Construction Work Done, Australia, Preliminary methodology

This publication contains preliminary estimates of building and engineering construction work done during the current quarter and revised estimates for the previous two quarters. The estimates of building work done and engineering work done are from the quarterly Building Activity Survey and the quarterly Engineering Construction Survey respectively. Estimates of work done are based upon a response from each survey of approximately 85% of the value of work done during the current quarter. More comprehensive and updated results will be available shortly in Building Activity, Australia and Engineering Construction Activity, Australia.

The scope of the building activity survey includes building activity relating to:

• construction of new buildings;
• alterations and additions to existing buildings;
• non-structural renovation and refurbishment work; and
• installation of integral building fixtures.

For the purposes of this collection, a building is a rigid, fixed and permanent structure which has a roof. Its intended purpose is primarily to house people, plant, machinery, vehicles, goods or livestock. An integral feature of a building's design is the provision for regular access by persons in order to satisfy its intended use.

The scope of the engineering construction collection comprises:

• value of engineering work done during the quarter
• values exclude the cost of land and repair and maintenance activity, as well as the value of any transfers of existing assets, the value of installed machinery and equipment not integral to the structure and the expenses for relocation of utility services. However, a contract for the installation of machinery and equipment which is an integral part of a construction project is included.

For the purpose of this collection engineering construction is any construction that does not have a roof eg roads, rail, pipelines etc. Where projects include elements of both building and engineering construction (for example, electricity generation, heavy industrial plant) every effort is taken to exclude the building component from these statistics.

A project is classified to a type of construction (bridges, roads) rather than to its end use eg mining. Data is collected separately for operations in each state and split into work for the private sector and work for the public sector.

The classification of work done for Public Private Partnerships and Joint Ventures may be classified as private sector although eventual ownership of the asset may reside with the public sector, depending who derives the economic benefit of the project upon completion.

Building activity data is collected from selected builders and building owners, and represents all approved public and private sector owned:

• residential building jobs valued at $10,000 or more.
• non-residential building jobs valued at $50,000 or more.

For historical changes to the collection design see the Directory of Statistical Sources on the ABS website. 

Engineering construction data is collected from the primary contractor (not subcontractor) of projects and selections are made from any business which may undertake Engineering Construction activity. In most cases the statistical unit used to represent businesses, and for which statistics are reported, is the Australian Business Number (ABN) unit. The ABN unit is the business unit which has registered for an ABN, and thus appears on the Australian Taxation Office (ATO) administered Australian Business Register. The unit is classified to the relevant subdivision of Australian and New Zealand Standard Industrial Classification (ANZSIC), 2006 (Revision 2.0).

Further details about the ABS economic statistical units used in the Engineering Construction Survey, and in other ABS economic surveys (both sample surveys and censuses), can be found in Chapter 2 of the Standard Economic Sector Classifications of Australia (SESCA) 2008.

Data on the value of work done on the construction of new private sector residential buildings, alterations and additions to private sector residential buildings, private sector non-residential buildings and the value of private sector engineering construction activity are the major sources of data which are used to compile the national accounts estimates for private gross fixed capital formation on dwellings, and other buildings and structures. However, there are some adjustments to the survey data which are made in the process of compiling these national accounts series. Allowances are made for the value of activity which is out of scope of the Building Activity Survey and the Engineering Construction Survey. Such activity includes work done on projects which fall below the size cut-offs used for the Building Activity survey and also the value of building work done which is undertaken without obtaining a building permit, either because such a permit is not required or because the requisite permit is not obtained. The national accounts estimates also make allowances for purchases (less sales) of buildings and other structures from (to) the public sector.

The ownership of a building is classified as either private sector or public sector, according to the sector of the intended owner of the completed building as evident at the time of approval. Residential buildings being constructed by private sector builders under government housing authority schemes whereby the authority has contracted, or intends to contract, to purchase the buildings on or before completion, are classified as public sector. 

Engineering projects are classified as private sector or public sector according to the expected ownership of the project at the time of completion. When a project is undertaken as a Private Public Partnership (PPP), or other similar arrangement, these projects will be classified according to the expected ownership of the asset at the time of completion. Projects undertaken as PPP's may be classified as private sector although ownership of the asset could eventually reside with the public sector.

The public sector includes Commonwealth Departments and Authorities, State Departments and Authorities, Local Government Authorities, Water, Sewerage and Electricity Authorities and government owned businesses and Statutory Authorities. All remaining organisations are classified as private sector.

Building jobs are classified both by the Type of building ('residential' and 'non-residential') and by the Type of work involved ('new' and 'alterations and additions'). For residential buildings these classifications are used in conjunction with each other.

An engineering project is classified to a category of construction without regard to end use. For example, a project involving coal handling equipment at an electricity generating plant is included under 'Heavy industry - Oil, gas, coal, bauxite, aluminia and other minerals' and not under 'Electricity generation, transmission and distribution'. Where a project involves more than one category of construction the project is included under the category which accounts for the major part of the contract in terms of value.

Statistics on the value of work (current prices) show residential building work done on a GST inclusive basis and non-residential work and engineering construction work done on a GST exclusive basis. This approach is consistent with that adopted in the Australian National Accounts which is based on the conceptual framework described in the 2008 edition of the international statistical standard System of National Accounts (SNA08).

SNA08 requires value added taxes (VAT), such as the GST, to be recorded on a net basis where:

1. both outputs of goods and services and imports are valued excluding invoiced VAT
2. purchases of goods and services are recorded including non-deductible VAT.
    

Under the net system, VAT is recorded as being payable by purchasers, not sellers, and then only by those purchasers who are not able to deduct it. Almost all VAT is therefore recorded in the SNA08 as being paid on final uses - mainly on household consumption. Small amounts of VAT, may however, be paid by businesses in respect of certain kinds of purchases on which VAT may not be deductible.

The ABS records value of work done inclusive of GST in respect of residential construction and exclusive of GST in respect of non-residential construction and engineering construction. Purchasers of residential structures are unable to deduct GST from the purchase price. For non-residential structures and engineering construction, the reverse is true in most circumstances.

Total construction work is derived by adding total building work and total engineering construction work. To derive total building activity it is appropriate to add the residential and non-residential components. Valuation of the components of the total is consistent, since, for both components, the value of work done is recorded inclusive of non-deductible GST paid by the purchaser. As such, total building activity and total construction includes the non-deductible GST payable on residential building.

As estimates for engineering work are provided on a GST exclusive basis, and the majority of construction materials used were exempt from Wholesale Sales Tax, the introduction of the GST had little direct effect on the estimates of engineering construction.

Seasonal adjustment

Seasonal adjustment is a means of removing the estimated effects of seasonal and calendar related variation from a series so that the effects of other influences can be more clearly recognised. It does not remove the effect of irregular or other influences (e.g. the approval of large projects or a change in the administrative arrangements of approving authorities). Since seasonally adjusted statistics reflect both irregular and trend movements, an upward or downward movement in a seasonally adjusted series does not necessarily indicate a change of trend. Particular care should therefore be taken in interpreting individual quarter to quarter movements.

Some of the component series shown have been seasonally adjusted independently. As a consequence, while the unadjusted components in the original series shown add to the totals, the adjusted components may not add to the adjusted totals. (For example, the sum of the adjusted state or sector series may not add to the adjusted Australian total). Therefore, figures should not be derived using the adjusted totals. 

Seasonally adjusted estimates are produced by a seasonal adjustment method which takes account of the latest available original estimates. A detailed review of seasonal factors is conducted annually, generally prior to the release of data for the December quarter. 

The ABS produces trend estimates to best represent the underlying behaviour in a series. Trend estimates are created by smoothing seasonally adjusted series to reduce the impact of the irregular component of the seasonally adjusted series. Abnormally high or low values (outliers) are discounted or excluded from the trend estimates.

Seasonally adjusted and trend estimates may be revised as new periods of data become available. Generally, revisions become smaller over time. Revisions to original data may also lead to revisions to seasonally adjusted and trend estimates.

As a general rule, caution should be exercised in using the seasonally adjusted series for dwelling unit commencements in Northern Territory and Australian Capital Territory. The small numbers and volatile nature of these data makes reliable estimation of the seasonal pattern very difficult. 

Further information on seasonally adjusted and trend estimates can be found in the ABS Information papers Time Series Analysis Frequently Asked Questions, 2003 and A Guide to Interpreting Time Series - Monitoring Trends, 2003.

Chain Volume Measures

Chain volume estimates of the value of work done are presented in original, seasonally adjusted and trend terms.

While current price estimates of value of work done reflect both price and volume changes, chain volume estimates measure changes in value after the direct effects of price changes have been eliminated and therefore only reflect volume changes. The direct impact of the GST is a price change, and hence is removed from chain volume estimates. The deflators used to revalue the current price estimates in this publication are derived from the same price data underlying the deflators compiled for the dwellings and new other building components, and the new engineering construction component, of the national accounts aggregate ‘Gross fixed capital formation’.

The chain volume measures of work done appearing in this publication are annually reweighted chain Laspeyres indexes referenced to current price values in a chosen reference year. The reference year is updated annually in the September quarter publication. Each year’s data in the value of work done series are based on the prices of the previous year, except for the quarters of the latest incomplete year which are based upon the current reference year. Comparability with previous years is achieved by linking (or chaining) the series together to form a continuous time series.

Chain volume measures do not, in general, sum exactly to the extrapolated total value of the components. Further information on the nature and concepts of chain volume measures is contained in the ABS Information Paper: Australian National Accounts, Introduction of Chain Volume and Price Indexes .

The factors used to seasonally adjust the chain volume series are identical to those used to adjust the corresponding current price series.

Since the estimates of both building activity and engineering activity are based on sample surveys they are subject to sampling error; that is they may differ from the figures that would have been obtained if information for all approved jobs or organisations for the relevant period had been included in the survey.

One measure of the likely difference is given by the standard error (SE), which indicates the extent to which an estimate might have varied by chance because only a sample of approved jobs was included. There are about two chances in three that a sample estimate will differ by less than one SE from the figure that would have been obtained if all approved jobs had been included, and about nineteen chances in twenty that the difference will be less than two SEs. Another measure of sampling variability is the relative standard error (RSE), which is obtained by expressing the SE as a percentage of the estimate to which it refers. The RSEs of estimates provide an indication of the percentage errors likely to have occurred due to sampling, and are shown in Data Cubes (see Data downloads section of the publication).

An example of the use of RSEs is as follows. If the total value of work done during the quarter is $2,500m and the associated RSE is 0.5% then there are about 2 chances in 3 that the value which would have been obtained if there had been a complete collection would have been within the range $2,488m to $2,513m and about 19 chances in 20 that the value would have been within the range $2,475m to $2,525m.

Estimates that have an estimated relative standard error between 10% and 25% are annotated with the symbol ‘^’. These estimates should be used with caution as they are subject to sampling variability too high for some purposes. Estimates with an RSE between 25% and 50% are annotated with the symbol ‘*’, indicating that the estimate should be used with caution as it is subject to sampling variability too high for most practical purposes. Estimates with an RSE greater than 50% are annotated with the symbol ‘**’ indicating that the sampling variability causes the estimates to be considered too unreliable for general use.

Statistics are released for the March, June, September and December quarters, approximately 9 weeks after the end of the reference period. 

Final Engineering construction estimates are released approximately 13 weeks after the end of the reference period in Engineering Construction, Australia. Final Building activity estimates are released approximately 14 weeks after the end of the reference period in Building Activity, Australia.

For inquiries about these and related statistics, contact the Customer Assistance Service via the ABS website Contact Us page. The ABS Privacy Policy outlines how the ABS will handle any personal information that you provide to us. 

All tables in this publication, plus some additional state and territory series are available in electronic form on the ABS web site.

Users may also wish to refer to the following publications:

Building Activity, Australia
Building Approvals, Australia
Engineering Construction Activity, Australia
Residential Property Price Indexes: Eight Capital Cities
Housing Finance, Australia
Private Sector Construction Industry, Australia
Producer Price Indexes, Australia