Sources and methods - Annual

Gross fixed capital formation on dwellings consists of the value of acquisitions of new and existing (used) dwellings less the value of disposals of existing dwellings.

It also includes the value of dwellings created by the conversion of existing non-dwelling buildings to dwellings, and the value of alterations and additions to existing dwellings.

Dwellings are buildings, or designated parts of buildings, that are used entirely or primarily as residences, including any associated structures regarded as fixed assets, such as garages, and all permanent fixtures customarily installed in residences. Houseboats, barges, mobile homes and caravans used as principal residences of households are also included and are regarded as fixed assets.

The costs of clearing and preparing the site for construction are part of the costs of new dwellings (and non-dwelling construction) and are therefore included in the value of the buildings.

Incomplete dwellings are included to the extent that the ultimate user is deemed to have taken ownership, either because the construction is on own-account or as evidenced by the existence of a contract of sale or purchase.

All dwellings must give rise to housing services that are included within the production boundary, regardless of whether the dwellings are occupied by the owners or rented on the market.

In the ASNA, private gross fixed capital formation for dwellings is presented with two sub-components: new and used dwellings and alterations and additions.

The Construction Industry Survey (CIS) and Household Expenditure Survey (HES) are used to periodically set annual levels for the benchmark years. In the off years of CIS and HES, the Building Activity Survey (BACS) growth rates are used to move dwellings estimates forward.

GFCF on dwellings is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The GFCF estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial GFCF estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7. 

Gross fixed capital formation in non-dwelling construction is recorded as the value of the acquisitions of new and existing non-dwelling buildings and structures, less the value of the disposals of existing non-dwelling buildings and structures, and the value of alterations and additions to existing non-dwelling buildings and structures.

Non-dwelling construction comprises three components: new building, new engineering construction and net purchases of second-hand assets.

• New building consists of newly constructed buildings that are not designated as dwellings. Fixtures, facilities and equipment that are integral parts of the structures are included. Examples of non-residential buildings include warehouses and industrial buildings, commercial buildings, buildings for public entertainment, hotels, restaurants, schools, hospitals, prisons etc.;
• New engineering construction includes civil engineering works, such as highways, streets, roads, railways and airfield runways; bridges, elevated highways, tunnels and subways; waterways, harbours, dams and other waterworks; long-distance pipelines, communication and power lines; local pipelines and cables, ancillary works; constructions for mining and manufacture; and constructions of sport and recreation facilities; and
• Net purchases of second-hand assets consist of the purchase and sale of existing non-dwelling buildings and structures.

The Construction Industry Survey (CIS) is used to periodically set annual levels for benchmark years. In the off year of CIS, Building Activity Survey (BACS) and Engineering Construction Survey (ECS) growth rates are used to move non-dwelling construction estimates forward.

Data are compiled by institutional sector and industry using the Economic Activity Survey, Building Activity Survey and the Survey of New Capital Expenditure, providing the elemental detail required by the Perpetual Inventory Method.

New engineering construction GFCF completed overseas is not captured in the ECS collection until the assets are fixed in place. Balance of Payments and the Survey of New Capital Expenditure data are used to make adjustments to recognise the progressive transfer of ownership for large mining projects built overseas.

GFCF on non-dwelling construction is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The GFCF estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial GFCF estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

Gross fixed capital formation for machinery and equipment is recorded as the value of the acquisitions of new and existing machinery and equipment, less the value of the disposals of existing machinery and equipment.

• Machinery and equipment is classified according to six asset types:
• Computers and peripherals;
• Electrical and electronic equipment;
• Industrial machinery and equipment;
• Motor vehicles;
• Other transport equipment; and
• Other machinery and equipment.

ASNA’s machinery and equipment mirrors the 2008 SNA concept.

In the ASNA, private gross fixed capital formation for machinery and equipment is presented with two sub-components: new machinery and equipment and net purchases of second-hand assets.

Prior to 1994-95, estimates are compiled using statistics of depreciable assets available from the Australian Taxation Office (ATO).

From 1994-95, the source of this data is the Economic Activity Survey which covers most large businesses in the economy in addition to the Survey of New Capital Expenditure.

Data are compiled by institutional sector and industry providing the elemental detail required by the Perpetual Inventory Method.

GFCF on machinery and equipment is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The GFCF estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial GFCF estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

The current price estimates are deflated at the asset level; that is, computers and peripherals; electrical and electronic equipment; industrial machinery and equipment; motor vehicles; other transport equipment; and other machinery and equipment.

A number of price indexes are used some of which include, but are not limited to the Consumer Price Index, Producer Price Indexes and the International Trade Price Index (ITPI).

GFCF for orchard growth consists of the value of all acquisitions of mature and immature trees, shrubs, etc., produced on own account, less the value of their disposals. Disposals consist of trees, shrubs, etc., sold or otherwise transferred to other units plus those cut down before the end of their service lives. Disposals do not include exceptional losses of trees due to drought or other natural disasters such as gales or hurricanes, these being recorded in the Other changes in the volume of assets account.

Estimates of the value of sheep and cattle used to produce products such as wool and milk, or for breeding, were historically derived from the annual Agricultural Commodity Survey conducted by the ABS, which provided the number of animals in major livestock categories. Results from the survey were published in Agriculture, Australia . More recently, price and quantity data is obtained from the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) which is revised during the March quarter each year following the release of the ABS publication, Value of Agricultural Commodities Produced, Australia .

Calculation of sheep and cattle numbers also relies on slaughtering and exports quarterly data from the ABS publication, Livestock Products, Australia. Data on acquisition and disposal prices of other animals are calculated using the ABARES publication, Agriculture Commodity Statistics. Values for sheep and cattle are estimated by multiplying the number of animals by an average price per head.

Historical, estimates for thoroughbred horses, standardbred horses and other horses (quantity and price) were modelled, based on data from the Australian Horse Industry Council (AHIC) and various horse associations.  More recently, estimates of thoroughbred horses are derived using quantity and price data from the Australian Racing Board; estimates of standardbred horses are derived using quantity and price data from Harness Racing Australia; and estimates of other horses is derived using quantity and price data from the Food & Agriculture Organisation (FAO) of the United Nations.

Pigs for breeding estimates are sourced from the ABS publication, Agricultural Commodities, Australia .

Annual volume estimates are derived using the underlying price and quantity information as used in the derivation of current prices.

The total current price estimate of cultivated biological resources is the sum of the livestock and orchard growth estimates.

GFCF on cultivated biological resources is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The GFCF estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial GFCF estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

Gross fixed capital formation of R&D, as defined in 2008 SNA, consists of the value of expenditures on creative work undertaken on a systematic basis in order to increase the stock of knowledge, including knowledge of humankind, culture and society, and use of this stock of knowledge to devise new applications. This does not, however, include human capital as assets within the SNA. It should also be recognised that R&D products are very heterogeneous and not all R&D products are fixed assets and hence their classification should be determined on the economic benefit they are expected to provide in the future. In other words, R&D that does not provide an economic benefit to its owner does not constitute a fixed asset and should be treated as intermediate consumption.

The nature of R&D poses measurement challenges because R&D products are very heterogeneous and not all R&D products are sold in the market. The 2008 SNA recommends that the output of R&D should be valued at market prices if purchased (outsourced) or as the sum of total production costs. R&D undertaken by specialised commercial research laboratories or institutes is valued by receipts from sales, contracts, commissions, fees, etc. R&D undertaken by government units, universities, non-profit research institutes, etc. is non-market production and should be valued on the basis of the total costs incurred excluding a return to capital used.

The ASNA’s treatment of R&D requires a fundamental distinction between R&D services and own account R&D.

The R&D services refer to market transactions in R&D as suggested in the 2008 SNA reference to ‘specialized commercial research laboratories or institutes. The output of these units includes the sale of R&D and is therefore considered other non-market production and hence valued as suggested in 2008 SNA (at the cost of production).

The own account R&D refers to production or R&D undertaken on own account and consists of:

• Production of R&D by market producers on own account. For example, consider a manufacturing unit producing computer screens and also undertaking R&D to improve methods for computer screen production. This unit will be classified by ANZSIC06 to the Manufacturing Division (where computer screens are primary) and will have output of both computer screens and own account R&D.
• R&D undertaken by non-market units (either primary production, secondary production or own account).

All output and GFCF of own account R&D is considered to be non-market production and is valued by summing the total production costs. It is also important to note that these costs include intermediate consumption of the R&D product and can be deducted from the GFCF accordingly.

Annual estimates for both own account R&D expenditure and R&D undertaken by other institutions are derived from the ABS Survey of Research and Experimental Development published in Research and Experimental Development, Businesses, Australia with current expenditure estimates calculated as the sum of labour costs and other expenditure.

Estimates of imports and exports of R&D are obtained from Balance of Payments and International Investment Position, Australia , which are directly collected through the Survey of International Trade in Services.

GFCF on R&D is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The GFCF estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial GFCF estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

Mineral and petroleum exploration is the value of expenditures on exploration for petroleum and natural gas and for non-petroleum deposits and subsequent evaluation of the discoveries made. Expenditures on mineral exploration are not treated as intermediate consumption. Whether they are successful or not, they are needed to acquire new reserves and are, therefore, all classified as gross fixed capital formation.

This item covers expenditure on exploration for petroleum (including oil shale), metallic minerals, construction materials, gemstones, and other non-metallic minerals less expenditure on successful bids for offshore petroleum leases (which is regarded as intermediate consumption, not capital formation).

Exploration expenditure covers all exploration activity undertaken on land and in Australia's territorial waters and the continental shelf over which Australia exercises exclusive rights. It includes pre-licence costs, licence and acquisition costs, appraisal costs, expenditure on aerial surveys, (including Landsat photographs), general surveys, report writing, map preparation and other activities indirectly attributable to exploration.

Data on mineral and Petroleum exploration expenditure are obtained from the quarterly publication, Mineral and Petroleum Exploration, Australia.

Annual estimates are obtained by summation of the quarterly series.

GFCF on mineral and petroleum exploration is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The GFCF estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial GFCF estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

Computer software consists of computer programs, program descriptions and supporting materials for both systems and applications software. It also includes databases which consist of files of data organised in such a way as to permit resource-effective access and use of the data.

GFCF in computer software can include both the initial in-house development and subsequent extensions of software as well as software purchased on the market.

Software purchased on the market, which is valued at purchasers’ prices, includes both products purchased 'off the shelf' and customised software designed by a specialist for a specific customer. Software developed in-house is valued at its estimated basic price or at its cost of production if it is not possible to estimate the basic price.

GFCF in databases includes the purchase or development of databases that the enterprise expects to use in production over a period of more than one year. Databases may be developed exclusively for own use or for sale as an entity or for sale by means of a licence to access the information contained.

Australian National Accounts: Information and Communication Technology Satellite Account is used to periodically set annual estimates for benchmark years.

For other years, growth rates are calculated from the Economic Activity Survey and applied to the annual estimates for all industries except Financial and Insurance Services. Data on capital and current expenditure of computer software is obtained from the Australian Prudential Regulation Authority for banks and registered financial corporations in order to estimate the Financial and Insurance Services industry.

GFCF on computer software is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The GFCF estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial GFCF estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

Annual estimates are derived as the sum of the following components:

• Film and independent television includes master tapes of feature films and independent television drama and documentaries. Capital formation is calculated as the present value of expected future income flows generated from the originals. These flows are discounted to derive the present value of film and television income in any given year.
• Television (own-account) includes in-house production of programs classified as artistic originals; that is, drama, sporting events and documentaries, by public and private television broadcasters.
• Recorded music includes master tapes owned by recording companies as used in the production of vinyl records, CDs and cassettes. Capital formation is estimated using a production cost approach. Budgets allocated to develop originals are indicative of expected future returns from those originals.
• Music publishing covers original musical works produced. Capital formation is estimated by using a market transactions approach. The advance a publisher pays a songwriter or composer on signing best describes the expected future return that the publisher hopes to receive from exploitation of the right assigned to them to use the artistic original, plus the publisher's share of the expected royalties.
• Literary works covers original manuscripts of books. Capital formation is estimated by a market transactions approach. The lump-sum payment a publisher pays an author is indicative of future benefits the publisher hopes to receive from publishing the literary work.

The Film, Television and Digital Games survey is the main data source used to periodically set annual estimates for film and television GFCF in benchmark years. Levels for current price estimates are adjusted when the survey is updated every five years. For other years, growth rates are calculated from annual production data published by Screen Australia, and are applied to the benchmarks.

Growth rates for music and literary GFCF are modelled using a seven-year moving average of film and television production, also based on data published by Screen Australia.

GFCF on entertainment, literary and artistic originals is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The GFCF estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial GFCF estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

Ownership transfer costs consist of the following components:

• fees paid to lawyers;
• fees and commissions paid to real estate agents, auctioneers, architects, surveyors, engineers and valuers;
• stamp duty; and
• local government charges.

Ownership transfer costs in the ASNA relate to dwellings, non-dwelling construction, and unoccupied land.

When available, annual estimates for income attributable to real estate agents' commissions and lawyers' conveyancing fees are based on results from the Economic Activity Survey and periodic surveys including Real Estate Agents Industry, Australia; Legal Services, Australia; Accounting Practices, Australia; and Legal and Accounting Services, Australia. For intervening years growth rates in title transfers are used to estimate income from services.

Stamp duties estimates are based on annual Government Finance Statistics (GFS) data, obtained from each state treasury. Local government charges are calculated as a combination of:

• a fixed-fee component (derived using individual state government schedules);
• an ad valorem component; and
• the number of property transfers.

The ad valorem component is calculated based on the median residential property price, and the value at which the ad valorem component is charged per state. The median residential property prices are extracted from Corelogic’s quarterly residential price change data.

Estimates for total ownership transfer costs are allocated to institutional sectors using sectoral estimates of land use in the balance sheets.

GFCF on ownership transfer costs is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The GFCF estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial GFCF estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

Government finance statistics is the most important data source used for annual estimates, these are compiled from audited annual returns from the Commonwealth Department of Finance.

Additional data for intellectual property products are sourced from external and internal sources including Research and Experimental Development, Businesses, Australia.

The data collected is by the following assets types:

• dwellings;
• non-dwelling construction;
• machinery and equipment; and
• intellectual property products (computer software, mineral and petroleum exploration, artistic originals, and research and development)

Amounts for new and second-hand purchases or disposals are determined in order to derive net second-hand purchases. This allows for the identification of private net sector purchases of fixed capital assets from the public sector which are used in the compilation of private sector gross fixed capital formation.

GFCF undertaken by Commonwealth public corporations is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The GFCF estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial GFCF estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

Government finance statistics is the most important data source used for annual estimates, these are compiled from audited annual returns from the State treasuries.

Additional data for intellectual property products are sourced from various external and internal sources including Research and Experimental Development, Businesses, Australia.

The data collected is by the following assets types:

• dwellings;
• non-dwelling construction;
• machinery and equipment; and
• intellectual property products (Computer software, mineral exploration, artistic originals, and research and development)

Amounts for new and second-hand purchases or disposals are determined in order to derive net second-hand purchases. This allows for the identification of private net sector purchases of fixed capital assets from the public sector which are used in the compilation of private sector gross fixed capital formation.

GFCF undertaken by State and local public corporations is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The GFCF estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial GFCF estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

Government finance statistics is the most important data source used for annual estimates, these are compiled from audited annual returns from the Commonwealth Department of Finance.

Additional data for intellectual property products are sourced from external and internal sources including Research and Experimental Development, Government and Private Non-Profit Organisations, Australia.

The data collected is by the following assets types:

• defence weapons systems;
• dwellings;
• non-dwelling construction;
• machinery and equipment; and
• intellectual property products (computer software, and research and development)

Defence Weapon Systems built overseas, are reported on a progress payments basis through Government Finance Statistics. Supplementary Balance of Payments and Department of Defence data is used to make adjustments to recognise the acquisition of Defence Weapon Systems when the change of ownership takes place. 

Amounts for new and second-hand purchases or disposals are determined in order to derive net second-hand purchases. This allows for the identification of private net sector purchases of capital from the public sector which are used in the compilation of private sector gross fixed capital formation.

GFCF undertaken by National defence is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The GFCF estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial GFCF estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

Government finance statistics is the most important data source used for annual estimates, these are compiled from audited annual returns from the commonwealth department of finance as well as annual reports of public universities.

Additional data for intellectual property products are sourced from external and internal sources including Research and Experimental Development, Government and Private Non-Profit Organisations, Australia and from Annual Reports for public broadcasting networks .

The data collected is by the following assets types:

• dwellings;
• non-dwelling construction;
• machinery and equipment; and
• intellectual property products (Computer software, mineral exploration, artistic originals, and research and development).

Amounts for new and second-hand purchases or disposals are determined in order to derive net second-hand purchases. This allows for the identification of private net sector purchases of capital from the public sector which are used in the compilation of private sector gross fixed capital formation.

GFCF undertaken by National non-defence is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The GFCF estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial GFCF estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.

Government finance statistics is the most important data source used for annual estimates, these are compiled from audited annual returns from State treasuries. 

Additional data for intellectual property products are sourced from external and internal sources including  Research and Experimental Development, Government and Private Non-Profit Organisations, Australia.

The data collected is by the following assets types:

• dwellings;
• non-dwelling construction;
• machinery and equipment; and
• intellectual property products (Computer software, mineral exploration, artistic originals, and research and development)

Amounts for new and second-hand purchases or disposals are determined in order to derive net second-hand purchases. This allows for the identification of private net sector purchases of capital from the public sector which are used in the compilation of private sector gross fixed capital formation.

GFCF undertaken by State and local is mapped to the Input-Output Product Classification (IOPC) level. The IOPC level is then aggregated to the Supply-Use Product Classification (SUPC) level.

Supply and Use balancing process

The GFCF estimates at the SUPC level are inserted into the Use table which is balanced with the Supply table at the product level using the product flow method. Therefore, adjustments are likely to be applied to the initial GFCF estimate to obtain a balance between supply and use. The adjustments are determined by confronting the supply and use data with industry association data, annual reports of significant units within the industry, as well as other relevant ABS survey results.

For more information on the product flow method refer to Chapter 7.