based on the relationship between BAS data and reported data for small businesses in the direct collect sample over 3 years and were defined at the industry level. Wages and salaries were modelled as 0 since these businesses were non-employers. Employment was based on the business type of (legal) structure.

Estimates for each of the selected industries were produced by aggregating the contributing data streams.

For further information on the method used to compile state and territory estimates refer to the Technical Note on State and Territory Estimates in this issue.

EAS state and territory estimates are produced for employment, wages and salaries and sales and service income. For the purpose of compiling the estimates in this publication, data for businesses as recorded on the ABS Business Register (ABSBR) contribute via one of three categories (or 'streams') in accordance with significance and collection-related characteristics. The data are produced using a combination of estimation methods. The estimation method depends on the stream:

• Stream 1: Completely enumerated and medium size multistate businesses
• Stream 2: Sampled sector units
• Stream 3: Micro Non-Employing Units
   

This stream consists of units recorded on the ABSBR as being economically significant units, plus medium size businesses which according to information recorded on the ABSBR operate in more than one state or territory and have 20 or more employees.

Stream 1 units contribute to the state and territory estimates via state data reported in the EAS.

This stream comprises of units selected in EAS which are not in Stream 1 and have turnover, in aggregate, above the bottom 2.5 percentile of BAS turnover for that industry, or are identified as employing businesses (based on ATO information).

Stream 2 units contribute to the state and territory estimates via proration of their data across the states and territories.

State/territory stratification is not used for selecting the EAS sample. As a result, state and territory estimates can be inaccurate due to under or over representation of some states in the selected sample. To minimise this risk, ABS uses a synthetic estimation method. The data reported by Stream 2 units is prorated across the states and territories using state/territory proration factors produced based on ABSBR survey frame information. For sales and service income, BAS turnover is used; for wages and salaries and employment, BAS wages is used. The proration factors are calculated at the stratum level.

This stream comprises non-employing businesses whose BAS turnover, in aggregate, is below the bottom 2.5 percentile of BAS turnover for that ANZSIC subdivision. Stream 3 units contribute to state and territory estimates for the main state of operation.

Stream 3 units are not sent a survey form, but enumerated based on data sourced from the ATO. Data for Stream 3 are produced using BAS turnover to model sales and service income. The modelling parameters are based on the relationship between BAS data and reported data for small businesses in the direct collect sample over 3 years and have been defined at the industry level. Wages and salaries have been modelled as 0 since these businesses are non-employers. Employment is based on the business type of (legal) structure.

For Stream 3 units, it is assumed that the business only operates in one state or territory. This is a reasonable assumption, given these units have no staff and very low turnover. As such, all of their reported data for the above variables contributes to the estimates of their main state of operation.

The estimation method used to create the Manufacturing estimates made use of observed linear relationships between data collected from businesses in the EAS and auxiliary information available from BAS data. Where the auxiliary information was strongly correlated with data items collected in the EAS, this information was used to create predicted values for non-profiled businesses and small profiled businesses that were not selected in the survey. The auxiliary variables used to create predicted values were:

• BAS total sales (to model sales and service income)
• BAS wages and salaries (to model wages and salaries, industry value added (IVA) and employment)
   

For the purpose of compiling the estimates in this publication, data for businesses as recorded on the ABS Business Register (ABSBR) contributed via one of three categories (or 'streams') in accordance with significance and collection-related characteristics.

The following table illustrates the ways in which Manufacturing businesses contributed to the estimates to the finer level estimates for the Manufacturing industry.

The survey stream consisted of businesses with directly collected EAS data.

The modelled stream included all businesses not selected in the EAS (the survey stream) whose turnover, in aggregate, was above the bottom 2.5 percentile of BAS sales for that industry, or were identified as employing businesses (based on ATO information).

Modelled data were created through the use of robust, trimmed regression estimators, which used survey data regressed against BAS data. The BAS data were found to have a high correlation with corresponding data from the EAS. The regression factors were obtained by utilising units from the survey stream and comparing their reported survey data with their matching BAS data. These regression factors were created at the ANZSIC subdivision level.

Sales and service income was modelled using BAS total sales as the auxiliary variable; wages and salaries, employment and IVA were modelled using BAS wages and salaries. Modelling of employment also took into account the business type (i.e. type of legal organisation) using a factor created at the ANZSIC division level. Modelled data for units in the modelled stream were created by multiplying their BAS data by the calculated regression factors.

The BAS stream comprised data for those non-employing businesses whose turnover, in aggregate, was below the bottom 2.5 percentile of BAS sales for that ANZSIC subdivision.

Data for the BAS steam was produced using a technique that used BAS turnover to model income from sales of goods and services and BAS non-capitalised purchases to model purchases. The modelling parameters were based on the relationship between BAS data and reported data for small businesses in the direct collect sample over 3 years and were defined at the industry level. Wages and salaries were modelled as 0 since these businesses were non-employers. Employment was based on the business type of (legal) structure.

Initial national ANZSIC class and state/territory ANZSIC subdivision estimates for the Manufacturing industry were produced by aggregating the contributing data streams.

Additional rules were applied to produce state/territory ANZSIC subdivision estimates:

• for businesses (from any stream) operating in only a single state or territory, their initial estimates contributed to the relevant state or territory and ANZSIC subdivision estimates.
• for businesses (from the survey stream) operating in more than one state or territory, their initial estimates (i.e. directly collected EAS data) contributed to the states and territories in alignment with the EAS methodology.
• for businesses (from the modelled stream) operating in more than one state or territory, their initial estimates were prorated across the states and territories in which they operated, based on a factor calculated at the ANZSIC division level from surveyed multi-state units of similar size. These modelled multi-state businesses accounted for only a small proportion of the estimates.
   

The ANZSIC class Manufacturing estimates for 2018-19 were created subject to the constraint of being additive to national ANZSIC subdivision estimates produced from the EAS. This was also true for state/territory estimates: the state/territory estimates within an ANZSIC subdivision were constrained to sum to the EAS estimate. This meant that the aggregate across all state/territory estimates for a given subdivision aligned with the EAS national subdivision estimate.

However, the aggregate across all ANZSIC subdivision estimates for a given state/territory were not constrained to add to the state/territory by ANZSIC division level EAS estimates. Consequently, for each state and territory, there are minor differences between the Manufacturing division level estimates contained in this data cube and the Manufacturing division EAS estimates presented in the other data cubes in this release.

The quality of estimates depends on the validity of the following assumptions underpinning the modelling:

• the national ANZSIC subdivision estimates and state/territory division estimates produced from the EAS were of sufficient quality to warrant disaggregation, respectively, at ANZSIC class level and state/territory level
• it was valid to distribute the difference between EAS national subdivision estimates and the initial subdivision estimates, based on the size of the modelled stream
• the relationship between the EAS data items and the BAS data items was meaningful and consistent. Analysis supports this assumption, with the correlation being of consistent quality to produce reliable estimates
• the auxiliary (BAS) data was of high quality
• the industry coding was accurate on the ABS maintained Business Register.
   

Users should consider the suitability of these assumptions when interpreting the estimates.

The 2018-19 EAS had a reference period ending 30 June 2019; that is, the aim of the EAS was to measure economic activity over the 12 months from 1 July 2018 to 30 June 2019. Analysis of data from EAS showed that the majority of businesses reported for this reference period, but for some industries a substantial proportion reported for some other reference period. Off-June year reporting was 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 2018-19 EAS, the types of 'Off-June year' reporting periods typically observed were:

• reporting period ending 31 December 2018;
• reporting period ending 31 March 2019; and
• reporting period ending 30 September 2019.
   

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 2018-19 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. For example, 4% of businesses in the Mining industry reported for a non-standard financial year and contributed 56% of total IVA in 2018-19.

The scope of the 'Off-June year adjusted estimates by subdivision' data cube was 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 and in Business Indicators (cat. no. 5676.0). In brief, the scope of the Off-June year adjusted estimates consisted 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 were included was 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.
   

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.

No adjustments were applied to data reported by Off-June year reporters with employment of 20 or less.

While the private sector components of Education and training and Health care and social assistance (ANZSIC Divisions P and Q, respectively) were 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 was applied to these data items for these industries.

The estimates published in the 'Off-June year adjusted estimates by 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.
   

It was necessary to create twenty-seven separate factors for each in scope ANZSIC subdivision, as demonstrated in Table 4.2 using the 2013-14 financial year as an example.

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 covered all possible types of reporting periods. For example, for 2013-14 the relevant quarters are March 2013 through September 2014. 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 2012 through September 2014) 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 were not expected to be impacted by Off-June year reporting in the EAS.
   

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.

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, Electricity, gas, water and waste services (Subdivisions 26 Electricity supply and Subdivision 27 Gas supply only), Wholesale trade, Retail trade and Accommodation and food services (ANZSIC Divisions B, C, D, F, G and H respectively).

Subdivision level factors were not applied (by design) for Off-June year reporters in Electricity, gas, water and waste services (ANZSIC Division D).

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 using the 2013-14 financial year as an example.

where Q is quarterly QBIS data aggregated by industry subdivision for the subset of businesses identified above.

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 total opening and total closing inventories.

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. Conversely, the further a factor lies from 1, the greater the impact of Off-June year reporting on industry estimates.

An example of the calculation of factors for Subdivision 14, Wood product manufacturing is provided below for the 2011-12 EAS. 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.

Sales of goods and services subdivision 14
Wood product manufacturing

Sales of goods and services,
Subdivision 14 Wood product manufacturing

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.
   

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

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).

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.

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.

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.
   

The methodology was 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.

The modelling methodology used to create the estimates presented in this publication was 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.

Represents the amount of bad and doubtful debts written-off, net of bad and doubtful debts previously written-off but recovered.

A business is generally considered to be a person, partnership, or corporation engaged in business or commerce.

In this publication, the term represents the Australian Business Number (ABN) unit or type of activity unit (TAU), which are the two standard statistical units for the 2018-19 Economic Activity Survey (EAS). For details, see the Explanatory Notes.

Businesses are categorised as:

• large businesses, with 200 or more employees
• medium businesses, with 20 to 199 employees
• small businesses, with 5 to 19 employees
• micro businesses, with 0 to 4 employees (including non-employing businesses).
   

Total (gross) expenditure on acquiring fixed tangible and intangible assets, before deduction of trade-in allowances, and including expenses (except capitalised interest) incurred during the year in acquiring such assets. Fixed tangible assets include land, dwellings, other buildings and structures, plant, machinery and equipment (including motor vehicles). Intangible assets include capitalised exploration expenditure, patents, licences and goodwill.

Capital expenditure incurred acquiring dwellings, other buildings and structures, including roads, factories, warehouses, offices, bridges, mine development, and oil and gas platforms. Represents expenditure before deduction of trade-in allowances, and includes expenses (except capitalised interest) incurred during the year in acquiring such assets.

Capital expenditure incurred acquiring assets other than dwellings, other buildings and structures and plant, machinery and equipment. Includes land and intangible assets such as exploration and evaluation expenditure both capitalised and expensed, patents, licences and goodwill. Also included is computer software capitalised, including capitalised computer software licence fees, installation costs, the purchase or development of large databases, software developed in-house (but excluded is software maintenance expenditure), and capitalised payments to contractors and consultants for software development. Note that if the cost of software and hardware cannot be separated, the total cost is included in acquisition of plant, machinery and equipment.

Capital expenditure incurred acquiring plant, machinery and other equipment, including motor vehicles. Includes expenses (except capitalised interest) incurred during the year in acquiring such assets.

Capitalised work done by the employees or proprietors of a business in manufacturing, constructing, installing or repairing assets, in mineral and petroleum exploration activities, and the in-house development of computer software, for use by the business or for rental or lease. This work is valued as the capitalised costs of the materials and the wages and salaries and 'on-costs' involved, as well as any amounts paid to contractors and subcontractors for their involvement in the project. Prior to the 2014-15 EAS, this item excluded any 'on-costs' paid to the employee in addition to their wages and salaries and the amounts paid to contractors and subcontractors. For more information see the entries for capitalised purchases and capitalised wages and salaries below.

All capitalised costs incurred in developing an asset developed in-house by the employees of the business/organisation for use by the business or for rental or lease, excluding any amounts included in capitalised wages and salaries paid to own employees. This includes the costs of goods and materials used to develop and build the asset and services such as invoiced amounts paid to contractors and subcontractors for their involvement in the project. Prior to the 2014-15 EAS, this item excluded amounts paid to contractors and subcontractors for their involvement in the project.

Capitalised payment of wages and salaries and 'on-costs' paid to employees for work done by own employees in manufacturing, constructing, installing or repairing assets, mineral and petroleum exploration activities or in developing computer software in-house for use by the business or for rental or lease, including wages paid to own employees to project manage the development of the asset. 'On-costs' include employee entitlements such as superannuation, fringe benefits tax and workers' compensation. Prior to the 2014-15 EAS, this item excluded any 'on-costs' paid to the employee in addition to their wages and salaries.

The value of total closing inventories less total opening inventories.

The value of all inventories of finished goods (including mineral ores and inventories for resale), work-in-progress (less progress payments billed), raw materials, fuels and containers at the end of the reporting period.

Contract payments for Mining services. Includes amounts paid/payable to Mining contractors and associated freight charges for materials brought in by the contractor.

Depreciation/amortisation allowed on tangible and intangible assets. Includes, for lessees only, depreciation/amortisation in respect of finance leases.

Proceeds from the sale of tangible assets (plant, machinery, equipment, land, dwellings, other buildings and structures), and intangible assets (such as patents, licences and goodwill).

Profit prior to the deduction of net interest (interest income minus interest expenses), income tax, depreciation and amortisation. Items classifiable to other income are also excluded.

Includes all employer contributions to superannuation funds (including the employer productivity contribution) and provisions for employer contributions to superannuation funds. Also includes expenses relating to employer funded defined benefit schemes. Employee contributions and salary sacrifice contributions are excluded.

Number of persons working for businesses during the last pay period ending in June of the given year. Includes working proprietors and partners, employees absent on paid or prepaid leave, employees on workers' compensation who continue to be paid through the payroll, and contract workers paid through the payroll. Excludes non-salaried directors and volunteers.

Includes handling charges and payments to owner/drivers for delivery of minerals. Excludes the cost of delivery by own vehicles and employees and overseas freight and cartage on goods exported.

Fringe benefits tax is payable by employers when certain benefits in excess of normal wages or salaries (e.g. free or discounted goods or services) are received by their employees (or associates of employees) in connection with their employment.

Comprises funding from government for amounts reimbursed under fuel tax credits and for other operational costs. For details, see the entries for these items below.

Estimates for this item were improved in 2018-19 for the Health care and social assistance division. For more information see the Changes in this release section of this issue.

The Energy Grants (Credits) Scheme was replaced by fuel tax credits from 1 July 2006. Fuel tax credits provide businesses with a credit for the fuel tax (excise or customs duty) included in the price of fuel used for business activities in machinery, plant, equipment and heavy vehicles.

Funding from federal, state and/or local government for operational costs (e.g. wages and salaries, rent, food). Includes bounties, subsidies, export grants, apprenticeship and traineeship schemes, and community service obligation payments and amounts reimbursed under fuel tax credits (when not published separately). Excludes funding from government for specific capital items.

Includes capital grants, and low interest or interest free loans made by government to businesses to encourage expenditure on specific equipment (e.g. environmental protection equipment).

Gross fixed capital formation is measured by the total value of a producer's acquisitions, less disposals, of fixed assets during the reference period, plus certain additions to the value of non-produced assets realised by the productive activity of businesses.

Fixed assets are tangible or intangible assets such as computer software and produced as outputs from processes of production that are themselves used repeatedly or continuously in other processes of production for more than one year.

The derivation of GFCF is as follows:

Acquisition of
         Road vehicles
         Other transport equipment
         Industrial machinery and equipment
         Computer software capitalised
         Computers and computer peripherals
         Electronic equipment and electrical machinery
         Communications equipment
         Other plant and equipment
         Dwellings, other buildings and structures
         Computer software expensed
         Mining exploration and evaluation expensed as incurred
less disposal of
         Plant, machinery and equipment (including motor vehicles)
         Dwellings, other buildings and structures
equals 
         GFCF

See the entry for sales and service income.

The structure of ANZSIC comprises four levels, ranging from industry division (broadest level) to industry class (finest level). Activities are narrowly defined within the industry class level, which is identified by a four-digit code, e.g. Industry Class 1510 Pulp, paper and paperboard manufacturing. Usually, an activity is primarily defined to one class. However, some activities may be primary to more than one class.

The structure of ANZSIC comprises four levels, ranging from industry division (broadest level) to industry class (finest level). The main purpose of the industry division level is to provide a limited number of categories which give a broad overall picture of the economy. There are 19 divisions within ANZSIC, each identified by an alphabetical letter, that is, 'A' for Agriculture, forestry and fishing, 'B' for Mining, 'C' for Manufacturing, etc.

This is the broadest level category within each industry division of ANZSIC and is identified by a two-digit code, e.g. Industry Subdivision 14 for Wood product manufacturing. Industry subdivisions are built up from industry groups which, in turn, are built up from industry classes.

IVA is an estimate of the difference between the market value of the output of an industry and the purchases of materials and expenses incurred in the production of that output.

The derivation of IVA for individual businesses depends on whether they are classified as market or non-market producers. Non-market producers are those institutions which provide goods or services either free or at prices that are not economically significant. In other words, their prices are not significantly influenced by the amounts that producers are willing to supply, nor the amounts that users are willing to pay to purchase the goods or services being provided. Conversely, market producers provide goods and services at prices that are economically significant.

For market producers, the derivation of IVA is as follows:

        Sales and service income
plus
        Funding from federal, state and/or local government for operational costs
        Capital work done for own use
        Change in inventories
less
        Purchases of goods and materials
        Other intermediate input expenses
equals
        IVA

However, it should be noted that IVA is a measure of economic activity and is not equivalent to operating profit before tax (OPBT). Wage and salary expenses, and most other labour costs, are not taken into account in the calculation for market producers, neither are interest expenses, depreciation or a number of lesser expenses. On the income side, OPBT includes total income, whereas IVA only includes sales and service income and government funding for operational costs.

As a principle, the output of non-market production is valued at cost, including intermediate input expenses. As shown in the above derivation, purchases and other intermediate input expenses are deducted from output in order to arrive at IVA.

Accordingly, the derivation of IVA for non-market producers can be described as follows:

        Selected labour costs
plus
        Depreciation and amortisation
equals
        IVA

Estimates of industry value added are obtained by summing the contributions of businesses classified to that industry, both market and (if any) non-market producers. Market producers are predominate in most industries.

Industry value added is related to, but different from, the national accounting variable gross value added (GVA). For national accounts purposes, GVA is calculated by adjusting IVA to include General government units and also to account for some other effects, such as inventory holding adjustments and adjustments for financial intermediary services, insurance services, and prices, taxes and subsidies.

IVA of businesses which operated in a given industry during the given year, divided by the number of persons employed by businesses in that industry during the last pay period ending in June of that year. Persons employed include working proprietors and partners.

Premiums for fire, general, accident, public liability, optional third-party and comprehensive motor vehicle insurance, professional indemnity insurance and common law liability. Excludes workers' compensation insurance premiums/costs (included in selected labour costs), compulsory third party motor vehicle insurance premiums (included in motor vehicle running expenses), and reinsurance premiums paid.

The number of times that businesses can meet their interest expenses from their earnings before net interest, tax, depreciation and amortisation (EBITDA), i.e. earnings before interest, tax, depreciation and amortisation divided by interest expenses.

Includes interest paid on loans from banks, finance companies, partners, and related or unrelated businesses, and in respect of finance leases. Also includes interest equivalents such as hedging costs and expenses associated with discounted bills. Excludes bank charges other than interest, and capital repayments.

Includes interest received from deposits in banks and non-bank financial institutions, loans, advances, finance leases and earnings on discounted bills. Excludes capital payments received.

The proportion of industry value added (IVA) used to acquire capital, i.e. (capital expenditure divided by IVA) multiplied by 100.

Comprises wages and salaries (including salary sacrificed earnings paid on behalf of employees and employee share based payments and stock options), employer contributions into superannuation, workers' compensation premiums/costs, fringe benefits tax and payroll tax. Also includes capitalised wages and salaries.

See the entry for business size.

See the entry for business size.

See the entry for business size.

Includes expenditure on registration fees, compulsory third-party insurance premiums, fuel, and repair and maintenance expenses for on-road motor vehicles. Excludes expenses for off-road motor vehicles (e.g. mobile plant, quarry dump trucks) and lease payments, optional third party and comprehensive motor vehicle insurance premiums, and depreciation.

Includes payments under mineral lease arrangements, payments under timber and quarrying lease arrangements, and resource rent taxes and royalties. Excludes payments for royalties from intellectual property (e.g. patents and copyrights) and computer software licence fees. Gold tax payments are also excluded.

The value of total capital expenditure less proceeds received from the disposal of assets. See the entries for these items.

The financial data collected in the EAS generally represent the 12 month period ended 30 June. Where businesses are unable to provide data on this basis, an alternate, or Off-June year accounting period is used. This issue particularly affects the Mining industry. As a result, in some instances estimates may reflect trading conditions occurring outside of the published reference year.

For current June estimates, see the 'Off-June Year adjusted estimates by subdivision' data cube in this issue.

For further information about Off-June year adjusted estimates, including the impact on industry estimates, see the Technical note on Off-June Year adjusted estimates in this issue.

The value of all inventories of finished goods (including mineral ores and inventories for resale), work-in-progress (less progress payments billed), raw materials, fuels and containers at the beginning of the reporting period.

Profit before extraordinary items are brought to account and prior to the deduction of income tax and appropriations to owners (e.g. dividends paid), i.e. total income less total expenses plus change in inventories.

Payments to other businesses and self-employed persons for work done or sales made on a contract or commission basis. Payments to persons paid by commission without a retainer are also included. Includes payments to owner drivers for removal of material, but not for delivery of the final mineral product. Excludes contract mining expenses, published separately.

Expenditure items not separately itemised in the industry performance table. Examples include bad and doubtful debts, natural resource royalty expenses, land tax and land rates, computer software expenses, freight, other royalties expenses, exploration and evaluation expenditure expensed as incurred, payments to employment agencies for staff and other operating expenses.

Income from sources not separately itemised, including:

• dividend income

• donations

• net profit or loss on share trading, asset sales, variations in exchange rates or resulting from the revaluation of assets in accordance with the Australian International Financial Reporting Standards (AIFRS).
   

Also includes funding from government for specific capital items in the Industry performance tables only (in division, subdivision and Mining data cubes).

Expenditure items not separately itemised in the industry value added table. Examples include payments to other businesses for staff, freight expenses, royalties expenses and other contract, subcontract and commission expenses.

A tax levied by state and territory governments on the amount of wages and salaries paid by a business. Excludes pay-as-you-go withholding tax.

The percentage of sales and service income available as operating profit before tax (OPBT), i.e. (OPBT divided by sales and service income) multiplied by 100.

Estimates for this item were improved in 2018-19 for the Health care and social assistance division. For more information see the Changes in this release section of this issue.

Comprises purchases of materials, components, containers and packaging materials for manufacture or construction, and purchases of finished goods for resale. Excludes delivery charges separately invoiced or itemised by suppliers and capitalised purchases.

Purchases of goods and materials, rent, leasing and hiring expenses, freight and cartage expenses, motor vehicle running expenses, repair and maintenance expenses, contract mining and other contract, subcontract and commission expenses.

Purchases of materials, components, explosives, containers, packaging materials, fuels, electricity and water, and purchases of minerals and other goods for resale. Also includes capitalised purchases. Excludes purchases of parts and fuels for on-road motor vehicles, but includes fuels for off-road vehicles, such as mobile plant and quarry dump trucks.

Payments for the rent, leasing and hiring of land, dwellings, other buildings and structures, motor vehicles, plant, machinery and other equipment (including telecommunication equipment). Includes operating lease payments; excludes finance lease payments.

See the entry for sales and service income.

Includes computer and communication software and hardware maintenance, and repair and maintenance of off-road motor vehicles. Excludes repair and maintenance costs of on-road motor vehicles and the wages and salaries of own employees undertaking repair and maintenance.

Estimates for this item were improved in 2018-19 for the Health care and social assistance division. For more information see the Changes in this release section of this issue.

Sales of goods

• Includes goods whether produced or not by the business (including goods produced for the business on a commission basis).

• Includes export sales, sales or transfers to related businesses or to overseas branches of the business, progress payments relating to long term contracts if they are billed in the period, delivery charges not separately invoiced or itemised to customers, sales of goods produced by the business from crude materials purchased, and income from 'specific' rates (e.g. water, sewerage, irrigation and drainage rates).

• Excludes excise and duties received on behalf of the government (e.g. the petroleum production excise duty), sales of assets, natural resource royalties income, interest income, and delivery charges separately invoiced or itemised to customers.

• Exports are valued free on board, i.e. export freight charges are excluded.

• This item is included in sales and service income, and is not separately published except for Mining.
   

Income from services (including royalties)

• Includes income from consulting services, income received from transporting goods not owned or sold by this business/organisation, repair, maintenance and service income and fees, contract, subcontract and commission income, management fees/charges from related and unrelated businesses, installation charges, delivery charges separately invoiced or itemised to customers and royalties from intellectual property (e.g. patents and copyrights) and natural resource royalties income.

• Also includes income from the provision of transport services and fee for service income.

• Includes government funding to reduce the expenses of the final consumer (i.e. households) where paid directly from government to the business providing the service. This type of funding is classified as sales and service income. Examples include the Child Care Subsidy, Medicare Benefits payments, a number of aged care subsidies and supplements and National Disability Insurance Scheme (NDIS) payments.

• Excludes interest income, and delivery charges not separately invoiced to customers.

• This item is included in sales and service income, and is not separately published except for Mining.
   

Rent, leasing and hiring income

• Derived from the ownership of land, dwellings, buildings and other structures, motor vehicles, plant, machinery and other equipment.

• Excludes royalties from mineral leases, income from finance leases and payments received under hire purchase arrangements.

• This item is included in sales and service income, and is not separately published except for Mining.
   

These are valued net of discounts given and exclusive of goods and services tax (GST). Extraordinary items are also excluded.

Sales and service income of businesses which operated in a given industry during the given year ended 30 June, divided by the number of persons employed by businesses in that industry during the last pay period ending in June of that year. Persons employed include working proprietors and partners.

Estimates for this item were improved in 2018-19 for the Health care and social assistance division. For more information see the Changes in this release section of this issue.

See the entry for sales and service income.

Comprises wages and salaries (including provisions for employee entitlements, salary sacrificed earnings, share based payments and stock options); employer contributions into superannuation; and workers' compensation premiums/costs.

See the entry for business size.

See the entry for employer contributions into superannuation.

The sum of all expense components.

Comprises sales and service income, interest income, funding from government for operational costs and other income (for details, see the entries for these items).

Comprises all classes in ANZSIC Division B Mining (i.e. Subdivisions 06-10).

This comprises data for all ANZSIC divisions, excluding ANZSIC Division K Financial and insurance services. For a detailed discussion of the scope and coverage of the estimates, see the Explanatory Notes. Units classified to the General government institutional sector are excluded from the scope of estimates for most industries that comprise Total selected industries. This limits coverage to private sector entities which particularly affects Public administration and safety, Education and training, and Health care and social assistance divisions.

The gross wages and salaries (including capitalised wages and salaries) of all employees of the business. The item includes severance, termination and redundancy payments, salaries and fees of directors and executives, retainers and commissions of persons who received a retainer, bonuses, and annual and other types of leave. Provision expenses for employee entitlements (e.g. provisions for annual leave and leave bonus, long service leave, sick leave, and severance, termination and redundancy payments) are also included, as are salary sacrificed earnings and remuneration of employees in the form of share based payments and stock options. (Note that in issues of this publication prior to 2006-07, salary sacrificed earnings and remuneration of employees in the form of share based payments and stock options were reported under related expense items. For example, salary sacrificed for superannuation was included in employer contributions into superannuation).

Payments related to self-employed persons such as consultants, contractors and persons paid solely by commission without a retainer are excluded. The drawings of working proprietors and partners are also excluded.

The wages and salaries paid by businesses which operated in a given industry during the given year ended 30 June, divided by the number of employees in that industry during the last pay period ending in June of that year. Working proprietors and partners are not included in employee estimates. The drawings of working proprietors and partners are not included in estimates of wages and salaries.

The wages and salaries paid by businesses which operated during the year ended 30 June as a proportion of the sales and service income of businesses which operated during the same year.

Workers' compensation is a compulsory insurance cover to be taken out by all employers, except for self-insured workers, according to legislative schemes to cover employees suffering injury or disease in the course of or arising out of employment.

The statistics presented in this release were derived using a combination of data collected directly by the Australian Bureau of Statistics (ABS), the Economic Activity Survey (EAS), under the authority of the Census and Statistics Act 1905 and Business Activity Statement (BAS) data collected by the Australian Taxation Office (ATO). The Income Tax Assessment Act 1936 provides for the ATO to pass information to the Australian Statistician for the purposes of the Census and Statistics Act 1905.

Please refer to ABS Institutional Environment for more information about the institutional environment of the ABS, including its legislative obligations, financing and governance arrangements and mechanisms for scrutiny of ABS operations. For more information about the institutional environment of the ATO, please refer to Part 4 Management and accountability in the Commissioner of Taxation Annual Report 2018–19.

The main purpose of the EAS is to measure the size, structure and performance of Australian industry for use in the compilation of national accounts. The estimates permit analysis not only for a single reference period (2018–19) but also over time (annually from 2006–07).

The information is also used by government departments and economic analysts to assist in policy formulation and evaluation. Financial estimates include income, expenses, industry value added, and capital expenditure.

A range of performance measures, usually referred to as ratios, can be produced from the data available from businesses' financial statements. The performance measures presented in this publication comprise:

• profitability ratios, which measure rates of profit on sales
• debt ratios, which indicate the ability of businesses to meet the cost of debt financing
• investment ratios, which indicate the capacity of business to invest in capital assets
• labour measures, which relate to output, labour costs and employment.
   

The businesses that contribute to the statistics in this publication are classified by:

• institutional sector, in accordance with the Standard Institutional Sector Classification of Australia (SISCA), which is detailed in Standard Economic Sector Classifications of Australia (SESCA) (cat. no. 1218.0)
• industry, in accordance with the Australian and New Zealand Standard Industrial Classification (ANZSIC), 2006 edition (cat. no. 1292.0)
• state and territory
• business size.
   

The scope of the EAS included all businesses operating in the Australian economy during 2018-19, except for:

• In most industries, entities classified to the SISCA Sector 3 General government institutional sector. This exclusion particularly affects data presented for Public administration and safety, Education and training and Health care and social assistance (ANZSIC Divisions O, P and Q, respectively), in that the estimates relate only to private sector businesses. However, SISCA Sector 3 General government businesses classified to Water supply, sewerage and drainage services (ANZSIC Subdivision 28, within Division D) are included, so that the estimates include data (for example) for relevant local government organisations.
• Entities classified to ANZSIC Division K Financial and insurance services, with the exception of Subdivision 64 Auxiliary finance and insurance services, which is now included as an experimental series, see the data cube 'Experimental estimates for Auxiliary finance and insurance services' in Australian Industry (cat. no. 8155.0). Note that estimates included in this publication for Total selected industries exclude Division K Financial and insurance services. 
   

Government owned or controlled Non-Financial Corporations are included.

The EAS was designed primarily to deliver national estimates for all in-scope industry divisions. State data were compiled for a restricted set of data items using a combination of data collected directly by the ABS and BAS data collected by the ATO.

Where businesses were unable to supply data for the 12 months ended 30 June 2019, an accounting period for which data can be provided was used for data other than those relating to employment. All businesses were asked to report employment for the last pay period ending in June 2019.

Estimates of financial data in some industries, such as Mining and Manufacturing, are heavily impacted by fluctuating commodity prices. In these industries the reporting by businesses for an accounting period that is not for the period ended 30 June, can result in different estimates compared with what they would have been, had the businesses reported for an accounting period ended 30 June. Estimates of wages and salaries, total income, total expenses and industry value added which have been adjusted for the effects of off-June year reporting are presented in the 'Off-June Year adjusted estimates by industry subdivision' data cube.

The EAS is conducted annually with estimates generally available within twelve months of the reference period to which they relate. For the 2018–19 reference period, questionnaires were despatched by ABS in August 2019 and BAS data were received from the ATO in September 2019. The estimates are scheduled for release in May 2020, almost eleven months after the end of the reference period.

The ABS aims to produce high quality data from its industry collections while minimising the reporting burden on businesses. To achieve this, extensive effort is put into survey and questionnaire design, collection procedures and processing. The 2018-19 survey used generalised regression estimation. Generalised regression estimation is a form of ratio estimation which makes use of auxiliary data items which are strongly correlated with key data items directly collected by the ABS from businesses. The auxiliary variables used in this survey were turnover and wages from data sourced from the ATO. Use of this methodology allowed high quality statistics to be produced from a small, direct collect sample of 19,109 businesses.

Two types of error can occur in estimates that are based on a sample survey: sampling error and non-sampling error.

Sampling error occurs when a sample, rather than the entire population, is surveyed. It reflects the difference between estimates based on a sample and those that would have been obtained had a census been conducted. One measure of this difference is the standard error. There are about two chances in three that a sample estimate will differ by less than one standard error from the figure that would have been obtained if all businesses had been included in the survey, and about nineteen chances in twenty that the difference will be less than two standard errors.

Another measure of sampling error is the relative standard error (RSE), which is obtained by expressing the standard error as a percentage of the estimate to which it refers. The relative standard error is a useful measure in that it provides an immediate indication of the sampling error in percentage terms, and this avoids the need to refer also to the size of the estimate. Selected data item RSEs at the industry division level for Australia are shown in the table below. Detailed relative standard errors are available on request.

To illustrate, the estimate of total income for Mining in 2018-19 was $317,628m. The RSE of this estimate is shown as 0.3%, giving a standard error of approximately $953m. Therefore, there are two chances in three that, if all units had been included in the survey, a figure in the range of $316,675m to $318,581m would have been obtained, and nineteen chances in twenty (i.e. a confidence interval of 95%) that the figure would have been within the range of $315,722m to $319,534m.

The size of the RSE may be a misleading indicator of the reliability of the estimates for (a) operating profit before tax, (b) earnings before interest, tax, depreciation and amortisation and (c) industry value added. It is possible for an estimate to legitimately include positive and negative values, reflecting the financial performance of individual businesses. In this case, the aggregated estimate can be small relative to the contribution of individual businesses, resulting in a standard error which is large relative to the estimate.

Non-sampling error arises from inaccuracies in collecting, recording and processing the data. Every effort was made to minimise reporting error, by the careful design of questionnaires, intensive training of survey analysts, and efficient data processing procedures. The imprecision due to non-sampling variability cannot be quantified and should not be confused with sampling variability, which is measured by the standard error.

Differences in accounting policy and practices across businesses and industries can also lead to some inconsistencies in the data provided to compile the estimates. Although much of the accounting process is subject to standards, there remains a great deal of flexibility available to individual businesses in the accounting policies and practices they adopt.

The above limitations are not meant to imply that analysis based on these data should be avoided, only that the limitations should be considered when interpreting the data. This publication presents a wide range of data that can be used to analyse business and industry performance. It is important that any analysis be based upon the range of data presented rather than focusing on one variable.

Non-sampling error also occurs when information cannot be obtained from all businesses selected in the survey. For the 2018-19 EAS, there was an 85.7% response rate from all businesses that were surveyed and found to be operating during the reference period. Data were imputed for the remaining 14.3% of operating businesses. This imputation contributed 11.0% to the estimate of total income for Total selected industries.

The ABS has been conducting the EAS annually since 1990–91, collecting a core set of data items each year. The definitions of these are reviewed each year and are refined or respecified as needed. Additional data items are collected in different years, in response to demand and priorities.

Since the 2006–07 reference year the survey has been conducted using ANZSIC 2006 and new methodologies. As a result, a new series of these estimates commenced from 2006–07.

In 2018-19, the EAS question wording was improved for the Health care and social assistance industry to provide explicit instructions on how businesses should report government payments. This resulted in improved estimates of sales and service income, funding from government for operational costs, profit margin and sales and service income per person employed for 2018-19. Caution should be exercised when comparing 2018-19 estimates for these items (which can be seen in the 'Australian industry by division' and 'Australian industry by subdivision' data cubes), with estimates from previous years. The improved question wording will be continued in future EAS collections and subsequent reporting for the Health care and social assistance division is expected to be consistent with the 2018-19 EAS. Further details can be found in the 'Changes in this release' section of the 2018-19 release of Australian Industry (cat. no. 8155.0).

Estimates from the EAS are available as original series only, and are neither seasonally nor trend adjusted.

Although financial estimates in this release relate to the full twelve months, employment estimates relate to the last pay period ending in June of the given year.

Further information about terminology and other technical aspects associated with these statistics can be found in the publication Australian Industry (cat. no. 8155.0), which contains detailed Explanatory Notes, a technical note on Estimation Methodology, a technical note on State and Territory Estimates, a technical note on Finer Level Manufacturing Industry Estimates, a technical note on Off-June Year Adjusted Estimates, and a Glossary.

Data from the 2018-19 EAS are available free of charge on the ABS website.