Supply and use tables in the New Zealand System of National Accounts – year ended March 2007
The New Zealand System of National Accounts (NZSNA) is a comprehensive accounting framework based on an international standard (System of National Accounts, 1993). The structure and content of the NZSNA aggregates economic transactions that take place each day into a framework, to analyse and compare important economic variables over time such as gross domestic product (GDP).
The NZSNA is based on the results of a wide and varying range of surveys and other data sources. The organisation and presentation of this material in a systematic form allows the behaviour and interaction of the major parts of the economy to be identified, and the impact of structural changes to be understood.
GDP is a frequently used measure of economic activity. In principle GDP can be derived using three approaches, namely the production, income, and expenditure approaches. The production measure of GDP is derived from firm level data and estimates the value added by all producing industries in the New Zealand economy. The income measure of GDP is derived from earnings data and estimates how the income earned from these producing industries is then distributed throughout the economy as returns to labour and capital. The expenditure measure of GDP is derived from data estimating spending on goods and services by final end users and includes consumption, investment, and exports minus the value of imports.
Supply and use balancing
In the NZSNA, annual current price production and expenditure estimates of GDP components are reconciled within the supply and use framework. This framework provides a powerful analytical tool within which to balance the flows of goods and services in the economy. It presents a detailed analysis of the production and use of goods and services.
The supply and use approach also provides the basis for checking the consistency of the measures of the supply and use of goods and services, which have been estimated from quite different statistical sources. This data confrontation results in balanced GDP and expenditure accounts. This approach leads to improvements in the accuracy of key national accounts measures, such as GDP, gross national expenditure, national disposable income, and their components.
The accounts are balanced when, for all industries, total inputs equal total outputs and, for products, total supply equals total demand. As a result, the statistical discrepancy between the measures of GDP is zero in the years for which balancing has been carried out.
Supply and use tables
Analytical tables produced for supply and use data confrontation are known as supply and use tables. The balancing process has now been undertaken up to the year ended March 2007. The previous release of supply and use tables in basic prices was for the year ended March 2003.
Changes to the tables for the year ended March 2003 are:
- the incorporation of new product data on income and expenditure by industry from the Commodity Data Collection Survey.
- an expanded product breakdown from 62 to 190 products.
- the previous central and local government final consumption expenditure products (product codes 911.11 and 911.21) have been allocated to 21 specific products.
The industry breakdown remains at 85 industries, based on the Australian and New Zealand Standard Industrial Classification 1996.
Valuation of transactions
Sales in production accounts, as collected in business surveys, are amounts received by producers.
Purchases made by industries for intermediate consumption and by final use for consumption or capital expenditure, as collected in surveys, are amounts paid by buyers. These observable purchasers' prices will exceed producer prices by the distribution margins and non-refundable GST.
Non-refundable GST and, in the case of goods, wholesale and retail distribution margins involved in delivering the goods from producer to user, are deducted from purchasers’ prices to derive producers’ prices. Transport margins are not available separately in the NZSNA.
The published supply and use tables for the year ended March 2007 have a basic price valuation. The accounts were initially balanced in producers’ prices with non-refundable GST, wholesale and retail margins removed from the purchasers’ prices on the use side. Producers’ prices may still include some taxes on products levied as tax payable per unit of output. Taxes on alcoholic beverages and tobacco products are examples. These taxes on products were then removed from producers’ prices to derive basic prices in the supply and use tables. Although the tax is an integral part of the price paid to the producer, it is best treated as if it were paid by the purchaser directly to the government. That is, the producer is merely collecting the tax on behalf of the government and passing the tax on to the government. The basic price measures the amount retained by the producer and is therefore the price most relevant for the producer’s decision making.
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