Australian National Accounts: State Accounts methodology

This is known components of GSP(E) plus the addition of net interstate trade in goods (including re-exports), net Household final consumption expenditure (HFCE) expenditure interstate and net BOP adjustments to international merchandise goods trade (exports - imports). This is compiled largely for creation of the GSP(I/E) deflator and is not published.

The total factor income arising from production in agriculture and services to agriculture. It is equal to the estimated gross value of production (after the inventory valuation adjustment) less estimated production costs other than compensation of employees and consumption of fixed capital for all enterprises engaged in agriculture and services to agriculture. It includes agricultural output produced by the household sector for its own consumption.

The income accruing from agricultural production during the year. It is equal to gross agricultural product at factor cost less consumption of fixed capital, compensation of employees, and net rent and interest payments.

Includes all costs (other than compensation of employees and consumption of fixed capital) incurred in current production but excludes net rent and interest payable which are treated as appropriations out of operating surplus. In general, marketing costs are as shown in the statistical publication Value of Agricultural Commodities Produced, Australia (cat. no. 7503.0) and represent the difference between the value at the farm (or other place of production) and wholesale markets. Other costs include taxes on production and imports, fertilisers, fuel, costs associated with inter-farm transfers of livestock and fodder, maintenance and other miscellaneous items.

Customs or merchandise trade adjusted for trade in goods which is not captured adequately as part of customs reporting.

Calculated as the residual of the sum of the components of GSP(E) less state final demand less international trade in exports of goods and services, plus international trade in imports of goods and services. The balancing item implicitly comprises changes in inventories, total net interstate trade as well as other miscellaneous items such as the balancing item discrepancy.

At the state level the national statistical discrepancy is allocated across the states and territories to ensure consistency between the sum of the states and Australia. In addition, the balancing item for each state implicitly contains the statistical discrepancy for that state - calculated as GSP using the income approach less GSP using the expenditure approach.

The amount receivable by the producer from the purchaser for a unit of a good or service produced as output, minus any tax payable plus any subsidy receivable, on that unit as a consequence of its production or sale; it excludes any transport charges invoiced separately by the producer.

The bottom up approach is used where national estimates in the national accounts are created as the sum of states.

Annually-reweighted chain Laspeyres volume price indexes referenced to the current price values in a chosen reference year (i.e. the year when the quarterly chain volume measures sum to the current price annual values). Chain Laspeyres volume measures are compiled by linking together (compounding) movements in volumes, calculated using the average prices of the previous financial year, and applying the compounded movements to the current price estimates of the reference year. Generally, chain volume measures are not additive. In other words, component chain volume measures do not sum to a total in the way original current price components do. In order to minimise the impact of this property, the ABS uses the latest base year as the reference year. By adopting this approach, additivity exists for the period following the reference year and non-additivity is relatively small for the years immediately preceding. A change in reference year changes levels but not growth rates, although some revision to recent growth rates can be expected because of the introduction of a more recent base year (and revisions to the current price estimates underlying the chain volume measures).

The total remuneration, in cash or in kind, payable by an enterprise to an employee in return for work done by the employee during the accounting period. It is further classified into two sub-components: wages and salaries; and employers' social contributions. Compensation of employees is not payable in respect of unpaid work undertaken voluntarily, including the work done by members of a household within an unincorporated enterprise owned by the same household. Compensation of employees excludes any taxes payable by the employer on the wage and salary bill (e.g. payroll tax). See also Employers' social contributions; Wages and salaries.

The reduction in the value of fixed assets used in production during the accounting period resulting from physical deterioration, normal obsolescence or normal accidental damage. Unforeseen obsolescence, major catastrophes and the depletion of natural resources are not taken into account.

Includes such assets as orchard growth and livestock. The definition of orchard growth is any plant that can produce a marketable quantity of fruit for more than one year in which the grower intends to obtain a future benefit from the sale of the fruits borne. It can include trees, vines, bushes and shrubs. The costs to be capitalised as part of the value of fruit and nut bearing plants are the establishment costs involved in planting the new nursery plant and then maintenance costs associated with making the plant grow. Livestock assets are classified as either fixed assets or inventories. Those livestock which are used in production of other products (e.g. breeding stock, animals for entertainment, sheep for wool and dairy cattle) are fixed assets. Inventories cover all other livestock types and includes those animals raised for meat or other one-off products (e.g. leather).

Estimates are valued at the prices of the period to which the observation relates. For example, estimates for 2003-04 are valued using 2003-04 prices. This contrasts to chain volume measures where the prices used in valuation refer to the prices of a previous period.

Includes taxes on the incomes of households or the profits of corporations and taxes on wealth that are payable regularly every tax assessment period (as distinct from capital taxes that are levied infrequently).

Transactions, other than those classified as capital transfers, in which one institutional unit provides a good, service or cash to another unit without receiving from the latter anything of economic value in return.

Transfers for non-capital purposes to private non-profit institutions serving households such as hospitals, independent schools, and religious and charitable organisations.

Prices which have significant influence on both the amounts producers are willing to supply and the amounts purchasers wish to buy.

Payments by employers which are intended to secure for their employees the entitlement to social benefits should certain events occur, or certain circumstances exist, that may adversely affect their employees' income or welfare - namely work-related accidents and retirement.

The value of goods exported and amounts receivable from non-residents for the provision of services by residents.

Government final consumption expenditure is current expenditure by general government bodies on services to the community such as defence, education, and public order and safety less any explicit charges for these services. If these are provided free of charge or at charges which cover only a small proportion of costs, the government is considered to be the consumer of its own output. This output has no directly observable market value, and so it is valued in the national accounts at its cost of production. It also includes the value of the portion of market output purchased by the General Government sector on behalf of beneficiaries.

Net expenditure on goods and services by persons and expenditure of a current nature by private non-profit institutions serving households. This item excludes expenditures by unincorporated businesses and expenditures on assets by non-profit institutions (included in gross fixed capital formation). Also excluded is expenditure on maintenance of dwellings (treated as intermediate expenses of private enterprises), but personal expenditure on motor vehicles and other durable goods and the imputed rent of owner-occupied dwellings are included. The value of 'backyard' production (including food produced and consumed on farms) is included in household final consumption expenditure and the payment of wages and salaries in kind (e.g. food and lodging supplied free to employees) is counted in both household income and household final consumption expenditure.

Gross household income less income tax payable, other current taxes on income, wealth etc., consumer debt interest, interest payable by unincorporated enterprises, net non-life insurance premiums and other current transfers payable by households.

The total market value of goods and services produced in Australia within a given period after deducting the cost of goods and services used up in the process of production but before deducting allowances for the consumption of fixed capital. Thus gross domestic product, as defined here, is 'at market prices'. It is equivalent to gross national expenditure plus exports of goods and services less imports of goods and services.

Expenditure on new fixed assets plus net expenditure on second-hand fixed assets whether for additions or replacements including defence weapons platforms that have an anticipated ongoing use (greater than one year). Expenditure on new roadworks (or upgrading existing roads) is included but expenditure on road repair and maintenance is classified as government final consumption expenditure.

Expenditure on fixed assets broken down into dwellings, non-dwelling construction, machinery and equipment, cultivated biological assets, intellectual property products and ownership transfer costs. The machinery and equipment category includes plant, machinery, equipment, vehicles, etc. Expenditure on repair and maintenance of fixed assets is excluded, being chargeable to the production account. Additions to fixed assets are regarded as capital formation. Also included is compensation of employees and other costs paid by private enterprise in connection with own-account capital formation. Expenditure on dwellings, non-dwelling construction, and machinery and equipment is measured as expenditure on new and second-hand assets, less sales of existing assets. Cultivated biological assets includes livestock and orchard growth. Along with Computer software, Mineral and petroleum exploration and Artistic originals, Research and development is now included in the intellectual property products asset type. Ownership transfer costs comprise of stamp duty, real estate agents' fees and sales commissions, conveyancing fees and miscellaneous government charges.

Expenditure on new fixed assets plus net expenditure on second-hand fixed assets and including both additions and replacements. Also included is compensation of employees paid by public corporations in connection with capital works undertaken on own account.

The total income, whether in cash or kind, receivable by persons normally resident in Australia. It includes both income in return for productive activity (such as compensation of employees, the gross mixed income of unincorporated enterprises, gross operating surplus on dwellings owned by persons, and property income receivable, etc.) as well as transfers receivable (such as social assistance benefits and non-life insurance claims).

The surplus or deficit accruing from production by unincorporated enterprises. It includes elements of both compensation of employees (returns on labour inputs) and operating surplus (returns on capital inputs).

The operating surplus accruing to all enterprises, except unincorporated enterprises, from their operations in Australia. It is the excess of gross output over the sum of intermediate consumption, compensation of employees, and taxes less subsidies on production and imports. It is calculated before deduction of consumption of fixed capital, dividends, interest, royalties and land rent, and direct taxes payable, but after deducting the inventory valuation adjustment. Gross operating surplus is also calculated for general government, and it equals general government's consumption of fixed capital.

GSP is defined equivalently to gross domestic product (GDP) but refers to production within a state or territory rather than to the nation as a whole. See gross domestic product.

The simple average of the available GSP measures. That is, in current price and volume terms the average of GSP(P) and GSP(I/E).

GSP using the expenditure approach. Estimated in current prices. Not all of the expenditure components are available at the state level so the difference between the sum of the available components (State Final Demand and International trade in goods and services) and GSP(I) is reflected as a balancing item. See also Balancing item.

GSP using the income approach. Estimated in current prices only by summing factor incomes (i.e. compensation of employees, gross operating surplus and gross mixed income) and taxes less subsidies on production and imports.

GSP using a combination of the income and expenditure approaches. Current price GSP(I/E) is produced using the GSP(I) measure to allocate to states the average of the GDP(I) and GDP(E) measures. chain volume GSP(I/E) is then produced by deflating current price GSP(I/E) with a deflator produced with known adjusted components of GSP(E).

The GSP(I/E) deflator is derived by aggregating the deflators for the adjusted known components of GSP(E).

GSP using the production approach. Estimated in volume terms by using different indicators (mostly output indicators) for each industry to compile state by industry GVA volume estimates and adding the volume of taxes less subsidies on products. Current prices are estimated using components of income GOSMI, COE and other taxes less subsidies on production.

The ratio of the chain volume estimates of GSP to an estimate of the resident Australian population. Population estimates use data published in the quarterly publication Australian Demographic Statistics (cat. no. 3101.0) and ABS projections.

GVA is the value of output at basic prices minus the value of intermediate consumption at purchasers' prices. The term is used to describe gross product by industry. Basic prices valuation of output removes the distortion caused by variations in the incidence of commodity taxes and subsidies across the output of individual industries. State GVA in current prices is not directly compiled so the Australia GVA by industry is allocated to the states using factor income shares. GVA can also be compiled in volume terms. For most industries an output indicator approach is used to create the volume measures of GVA by industry for each of the states.

Includes items of the balancing which are estimated or modelled including interstate trade in goods (including re-exports), net HFCE expenditure interstate, changes in inventories and the balancing item discrepancy. This is compiled for internal analytical purposes and not published due to quality concerns.

Obtained by dividing a current price value by its real counterpart (the chain volume measure). When calculated from the major national accounting aggregates, such as gross domestic product, implicit price deflators relate to a broader range of goods and services in the economy than that represented by any of the individual price indexes that are published by the ABS. Whereas the chain price indexes are chain Laspeyres indexes, the annual implicit price deflators are chain Paasche price indexes, i.e. each year-to-year movement is calculated using the current price value shares of the second of the two years to weight together the elemental price indexes.

The value of goods imported and amounts payable to non-residents for the provision of services to residents.

Includes such assets as computer software, research and development, entertainment, literary or artistic originals, and mineral exploration intended to be used for more than a year.

Consists of the value of the goods and services used as inputs by a process of production, excluding compensation of employees and the consumption of fixed capital. Can also be defined as intermediate consumption.

Consist of stocks of outputs that are held at the end of a period by the units that produced them prior to their being further processed, sold, delivered to other units or used in other ways and stocks of products acquired from other units that are intended to be used for intermediate consumption or for resale without further processing.

Known components of GSP(E) is the aggregate of State Final Demand and International trade in goods and services.

Livestock assets are classified as either fixed assets or inventories. Those livestock which are used in production of other products (e.g. breeding stock, animals for entertainment, sheep for wool and dairy cattle) are fixed assets. Inventories cover all other livestock types and includes those animals raised for meat or other one-off products (e.g. leather).

Consists of transport equipment, computing equipment and other machinery and equipment other than that acquired by households for final consumption.

Output that is sold at prices that are economically significant or otherwise disposed of on the market, or intended for sale or disposal on the market.

Net saving plus consumption of fixed capital - households Is equal to gross household disposable income less household final consumption expenditure and can also be referred to as the gross saving of households. Household saving is estimated as the balancing item in the households income account. It includes saving through life insurance and superannuation funds (including net earnings on these funds), increased equity in unfunded superannuation schemes and the increase in farm assets with marketing boards. Household net saving, i.e. gross saving less consumption of fixed capital, cannot be calculated at a state level as consumption of fixed capital is only calculated at the Australia level.

Household final consumption expenditure (HFCE) is measured on a resident basis and as such includes the expenditure of residents who travel interstate. The data sources used to compile HFCE (such as Retail Trade) do not account for the residency of the consumer and hence an adjustment to the source data is required. This adjustment item is called Net expenditure interstate (NEI) and is calculated by adding in amounts for the expenditure of residents of a state who travel interstate and deducting the expenditure of residents from other states within that state. NEI nets to zero at the Australia level.

Goods and services produced by any institutional unit that are supplied free or at prices that are not economically significant.

Consists of all subsidies, except subsidies on products, which resident enterprises may receive as a consequence of engaging in production. Other subsidies on production include: subsidies related to the payroll or workforce numbers, including subsidies payable on the total wage or salary bill, on numbers employed, or on the employment of particular types of persons, e.g. persons with disabilities or persons who have been unemployed for a long period. The subsidies may also be intended to cover some or all of the costs of training schemes organised or financed by enterprises. Subsidies aimed at reducing pollution are also included. See also Subsidies on products.

Consists of all taxes that enterprises incur as a result of engaging in production, except taxes on products. Other taxes on production include: taxes related to the payroll or workforce numbers excluding compulsory social security contributions paid by employers and any taxes paid by the employees themselves out of their wages or salaries; recurrent taxes on land, buildings or other structures; some business and professional licences where no service is provided by the Government in return; taxes on the use of fixed assets or other activities; stamp duties; taxes on pollution; and taxes on international transactions. See also Current taxes on income, wealth, etc., Taxes on production and imports and Taxes on products.

Consists of those goods and services that are produced within an establishment that become available for use outside that establishment, plus any goods and services produced for own final use.

Output indicators are usually sales or turnover data for an industry, industry sub-divisions or commodity. These are used to allocate GVA and GOSMI to state.

This is the methodology used to create GVA in the state accounts using output indicators. This is opposed to creating GVA from components of output and intermediate use.

Dividing a price index into a current price value.

Consist of incomes that accrue to institutional units as a consequence of their involvement in processes of production or their ownership of assets that may be needed for the purposes of production.

The amount receivable by the producer from the purchaser for a unit of a good or service produced as output, including any tax that is incorporated within the sales price, and excluding any subsidy that reduces the sales price, on that unit as a consequence of its production or sale. It excludes any transport charges invoiced separately by the producer, but includes delivery charges not separately invoiced.

Is the income receivable by the owner of a financial asset or a tangible non-produced asset in return for providing funds, or putting a tangible non-produced asset at the disposal of another institutional unit.

The amount paid by the purchaser, excluding any deductible tax, in order to take delivery of a unit of a good or service at the time and place required by the purchaser. The purchaser's price of a good includes any transport charges paid separately by the purchaser to take delivery at the required time and place.

For an individual commodity, the estimate of quantity in each period is multiplied by the price (or average unit value) in some base year. This method can be applied if the commodity is defined narrowly enough to ensure that it is homogenous in content and free from quality change over time (since a change in quality is defined as a change in quantum).

A measure of the real purchasing power of income generated by domestic production. It is calculated by adjusting the chain volume measure of GDP for changes in the terms of trade.

A measure of the real purchasing power of income generated by production within a state or territory. It is calculated by adjusting the chain volume measure of GSP for changes in the terms of trade.

Consists of receipt and payment of current transfers.

Includes current transfers to persons from general government in return for which no services are rendered or goods supplied. Principal components include: scholarships; maternity, sickness and unemployment benefits; family allowances; and widows', age, invalid and repatriation pensions.

The aggregate obtained by summing government final consumption expenditure, household final consumption expenditure, private gross fixed capital formation and the gross fixed capital formation of public corporations and general government. It is conceptually equivalent to the Australia level aggregate domestic final demand.

Calculated as the difference between the individual aggregate income, expenditure and production measures of GSP and the headline GSP measure (i.e. GSP(A)).

Subsidies payable per unit of a good or service. The subsidy may be a specific amount of money per unit of quantity of a good or service, or it may be calculated ad valorem as a specified percentage of the price per unit. A subsidy may also be calculated as the difference between a specified target price and the market price actually paid by a purchaser. A subsidy on a product usually becomes payable when the product is produced, sold or imported, but it may also become payable in other circumstances, such as when a product is exported, leased, transferred, delivered or used for own consumption or own capital formation.

Defined as 'taxes on products' plus 'other taxes on production' less 'subsidies on products' less 'other subsidies on production'.

Consists of 'taxes on products' and 'other taxes on production'. These taxes do not include any taxes on the profits or other income received by an enterprise. They are payable irrespective of the profitability of the production process. They may be payable on the land, fixed assets or labour employed in the production process, or on certain activities or transactions. See also Current taxes on income and wealth, Other taxes on production and Taxes on products.

Taxes payable per unit of some good or service. The tax may be a specific amount of money per unit of quantity of a good or service (quantity being measured either in terms of discrete units or continuous physical variables such as volume, weight, strength, distance, time, etc.), or it may be calculated ad valorem as a specified percentage of the price per unit or value of the goods or services transacted. A tax on a product usually becomes payable when the product is produced, sold or imported, but it may also become payable in other circumstances, such as when a good is exported, leased, transferred, delivered, or used for own consumption or own capital formation.

Calculated by dividing the export implicit price deflator by the import implicit price deflator and multiplying by 100.

A top down approach allocates national estimates to the state level using state indicators.

That part of the cost of producing the gross domestic product which consists of gross payments to factors of production (labour and capital). It represents the value added by these factors in the process of production and is equivalent to gross domestic product less taxes plus subsidies on production and imports.

The unidentified component is created as a residual between the total balancing item and identified components. Conceptually represents interstate trade in services, but it also embodies any remaining discrepancies that occur across state measures of expenditure and income due to measurement issues. This is compiled for internal analytical purposes and not published due to quality concerns.

Consists of amounts payable in cash including the value of any social contributions, income taxes, fringe benefits tax, etc., payable by the employee even if they are actually withheld by the employer for administrative convenience or other reasons and paid directly to social insurance schemes, tax authorities, etc., on behalf of the employee. Wages and salaries may be paid as remuneration in kind instead of, or in addition to, remuneration in cash. Separation, termination and redundancy payments are also included in wages and salaries. Wages and salaries are also measured as far as possible on an accrual rather than a strict cash basis. See also Employers' social contributions; Compensation of employees.

For information on the institutional environment of the Australian Bureau of Statistics (ABS), including the legislative obligations of the ABS, financing and governance arrangements, and mechanisms for scrutiny of ABS operations, please see ABS Institutional Environment.

The standards governing national accounts are agreed internationally, and detailed in the "System of National Accounts 2008" (SNA08). SNA08 is endorsed by the five major international economic organisations: the United Nations, the International Monetary Fund, the OECD, the World Bank and the European Commission. The current complete version of SNA08 is available online: http://unstats.un.org/

The Australian national accounts differ from the recommendations in the SNA08 in certain cases where the data is not available to meet these requirements, or it is not considered practical to adhere to the standards. For more information on the Australian national accounts see Australian System of National Accounts: Concepts, Sources and Methods (cat. no. 5216.0). For more information on the implementation of the new international standards see Information Paper: Implementation of new international statistical standards in ABS National and International Accounts (cat. no. 5310.0.55.002).

The annual Australian national accounts are compiled using data from the four most recent quarters along with the latest supply and use balanced data. The release of this information generally occurs in the first week of November following the end of the most recent financial year.

Accuracy remains the main focus of ABS quality control. However, in the case of the national accounts, it is recognised internationally that an objective accuracy measure in the sense of proximity to the ‘true value’ is impossible to produce. The national accounts are a highly complex set of economic statistics. They combine a very large number of internal and external data sources covering various aspects of the economy to derive GDP and other headline measures.

The national accounts compilation process transforms the various partial data into a set of economic accounts. To make the data more analytically useful it also requires a further transformation of the data to produce the headline chain volume of GDP and components. These data transformations involve various assumptions.

Given the variety of data used, and the transformations and aggregations used in the national accounts process, an assessment of accuracy is necessarily subjective and indirect. It involves an assessment of the national accounts process, the input data and the transformations used to produce the national accounts. The ABS aims to achieve best practice in each of these facets of national accounts compilation. The related quality concept of reliability can be objectively measured by an analysis of revisions, but a reliable series is not necessarily accurate if it is based on poor quality data.

For a more in-depth discussion of the accuracy of the national accounts including an analysis of revisions please see the Information Paper: Quality Dimensions of the Australian National Accounts (cat. no. 5216.0.55.002).

The coherence of data is an aspect of quality closely associated with accuracy, both within the national accounts system, and compared with the partial indicators of the economy. A major unifying feature within the Australian System of National Accounts is the use of supply and use methodology to confront the data and balance the components of GDP in annual terms.

The ABS publishes a large amount of data on various aspects of the economy. As the majority of these are used in the national accounts it could be expected that there would be coherence between the partial indicators data and the national accounts. While there are some differences in coverage and concept, there are formal processes in place to ensure that the collections and national accounts staff come to a common view of the statistical treatment of current economic events. National accounts staff also have the opportunity to comment on the partial indicators before they are finalised for publication. None the less, over time, the process of annual benchmarking may lead to some divergencies with the partial indicators.

There are a number of derived statistics and data transformations published with national accounts output to aid interpretation of the data. These include chain volume estimates, trend and seasonally adjusted estimates, GDP growth rates and contributions to GDP growth. Analysis and commentary is included with each publication, and quarterly presentations are available to key users across Australia to provide more information and discussion of the estimates. Australian System of National Accounts: Concepts, Sources and Methods (cat. no. 5216.0) is a comprehensive description of the methods and concepts underpinning the national accounts.

For links to all national accounts related data and publications, recent national accounts changes and forthcoming events, relevant websites and a range of other information about the Australian National Accounts, please see the National Accounts Statistics homepage.

For more detailed information about the quality dimensions of the Australian National Accounts please see the Information Paper: Quality Dimensions of the Australian National Accounts, Australia 2007 (cat. no. 5216.0.55.002).