2019 national accounts improvements preview - Stats NZ

 
2019 national accounts
improvements preview
Crown copyright ©
See Copyright and terms of use for our copyright, attribution, and liability statements.

Citation
Stats NZ (2019). 2019 national accounts improvements preview. Retrieved from www.stats.govt.nz.

ISBN 978-1-98-858366-2 (online)

Published in November 2019 by
Stats NZ Tatauranga Aotearoa
Wellington, New Zealand

Contact
Stats NZ Information Centre: info@stats.govt.nz
Phone toll-free 0508 525 525
Phone international +64 4 931 4600

www.stats.govt.nz
2019 national accounts improvements preview

Contents
1. Purpose and background .............................................................................................. 4
    Purpose .................................................................................................................................. 4
    Background to the improvements ......................................................................................... 4
    Structure of this paper ........................................................................................................... 4
    Other associated statistics ..................................................................................................... 5

2. Main improvements to national accounts statistics ....................................................... 6
    Overview of the national account and annual publication ................................................... 6
    Effect of revisions on nominal GDP ....................................................................................... 6
    Updates expected every year ................................................................................................ 7
    One- off updates .................................................................................................................... 9

3. Main updates to quarterly gross domestic product ...................................................... 10
    Overview of quarterly GDP publication ............................................................................... 10
    Annual benchmark updates ................................................................................................. 10
    Methodology and new data sources ................................................................................... 10

4.Overview of planned work in 2020 ............................................................................... 12

Appendix ........................................................................................................................ 13

List of tables
Table 1 Percentage revisions nominal GDP-P levels (indicative) ............................................................ 6
Table 2 Percentage revisions nominal GDP-E levels (indicative) ............................................................ 7

                                                                            3
2019 national accounts improvements preview

1. Purpose and background
Purpose
2019 national accounts improvements preview presents the improvements we will make to New
Zealand’s national accounts. It provides information and analysis to help technical users of national
accounts and gross domestic product (GDP) data anticipate the impact of revisions in the following
releases:

•   National accounts (industry production and investment): Year ended March 2018 (scheduled for
    21 November 2019)
•   National accounts (income and expenditure): Year ended March 2019 (scheduled for 21
    November 2019)
•   Gross domestic product: September 2019 quarter (scheduled for 19 December 2019).

Note: the data in this paper provides broad indicators of the revisions that can be expected. These
revisions may change in the final publications.

Background to the improvements
Improvements to the national accounts in 2019 are due to new data and information that have
become available since the 2018 annual release and other changes.

The most notable changes this year are the following:

•   updates of investment and inventories data, replacing provisional estimates with data integrated
    through the supply-use framework
•   revisions to central government and household expenditure data, incorporating changes from
    GST and social assistance benefits in kind
•   trade data revisions, including IT and film exports.

Structure of this paper
Section 2 provides analysis of two types of improvements to national accounts and nominal GDP
statistics:
    • updates expected every year
    • one-off updates.

 Section 3 outlines our improvements to measures of quarterly economic growth in real terms. The
improvements fall into two broad categories:
    • annual benchmark updates
    • methodology and new data sources.

Section 4 is an overview of work we plan for 2020 that will affect the next annual national accounts
release.

                                                  4
2019 national accounts improvements preview

Other associated statistics
  These improvements will also affect other related national accounts releases:

  •   Tourism satellite account: 2019 (scheduled for 10 December 2019)
  •   Productivity statistics: 1978–2019 (scheduled for 13 February 2020)
  •   Regional gross domestic product: Year ended March 2019 (scheduled for 31 March 2020)

                                               5
2019 national accounts improvements preview

2. Main improvements to national accounts statistics
This section provides a detailed analysis of the main improvements to the national accounts and
nominal GDP statistics.

Overview of the national account and annual publication
National accounts (industry production and investment) provides comprehensive industry data on
production, investment, and capital stocks. It focuses on industry data and the benchmarks for the
nominal level of activity, which update and maintain the quality of the quarterly production measure
of GDP (GDP-P) statistics.

National accounts (income and expenditure) provides information on the national income available
for spending and saving, in nominal terms. The release gives an insight into how saving is used and
invested between different sectors of the economy. Income and expenditure items provide the basis
of updated benchmarks for measuring quarterly expenditure measure of GDP (GDP-E) statistics.

Effect of revisions on nominal GDP
Tables 1 and 2 indicate the revisions we expect to nominal GDP with the release of National
accounts (industry production and investment): Year ended March 2018 and National accounts
(income and expenditure): Year ended March 2019, both scheduled for release on 21 November
2019. The revisions indicated in these tables relate to the consolidated accounts of the nation, gross
domestic product and expenditure account (or table 1.1 of the income and expenditure release).

Table 1

 Percentage revisions nominal GDP-P levels (indicative)

                                                                    Contribution to GDP-P revisions

  Year ended March        Total revisions to
                                                  Compensation of           Gross operating      Taxes on production
                             production
                                                    employees              surplus and gross      and imports (less
                                GDP-P
                                                                             mixed income             subsidies)

                                                                  Percent
 1972–1997                       0.0                    0.0                       0.0                    0.0
 1998–2015(1)                    0.0                    0.0                      -0.1                    0.1
 2016                            0.1                    0.0                       0.0                    0.1
 2017                            0.2                    0.0                       0.1                    0.1
 2018                            1.6                    0.1                       1.3                    0.2

 1.   Treatment of gambling prizes and taxes updated from 1998.
 Source: Stats NZ

                                                         6
2019 national accounts improvements preview

Table 2

 Percentage revisions nominal GDP-E levels (indicative)

                                                                   Contributions to GDP-E revisions
      Year ended       Total revisions to
        March            expenditure            Private          Government and       Gross capital     Exports of goods
                             GDP-E            households’         non-profit final     formation        and services less
                                              expenditure          consumption          (includes           imports
                                                                   expenditure         inventory
                                                                                         change)

                                                                     Percent
 1972–1998                    0.0                 0.0                  0.0                 0.0                 0.0
 1999–2015(1)                 0.0                 -0.1                 0.1                 0.0                 0.0
 2016(2)                      0.1                 -0.1                 0.1                 0.0                 0.1
 2017                         0.2                 0.1                  0.2                 -0.2                0.1
 2018                         1.7                 0.3                  0.2                 0.9                 0.2

 1.     Rental price and social assistance benefits in kind updated from 1999, cruise ship expenditure update from 2015.
 2.    Updated trade data from 2016.
 Source: Stats NZ

Updates expected every year
Each year, we make regular updates to the most recent data in the annual national accounts. These
updates generally reflect more accurate data becoming available from the underlying data sources.

We integrate all annual data updates through the supply-use framework, which is a core part of the
national accounts framework. The updates affect nearly all statistics published in the national
accounts releases. The supply-use framework captures the flow of goods and services across the
economy. The overall framework ensures that data and methodology updates are reflected in other
components affected by the changes. Applying the supply-use framework involves an extensive
process to reconcile the flow of goods and services.

Data sourced from the annual enterprise survey (AES) is the key component that enables us to
compile a reconciled set of data through the supply-use framework.

Improved investment data
We revised total investment (gross fixed capital formation) downward for 2017 and upward for 2018
in the 2019 national accounts because new and updated information became available. The impact
of the revisions on the total nominal expenditure GDP level were -0.2 percent in the March 2017
year and 0.4 percent in the March 2018 year.

The most notable new information for 2018 is a full set of industry reported investment values being
available for the first time. The most significant changes in 2018 investment data are:

                                                             7
2019 national accounts improvements preview

    •   Other construction: Other construction gross fixed capital formation (GFKF) revised upwards
        (0.4 percent of expenditure GDP) for the 2018 March year, due to more data available that
        captures infrastructure investment.
    •   Transport: Investment in transport equipment is revised up (0.2 percent of expenditure
        GDP) from incorporating industry reported values.
    •   Residential building: Residential building investment for the March 2018 year will be revised
        down (0.4 percent of expenditure GDP), offsetting the overall upward revision to total
        investment. This revision is mainly due to transfer costs on housing purchases. The new
        information from the reconciled set of National Accounts is that there was a stronger fall in
        transfer costs than was apparent from the data available in November 2018.

Improved inventories
We improved the data for reconciling inventory changes with the rest of the economy, minimising
timing and valuation issues. This revision results in a stronger stock build up and represents 0.5
percentage points of the expenditure GDP in the March 2018 year.

Improved household expenditure data
The household expenditure measures reflect improved data that revises 2017 and 2018 upwards
(0.1 and 0.3 percentage points of expenditure GDP, respectively). This includes data updates
expected every year, and the effects of improved methodology data sources that are outlined in the
one-off updates section below.

The main changes to household consumption expenditure (HCE) are from:

    •   social assistance benefit in kind (SABIKS)
    •   exports and imports of services
    •   housing rental services.

SABIKS are services purchased by the government on behalf of households such as education and
health services.

Travel services exports are used in the calculation of HCE in quarterly GDP. HCE is spending by New
Zealand residents on goods and services and contributes approximately 60 percent to the
expenditure measure of GDP. It is calculated in part by accounting for spending by overseas visitors
in New Zealand such as tourists and business travellers.

For housing rental services see Improvements in rental price index in HCE.

Improved trade data
Annual revisions to national accounts incorporate balance of payments (BoP) data updates. This
year, our BoP revisions included improvements in trade data, particularly exports, due to new or
updated information becoming available.

2019 revisions to balance of payments and national accounts has more information.

Significant changes to the data are:

    •   increases in IT exports, due to incorporating new data from the ICT survey 2017 and the
        annual enterprise surveys for the three years from 2016 to 2018

                                                     8
2019 national accounts improvements preview

    •   increases in film exports, due to incorporating new data from the 2017/18 screen industry
        survey.

Table 2 shows the total effects of these updates on GDP-E. Revisions to trade data contributes 0.1
percent in nominal expenditure GDP movement in the March 2017 year and 0.2 percent in the
March 2018 year.

One-off updates
From time to time, we make specific improvements to the annual national accounts that reflect
either improved methodologies or incorporating a new data source that enables more accurate
estimates. The effects of the Canterbury and Kaikoura earthquakes on economic activity are good
examples of where more accurate data becomes available over time.

The one-off updates effecting the annual national accounts release in 2019 are:

    •   improved coverage of travel expenditure
    •   improved tax series: NZ lotteries commission to NZ lottery grants board transfer
    •   improved treatment of gambling prizes and dividend
    •   improved classifications for central government contributions to defined benefit schemes
    •   revised sector allocations of insurance claims related to the Kaikoura earthquake
    •   improvement to sector and industry allocations of gross fixed capital formation
    •   improvement to sector level estimates of capital stocks and consumption of fixed capital
    •   updated GST and social assistance benefits in kind
    •   incorporating revised national population estimates.

Further details for each of these updates are in the appendix.

                                                  9
2019 national accounts improvements preview

3. Main updates to quarterly gross domestic product

This section outlines the improvements we are making from the September 2019 quarter to the
quarterly measures of economic growth.

Overview of quarterly GDP publication
GDP is New Zealand’s official measure of economic growth. The production measure of GDP (GDP-P)
refers to the volume of goods and services produced in the economy, while the expenditure
measure of GDP (GDP-E) shows how these goods and services were used. We express quarterly GDP-
P in volume terms only (with the effects of price changes removed), and we express GDP-E in both
volume terms and current-price terms.

This section describes changes we have made to data and methodology that will affect our estimates
of GDP growth. More detailed analysis of the changes and the revisions to total GDP growth will be
published in Gross domestic product: September 2019 quarter, to be released on 19 December 2019.

Annual benchmark updates
Detailed annual national accounts data are used to weight (benchmark) the short-term indicator
series used to produce the quarterly production and expenditure measures of GDP. The release of
updated annual national accounts data allows for these benchmarks to be refreshed each year in the
September quarter GDP release. This ensures that the quarterly measures incorporate more detailed
data sources and reflect changes in the structure of New Zealand's economy over time.

The new quarterly GDP benchmarks will reflect:

   •   final balanced data for the year ended March 2017
   •   provisional balanced data for the year ended March 2018.

The effects of these changes will be published in the September 2019 quarter GDP release on 19
December 2019.

Methodology and new data sources
Improvements in rental price index in HCE
We have updated the underlying price indexes used in the compilation of the housing and
household utilities component of HCE. This is due to the change in data source and methodology
resulting from implementation of the new rental price indexes, which utilises tenancy bond data.
This has resulted in revisions to HCE back to the June 2016 quarter.

Improvements in calculation of aggregate inventory volumes
We are investigating changes to the methods used to calculate aggregate inventory volumes, and to
the seasonal adjustment of inventories. The aim of these changes is to improve overall coherence
for the quarterly chain-volume expenditure measure of GDP. We are also introducing minor changes
to how we calculate manufacturing and other inventories. These changes may result in significant
revisions to chain-volume changes in inventories and seasonally adjusted changes in inventories, and
minor revisions to the expenditure measure of GDP.

                                                 10
2019 national accounts improvements preview

New data source and methodology for the banking and finance industry
We have introduced a better data source and method to capture non-FISIM (Financial intermediate
services indirectly measured) income for the compilation of value added for the banking industry.
Quarterly data on fees and commissions from the Reserve Bank will be used as the new data source
from September 2019 quarter onwards. Using this data has allowed us to improve our measurement
of value added for the banking industry.

The introduction of this new data and method will result in revisions from the September 2013
quarter.

                                                11
2019 national accounts improvements preview

4. Overview of planned work in 2020
This section outlines some key elements to next year’s work programme that potentially affect the
2020 annual national accounts.

Updates from balance of payments data
Regular updates (those expected every year) of particular note for the 2020 national accounts will be
improvements to measuring international flows through BoP. 2019 revisions to balance of payments
and national accounts signalled these updates, which include spending by international students,
and IT exports. These will be accounted for in next year’s reconciliation of 2018 and 2019 trade data.

Regular periodic updates
Less frequent (regular periodic) updates to annual national accounts will incorporate new data from
less frequent data collections. These come from surveys or censuses not carried out every year, for
example a three or five year cycle, and occasional agency reports from which detailed income and
expenditure estimates are available.

Impact of 2018 Census of Population and Dwellings
The complete 2018 Census data will be available in 2020. This new information will affect HCE and
some industry estimates next year as we use it to measure the consumption of goods and services.
Some measures within the currently published HCE values for 2014 to 2018 March years are based
on the 2013 Census.

2019 Household Economic Survey
The 2019 Household Economic Survey (HES) will also be available in 2020 and will be used to update
underlying components of HCE from 2017 onwards Other currently published HCE measures for
2017 and 2018 March years are based on the 2016 HES.

Financial flows and balance sheets improvements
In 2020 we also expect to produce initial estimates of quarterly national accounts for the generation
of income, saving, net lending, and net wealth. This will mean that a full set of quarterly national
accounts will be available for the first time. The impact of these on existing annual national accounts
is not known at this time, and further information on any impacts will be released next year. These
estimates will be experimental as we anticipate further refinement over the next year or two.

                                                  12
2019 national accounts improvements preview

Appendix
Improved coverage of travel expenditure
The latest cruise ship expenditure data from the cruise ship traveller and expenditure statistics were
revised to reflect changes from improvements to card transaction expenditure source data, cruise
ship manifest modelling insights, and additional cruise related data providers. The impact of these
revisions affects the March 2015 year onwards.

Cruise ship traveller expenditure statistics: Year ended June 2019 updated the data in August 2019.

BoP included the latest data in their travel service from the December 2014 to the June 2018
quarters.

Improved tax series: New Zealand Lotteries Commission (Lotto New Zealand) to
New Zealand Lottery Grants Board transfer
We updated the treatment of lottery profit funding distributions from Lotto New Zealand to the New
Zealand Lottery Grants Board. This is better aligned with international national accounts standards
for the treatment of profits on fiscal monopolies.

For context, Lotto New Zealand transfers all lottery profits – excluding approved retentions – to the
New Zealand Lottery Grants Board, who in turn administers the final distribution to community
groups. We previously treated the transfer from Lotto New Zealand to the New Zealand Lottery
Grants Board as a current transfer. However, we will now recognise this transaction as a tax on a
product, which better reflects the primary purpose of the lottery – namely, as a device to raise
revenue for distribution to the public, as opposed to advancing interests of public economic or social
policy. The net effect on saving is zero.

These changed will be reflected in National accounts (income and expenditure): year ended March
2019 and Government finance statistics (general government): year ended June 2019 in the central
government series, and in the National accounts (industry production and investment): year ended
March 2018 taxes on production series.

Improved recording of gambling prizes and dividends as a ‘net’ transaction under
miscellaneous current transfer
As per paragraphs 8.136 to 8.139 in the 2008 System of National Accounts (SNA), there are two key
transactions that occur when households take part in any form of gambling activity.

The first transaction is the ‘service charge’ to the organiser of the lottery or betting. This is classified
as an expenditure by households within HCE and as an output for the gambling industry. This
includes service charges on imports of gambling services from overseas and reflects the expenditure
by New Zealand households on purchasing gambling services offshore. There are no revisions to how
the service charge for gambling is recorded in the National Accounts.

The second of the two transactions is the transfer of winnings (or losses) between the two
population groups: the winners and those who lose money on gambling. The Department of Internal
Affairs (DIA) refers to these as dividends or prizes. The SNA recommends these be considered
‘current transfers’ taking place directly between the units participating in gambling most often
between households, including non-resident households. The revision discussed in this paper applies
to this second transaction.

                                                    13
2019 national accounts improvements preview

Due to lack of reliable data on the distribution of winnings or losses between the two key population
groups – New Zealand residents gambling offshore and visitors gambling in New Zealand, we
currently do not include any estimate for gambling dividends-related ‘current transfers’ to/from the
rest of the world. Our current treatment of gambling dividends is restricted to New Zealand resident
households.

In our previously published accounts, we recorded transactions for domestic households or New
Zealand residents gambling in New Zealand within ‘miscellaneous current transfers’ in the household
sector accounts. The value for gambling dividends was recorded as a gross transaction, as an income
under miscellaneous current transfers receivable by households, and a similar value was shown for
losses as an expense under miscellaneous current transfers payable by households; the transfer
value was shown as both a debit and credit.

We have reviewed our presentation of gambling dividends in our published accounts. Recording the
transaction as a ‘gross’ value can lead to large transactions in the accounts that have no actual
impact on saving or net lending for the household sector. Therefore, for our upcoming release we
will be recording gambling dividends as a ‘net’ transaction or as winnings less losses. Since the value
is the same for both winnings and losses across all resident households, the net winning position will
be equal to zero.

Both miscellaneous current transfers receivable and miscellaneous current transfers payable will be
revised downwards by the same value in our household sector accounts. The result from change in
presentation will be zero on household disposable income, saving or net lending.

Improved classifications for central government contributions to defined benefit
schemes
Defined benefit pension schemes are when an employer/sponsor promises a specified pension
payment on retirement, based on various factors (for example, earnings history, service length, or
age). These schemes can be underfunded when assets set aside by the scheme are insufficient to
cover the future discounted pension liability. Sponsors can agree to cover any shortfalls, which
creates an asset claim for the pension manager over the sponsor, equal to that of the under-funding.

Central government sponsors the National Provident Fund (NPF) and the Government
Superannuation Fund (GSF). The GSF is a defined benefit pension scheme, and the NPF contains
schemes that are defined benefit pensions. As both the GSF and NPF schemes are underfunded,
these schemes have an asset claim over central government to cover the shortfall. Over time, these
asset claims will automatically increase as the underfunding worsens. As the pension schemes are
not responsible for funding any shortfall, the automatic increase in the asset claim over central
government must be imputed as income to keep the scheme’s operating balance neutral. This
imputed income for the scheme is expenditure for the sponsor, the central government.

In the 2019 release, we have treated the imputed expense for central government relating to
underfunding of defined benefit schemes as a property expense under ‘Earnings attributed to
insurance/pension policyholders’. An imputed income equal to the same value is attributed to the
pension scheme. This contrasts with the historical treatment where the underfunding was shown as
an actual interest expense for the central government (the sponsor) and as an interest income for
the scheme.

As this is a re-classification of an existing transaction from actual interest to an imputed interest
within property income, there are no revisions to the disposable income and saving for both the

                                                    14
2019 national accounts improvements preview

central government institutions sector or the financial business enterprises sector, to which the
pension schemes are classified.

Revised sector allocations of insurance claims related to the Kaikoura earthquake
Insurance flows related to the Kaikoura earthquake are recorded as capital transfers in our National
Accounts. We have updated data for recognised claims by Earthquake Commission (EQC) and private
insurers relating to the Kaikoura earthquake. We made also quality improvements to the processes
used to allocate insurance claims to the institutional sectors most affected by the earthquake. These
changes have been backdated to 2017.

Improvement to sector and industry allocations of gross fixed capital formation
We made quality improvements to the processes used to allocate GFKF to industry and sector
classes for the asset types plant, machinery and Equipment (PME), and software and air transport
equipment. These changes have been backdated to 2007. There is no change to the asset level totals
of GFKF by asset, but published industry and sector level breakdowns have been revised to reflect
the improved approach.

Improvement to sector level estimates of capital stocks and consumption of fixed
capital
Two years ago, we introduced a new institutional sector classification in the National accounts
(income and expenditure): Year ended March 2017 release. The new classification is known as
Statistical Classification for Institutional Sectors (SCIS).

This year we have improved the SCIS level measurement of capital stocks and consumption of fixed
capital (CFK) by carrying SCIS level source data through the Perpetual Inventory Method (PIM)
system rather than applying SCIS breakdowns to the outputs of the PIM system. Revisions to the
time series of capital stocks and CFK at SCIS level have been brought in to reflect the improved
quality from this approach. This work led us to reconsider how we have accounted for the
privatisation of Bank of New Zealand in the early 1990s. This has caused very minor revisions to
capital stock and CFK estimates for affected sector of ownership levels.

Updated GST and social assistance benefits in kind
We have updated the methodology for how we calculate the amount of GST received by central
government. The new method draws upon actual source data rather than estimates and is more
aligned with how the New Zealand Treasury calculates the amount of GST received in its central
government accounts. This updated method has been backdated to 2004.

We have also added GST to certain social assistance benefits paid by government that did not
include it previously. This increases central government final consumption expenditure which is
offset against HCE. The reasoning for this is with government paying more for certain services on the
behalf of households, the expenditure of households on those services will correspondingly drop.
These revisions have been backdated to 1999.

Incorporating revised national population estimates
Stats NZ released a new outcomes-based measure of migration in November 2018. From the
December 2018 quarter, the outcomes-based migration measure has been used to produce the
quarterly national population estimates.

In the National population estimates: At 30 June 2019 release, the historical population series has
been revised back to the September 2013 quarter using the outcomes-based migration data.

                                                  15
2019 national accounts improvements preview

Implementing the outcomes-based migration measure has resulted in a downward revision to New
Zealand's estimated resident population of about 50,000 over the period September 2013 quarter to
June 2019 quarter. New Zealand's population growth 1.6 percent in June year has more information.

Per capita measures are calculated by dividing the relevant series by the estimated resident
population of New Zealand. The revisions to the national population estimates will result in upward
revisions to GDP per capita levels.

                                                 16
You can also read