Data Collection National Accounts (Income and Expenditure): Year ended March 2014-corrected

Period-specific information Implementation of the 2008 System of National Accounts This information release includes changes made to our macro-economic accounts in 2014. Changes have come from: updated macro-economic statistics to match new international standards other corrections and improvements annual updates for the 2011 and 2012 years. Revised figures from changing international standards This release incorporates changes in international standards as recommended in the System of National Accounts 2008 (SNA08) for the first time. In August 2014, Statistics NZ published Preview of 2014 national accounts improvements, outlining the conceptual changes of the new international standards and the expected magnitude of revisions to GDP as a result. We discuss these revisions in the commentary and revisions sections of this release. Capitalising research and development The largest effect of the international standard updates on GDP was that research and development (R&D) was capitalised. This means we now treat R&D expenditure as an investment instead of an expense. These values include the costs of all inputs of labour, materials, and capital goods used in the R&D process. R&D investment by businesses directly contributes an increase to GDP. As Crown research institutes and universities do not generally sell their output, the operational cost of these institutions is used to estimate the value of their output. The depreciation of accumulated R&D investments adds to their output and GDP contribution. Weapons systems’ capitalisation recognises use over full-service life Weapons delivery systems, such as fighter aircraft or tanks, were treated as a current expense under the old standards. Under SNA08, we treat them as an investment, with the weapons classified as fixed assets. This increases GDP not due to the reclassification – weapons expenditures were already included in final government expenditure – but the inclusion of consumption of fixed capital in government expenditure. Expenditure on weapons systems by the New Zealand armed forces is small; the highest percentage revision to GDP is 0.1 percent. Other asset changes The biggest change in this 'other asset changes' category is an improvement to the measurement of assets produced in-house. These are often measured as the sum of the cost of inputs used in the asset production process as there are no market prices available. The recommended valuation method now also includes the full value of capital services in the costs, including a return on capital. This valuation change raises the level of investment and GDP. In recent periods, the impact is small. However, the effect is larger for the pre-1990 period, when a significant amount of government construction was undertaken by internal agencies (eg the Ministry of Works) on behalf of other parts of central and local government. Other asset changes revise GDP by between 0.2 percent and 0.3 percent between 1972 and 1987, and less than 0.1 percent from 1988 onwards. Updates to the financial sector The international standards were updated to reflect developments in one of the fastest-changing segments of modern economies. The changes include: service charge on non-life insurance unfunded pension schemes. We have updated non-life insurance output to better reflect long-term expectations of future claims and to deal with irregular or exceptional events such as the Canterbury earthquakes. Under the new standard, expected claims are deducted rather than actual claims. This smooths the measurement of service fees, and better reflects actual insurance company practices. This results in a small increase on GDP, largely reflecting higher consumption of insurance services by households and the non-market sectors. SNA08 recommends a revised treatment of defined benefit employer pension schemes whereby the true liability of the employers will be recorded, and matched by a household pension asset, whether or not the schemes themselves are over- or under-funded. This treatment applies to both funded and unfunded schemes. For New Zealand, the major effect comes through revising the treatment of the Government Superannuation Fund. The updates to pension transactions include data improvements affecting the output of central government, which will have a mainly downward effect on GDP for the 1970s, 1980s, and 1990s. First edition of Annual national accounts sources and methods Statistics NZ has released the first edition of a guide to the data and methods we use to compile the annual national accounts in New Zealand. The primary purpose is to specify the data and methods we currently use to compile particular published statistics, released as the National Accounts (Industry Benchmarks) and National Accounts (Income and Expenditure). Annual national accounts sources and methods provides an overview of the conceptual framework of the national accounts, and other information, to help interpret the sources and methods in the three attached sets of tables: 1.Industry 2.Expenditure 3.Institutional sector accounts. See Annual national accounts sources and methods. Estimates for 2013 and 2014 are provisional Figures for the March 2013 and 2014 years are provisional and incomplete for the business sectors of the economy. More up-to-date information will be incorporated in future releases, which will also affect distributions between the business and household sectors and flow into household saving. National Accounts (Income and Expenditure): Year ended March 2015 will provide provisional estimates for the March 2015 year and revised estimates for March 2013 and 2014 years. Revisions to the national accounts next year will result from more up-to-date information becoming available, including updated data from the Annual Enterprise Survey: 2013 financial year (provisional) and initial inclusion of detailed results from the 2014 Annual Enterprise Survey. Statistics for the years up to 2012 are consistent with National Accounts (Industry Benchmarks): Year ended March 2012. Summary tables presented in a 'resource and use' format We have improved the format of the sector account summary tables in this release. Flows are now summarised in a 'resource and use' framework, which better represents the linkages between sector accounts and the broader set of national accounts. Corrections 30 January 2015 correction We republished National Accounts (Income and Expenditure): Year ended March 2014 on 30 January 2015. We did this to correct an error in the 2014 current-price estimates for taxes on production and imports that were published on 21 November 2014. The error did not affect quarterly economic growth, as measured by the quarterly increase in constant price gross domestic product (GDP). The error overstated the value of the affected tax series for the provisional 2014 year by approximately $1.3 billion. We produce provisional estimates for the two most recent published years in the annual National Accounts. Provisional estimates are based on the latest available information, and are revised in later publications as more detailed information becomes available. As a result of the error, the following series were also overstated and have now been revised down: GDP (income measure) – down $1.3 billion to $229.7 billion national income – down $1.3 billion to $220.2 billion national saving – down $1.3 billion to $14.2 billion government saving – down $1.6 billion to $3.4 billion. At a total economy level, the effect on these provisional measures was less than 0.6 percent. The error therefore had little impact on the overall provisional picture published on 21 November 2014. At a sector level, government saving has been revised down by $1.6 billion to $3.4 billion. This revision includes a further correction of approximately $300 million to the provisional estimate for 2014 of current transfers, which is included for completeness. The error did not affect the provisional estimates for household saving in 2014. Scope of republication The scope of this republication is to correct the error to the taxes on production and imports series, and to correct the provisional government saving series. We did not update the expenditure information to include revisions from the Gross Domestic Product: September 2014 quarter information release, published on 18 December 2014. Revisions 21 November 2014 revisions This release contains revisions arising from new and more up-to-date information, and implements the updated international standards. It incorporates the National Accounts (Industry Benchmarks): Year ended March 2012 statistics and new and improved information. Implementing the updated standards resulted in revisions to the entire time series. Revisions to National Accounts (Industry Benchmarks) The revisions to National Accounts (Industry Benchmarks) result from balancing the production and expenditure estimates of gross domestic product (GDP) within a supply and use framework. For balancing we incorporated most up to date information from the 2011 and 2012 annual economic surveys. We also included updated and new information from other data sources. Annual national accounts sources and methods has more information. Revisions to balance of payments Balance of Payments and International Investment Position: June 2014 quarter included revisions to overseas investment income, which are included in this release. Revisions of note came from: updated Inland Revenue data from the latest tax returns for companies, individuals, and other relevant units implementing the Balance of Payments Manual Version 6. Revisions to saving Revisions to national saving in 2013 are due to the availability of more accurate data for provisional estimates: partial incorporation of the annual enterprise survey 2013 updated tax data. Revisions to 2010 and 2012 have resulted from: incorporating of the supply use benchmarks from balancing methodology improvements from incorporating the international standards other methodology improvements and corrections to previously published estimates. Saving revisions summary Year ended March National saving in current price, $(million) Household saving in current price, $(million) Published Nov 2013 Published Nov 2014 Published Nov 2013 Published Nov 2014 2010 5,172 5,707 181 991 2011 4,359 5452 1,110 3,200 2012 5,397 6,636 517 1,766 2013 5,093 7,125 -837 2,889 Household saving comparison Other corrections and improvements Improvements and corrections to measuring non-life insurance As part of implementing the updated standards for measuring non-life insurance, we reviewed our methods and processes to calculate the supply and use of insurance services. Correcting inconsistencies we found in the calculations resulted in small (predominantly negative) changes to GDP. Improvements and corrections to measuring capital stocks and depreciation Issues we identified while implementing the new international standards led to downward revisions to depreciation and capital stocks. Those for depreciation partly offset the additional depreciation from updating the international standards. In the latest years, the negative effect on capital stocks is greater than the overall increase in stocks from implementing the new standards. Revised depreciation affects GDP through the changed contributions from government and non-profit sectors; however, it is not significant in size. All other parts of the economy also have revisions to depreciation, which flow through to net saving for households and other sectors. en-NZ