Sources and methods - Quarterly

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, as are public monuments identified primarily as dwellings.

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 are treated as an asset, 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.

These are primarily based on the value of work done during the period on new residential buildings and on alterations and additions to residential buildings sourced from the quarterly Building Activity Survey (BACS).

This survey covers both public and private sector activity. Dwellings may be purchased by public housing authorities from private builders after being classified as private sector construction. To avoid incorrect classification of completed dwellings, estimates of GFCF for dwellings by the public sector are sourced from Government Finance Statistics. Public expenditure (which also allows for net sales of existing dwellings to the private sector) is deducted from total GFCF for dwellings to derive the correct value for the private sector.

Estimates are constructed using new residential building data from BACS plus modelled estimates for net expenditure on new dwellings not included within the scope of the BACS (e.g. dwellings on rural properties not requiring local government permits, existing commercial premises converted to dwelling use and caravans bought for use as dwellings) and modelled estimates for services involved in the dwelling construction (e.g. architects' and other professional fees), but excluding ownership transfer costs.

Estimates are obtained from Government Finance Statistics from the following Economic Type Framework (ETF) item, Purchases of new assets (ETF 2221) in respect of dwellings (Type of Asset Code 111).

State level estimates are constructed by allocating each State/Territory Level of Government to the relevant state. Estimates for the National jurisdiction are allocated using a proportion based on public employment from the Survey of Employment and Earnings (SEE).

State estimates are obtained directly from Government Finance Statistics by summing the following ETF categories in respect of Dwellings (ETF Type of Asset Code 111):

• purchases of second-hand non-financial assets (ETF 2222);
• assets acquired under finance leases (ETF4101); and
• acquisitions of non-financial assets below fair value (ETF 1152)

minus

• sales of non-financial assets (ETF 2223); and
• donations (ETF 1252).

State level estimates are constructed by allocating each State/Territory Level of Government to the relevant state. Estimates for the National jurisdiction are allocated in proportion to employment from the Survey of Employment and Earnings.

Estimates for the public sector are used to estimate values for the private sector. By way of example, if the general government sector sells two used dwellings for $300k each (one to the private sector and one to a public non-financial corporation) while a public non-financial corporation purchases a used dwelling from the private sector for $275k, estimates derived from Government Finance Statistics will generate -$600k for the general government sector and $575k (= $300k + $275k) for public non-financial corporations. Estimates for the private sector will be set equal to $25k to reflect this sector's net purchases.

It should be noted that dwellings are not allocated to a specific industry; however, they are shown as ownership of dwellings.

Sum of the total value of dwellings from the quarterly Building Activity Survey (BACS) (including public) less purchases by general government plus sales by general government.

Alterations and additions to existing dwellings are estimated using data from the BACS, and BIS Oxford Economics.

BACS provides estimates of the value of work done on alterations and additions with an approval value of $10,000 or more. As a significant part of alterations and additions activity is not covered in the BACS, estimates from BIS Oxford Economics data are used to ensure complete coverage of expenditure on alterations and additions.

State estimates are constructed using Alterations and additions to residential buildings from the BACS and applying a modeled estimate to account for work not captured by this survey (e.g. alterations and additions undertaken with an approval value below $10,000, do-it yourself (DIY) work not requiring a local government permit).

Current price estimates of gross fixed capital formation for dwellings are deflated at the State level for each of the three categories: private houses; other dwellings; and alterations and additions, to express them in the prices of the previous year.

These estimates are then aggregated to form volume estimates for new and used dwellings and alterations and additions for Australia, and total dwellings for Australia and each State.

The resulting estimates expressed in the previous period prices are linked to form chain volume measures.

Current price estimates are deflated using composite state-specific price indexes with each State index derived as a weighted average of a price index for contract-built houses and a price index for other than contract-built houses using the Producer Price Index (PPI) for Outputs of House Construction.

Contract-built house price indexes are derived as a two-quarter ending moving average (i.e. an average of the current quarter and the previous quarter) of the PPI for Outputs of House Construction for the respective state and territory.

The other than contract-built house price indexes are derived as a four quarter ending moving average (i.e. an average of the current quarter and the three preceding quarters) of the PPI for Outputs of House Construction for the respective state and territory.

The two groups for contract-built and other types of dwelling construction are used to reflect the different lags between when prices are determined and when the work is done.

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

• New building consists of 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 main source is the quarterly Building Activity Survey (BACS). This survey covers work done on private sector owned non-residential building valued at $50,000 or more.

The following adjustments are made:

• for work done on non-residential building with an approval value of less than $50,000;
• where approvals are not obtained such as for farm buildings; and
• for services involved in the construction of the building such as architect fees.

The main source is the Engineering Construction Survey (ECS). As farm non-dwelling construction is not included in the ECS, adjustments are made to capital formation to estimate expenditure of farm on non-dwelling construction.

Current price estimates of gross fixed capital formation for non-dwelling construction are deflated at the State level for each component.

Current price estimates are deflated using a composite of price indexes for roads, dams, sewerage, electricity infrastructure and telecommunications infrastructure. For all but road construction, these price indexes are derived for Australia only.

Gross fixed capital formation in 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.

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

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

The main data source is the Survey of New Capital Expenditure (Private New Capital Expenditure and Expected Expenditure, Australia). This survey provides estimates of new capital expenditure by private businesses for selected industries.

The following outlines adjustments that are made to industries that are out of scope of the survey:

• Agriculture, Forestry and Fishing industry - import statistics from International Trade in Goods and Services, Australia are used; and
• Public Administration and Safety, - estimates are obtained by applying the average movement of the industries covered in the ABS Survey of New Capital Expenditure.

Data from the Survey of New Capital Expenditure is also used to calculate industry weights for both new machinery and equipment and net purchases of second-hand assets.

Net purchase of second-hand assets covers the purchases of second-hand assets from the public sector (which are added to private GFCF), used motor vehicle sales from businesses to households and used equipment sold overseas (both of which are deducted from private GFCF).

An estimate of the value of net purchases of second-hand assets from the public sector is derived using data from quarterly surveys of public financial and non-financial corporations and Government Finance Statistics data for general government units.

An estimate of the value of motor vehicle sales from businesses to households is deducted. This estimate is first derived on an annual basis using a Perpetual Inventory Method of the stock of vehicles incorporating data from the ABS Survey of Motor Vehicle Use and motor vehicle sales data available through the VFACTS services. Quarterly estimates are then interpolated and extrapolated according to new motor vehicle sales.

An estimate of the value of used equipment sold overseas is also deducted. This estimate is derived from the international trade statistics.

Current price estimates of GFCF for new machinery and equipment and net purchases of second-hand machinery and equipment are deflated at the State level using State-specific chain price indexes.

The price indexes used for deflation are sourced from ABS publications,  Consumer Price Index, Australia; Producer Price Indexes, Australia; International Trade Price Indexes, Australia; and several price indexes from overseas, including the hedonic computer price index published by the US Bureau of Economic Analysis (BEA).

Cultivated biological resources include animal resources (livestock) and tree, crop and plant resources (orchard growth) yielding repeat products whose natural growth and regeneration are under the direct control, responsibility and management of an institutional unit.

Livestock (cattle, pigs, horses and sheep) includes breeding stocks, dairy cattle, draft animals, sheep or other animals used for wool production and animals used for transportation, racing or entertainment.

Orchard growth includes all fruit and nut bearing plants such as trees, vines, bushes, shrubs etc. (i.e. any plant that can produce a marketable quantity of fruit for more than one year where the grower intends to obtain a future benefit from the sale of the fruits grown).

GFCF for livestock is measured by the total value of all acquisitions of mature and immature animals produced on own account by users of the livestock less the value of their disposal. Disposals consist of animals sold or otherwise disposed of, including those sold for slaughter, plus those animals slaughtered by their owners. Exceptional losses of animals due to major outbreaks of disease, contamination, drought, or other natural disasters are recorded in the Other changes in the volume of assets account and not as disposals. Incidental losses of animals due to occasional deaths from natural causes form part of consumption of fixed capital.

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.

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 man, 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 by 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 at 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 by 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 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 should be deducted from the GFCF accordingly.

Mineral and petroleum exploration is the value of expenditure on exploration for petroleum and natural gas and for non-petroleum deposits and subsequent evaluation of the discoveries made. Expenditure on mineral exploration is 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 expenditure, 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.

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.

Gross fixed capital formation 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.

Current price estimates are deflated as follows:

• Film and television: current price estimates of gross fixed capital formation for film and television originals are deflated using a price index for entertainment services (Consumer Price Index, Australia)) as the future revenue/ royalty streams are likely to be driven by box office sales.
• Music originals: current price estimates of gross fixed capital formation for music originals are deflated using the All groups CPI (Consumer Price Index, Australia).
• Literary works: current price estimates of gross fixed capital formation for literary originals are deflated using the PPI component index for books, newspapers and magazines (Producer Price Indexes, Australia).

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.

Quarterly estimates for lawyers' fees are derived from annual benchmarks using movements in State data for the number and value of real estate transactions.

Quarterly estimates for real estate agents' commissions are derived based on the number of title transfers and an average fee per dwelling by state.

Periodic changes in scheduled fees are taken into account as well as changes in average charges from the declining rate schedules that generally apply.

Data on the number of transactions are obtained from State Titles Offices (Land Title Transfers) and median residential property prices are sourced from Corelogic quarterly change in dwelling values data.

Stamp duty estimates are based on quarterly Government Finance Statistics data sourced from  state government treasuries. Local government charges are estimated from the number of transactions occurring in each quarter and state government land registry fees .

Volume estimates for ownership transfer costs are derived by quantity revaluation at the State level, using title transfers data obtained from the State Title Offices and Treasuries.  Title transfers exempt from stamp duty are removed from these estimates based on state title office data where available.  Where unavailable, data from the Lending Indicators publication is combined with state specific exemptions to estimate the number of transfers exempt from stamp duty.

The most important quarterly data source is Government Finance Statistics which is obtained from individual returns from Commonwealth public non-financial corporations.

Estimates for intellectual property products are estimated using a linear trend interpolation to split the annual value over the four quarters.  These are then added to the estimated total of dwellings, non-dwelling construction, and machinery and equipment.

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.

The most important quarterly data source is Government Finance Statistics which is obtained from a mixture of centralised quarterly returns from State and Territory treasuries for approximately half the jurisdictions, while survey forms from individual public corporations make up the remainder of the source data.

Estimates for intellectual property products are estimated using a linear trend interpolation to split the annual value over the four quarters.  These are then added to the estimated total of dwellings, non-dwelling construction, and machinery and equipment.

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.

The most important quarterly data source is Government Finance Statistics which is obtained from quarterly returns from Commonwealth Department of Finance.

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. 

Estimates for intellectual property products are estimated using a linear trend interpolation to split the annual value over the four quarters. These are then added to the estimated total of dwellings, defence weapons systems, non-dwelling construction, and machinery and equipment.

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.

The most important quarterly data source is Government Finance Statistics which is obtained from quarterly returns from Commonwealth Department of Finance and a  census of public universities.

Estimates for intellectual property products are estimated using a linear trend interpolation to split the annual value over the four quarters. These are then added to the estimated total of dwellings, non-dwelling construction, and machinery and equipment.

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.

The most important quarterly data source is Government Finance Statistics which is obtained from quarterly returns from state and territory treasuries as well as a 20 percent sample of local governments.

Estimates for intellectual property products are estimated using a linear trend interpolation to split the annual value over the four quarters. These are then added to the estimated total of dwellings, non-dwelling construction, and machinery and equipment.

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.