This report has been prepared by the National Centre for Culture and Recreation Statistics of the Australian Bureau of Statistics (ABS)
Input-output multipliers are measures which can be used to predict the impact on the economy of a change in the demand for the output of an industry. They can provide quick answers about the likely impacts of an increase or decrease in demand for the output of an industry, the likely impacts of new projects, and the likely results of import replacement strategies, not only on the industry itself, but also on all other industries in the economy. Their application is comparatively simple and relatively effective. However, as multipliers describe average effects (rather than changes at the margin), they do not take into account economies of scale, unused capacity or technological change.
The ABS produces input-output multipliers for each of the 106 industry sectors which make up the Australian economy. However, it does not produce multipliers for the culture-related industries, which are split between a number of these industry sectors. This report aims to fill this gap by estimating multipliers for the culture-related industries.
The report firstly provides a description of input-output tables, from which multipliers are derived. It then explains how these tables can be used to analyse the impact on the economy of changes in the demand for goods and services. The concept of multipliers is then introduced, and some of their limitations described. Following this, estimates of multipliers are presented, together with some advice on their application. Economic terms used in this report are contained in the glossary.
Multipliers are derived from input-output tables. These tables show the structure of the country’s entire production system for a particular period (usually one year). They show the value of goods and services produced by each industry and who purchases them (e.g. some goods, such as cars, are mainly sold to final consumers, while others, such as steel, are used as inputs to other industries in producing more goods and services).
Thus input-output tables show the relationships that exist between industries. From these tables, it is possible to determine what types of inputs any industry uses, such as raw materials, manufactured goods and labour. By setting out the links amongst different industries, input-output tables present a picture of the structure of the economy.
Table 1 shows a very simplified input-output table for Australia for the financial year 1996-97. It divides the economy into three broad industry sectors primary industry, which comprises agriculture and mining; secondary industry, which comprises manufacturing, construction, electricity, gas and water; and tertiary industry, which includes transport, wholesale, retail, finance, government and other service industries such as culture and recreation. The column headed ‘Total supply’ shows the total value of production of each industry. For example, secondary industry produced $301,000m of output in 1996-97, of which $10,000m, $74,000m and $49,000m were purchased by primary, secondary and tertiary industries respectively. These figures are shown in the second row of the table and total to $133,000m as shown in the ‘Total industry uses’ column. A further $59,000m of the output of secondary industry was purchased for consumption, $71,000m was capital equipment purchased by businesses while $38,000m was exported
| USING INDUSTRY | ||||||||||
| Primary | Secondary | Tertiary | Total industry uses | |||||||
| $’000m | $’000m | $’000m | $’000m | |||||||
| Supplying industry | ||||||||||
| Primary | 8 | 27 | 3 | 37 | ||||||
| Secondary | 10 | 74 | 49 | 133 | ||||||
| Tertiary | 13 | 56 | 174 | 242 | ||||||
| Intermediate uses | 31 | 156 | 225 | 412 | ||||||
| Compensation of employees(a) | 10 | 53 | 194 | 257 | ||||||
| Gross operating surplus(b) | 29 | 52 | 132 | 214 | ||||||
| Imports | 4 | 33 | 20 | 57 | ||||||
| Taxes less subsidies | 2 | 6 | 25 | 33 | ||||||
| Australian production | 76 | 301 | 596 | 973 | ||||||
|
Note: Primary industry comprises agriculture and mining. Secondary industry comprises manufacturing, construction, electricity, gas and water. | ||||||||||
|
(a) Compensation of employees comprises wages and salaries, as well as other labour costs, such as employer contributions to superannuation funds and employers premiums for workers’ compensation schemes. | ||||||||||
|
(b) Gross operating surplus is the operating surplus (a measure of profit) before deduction of items such as depreciation (which reflects the consumption of fixed capital) and interest on loans. | ||||||||||
| Source: ABS, Australian National Accounts: Input-Output Tables, 1996-97 (data available on request). | ||||||||||
| FINAL DEMAND | ||||||||||
| Consumption | ||||||||||
House- holds |
Govern-ment |
Invest- ment |
Exports |
Total supply | ||||||
| $’000m | $’000m | $’000m | $’000m | $’000m | ||||||
| 5 | 1 | 1 | 32 | 76 | ||||||
| 54 | 5 | 71 | 38 | 301 | ||||||
| 213 | 90 | 22 | 29 | 596 | ||||||
| 272 | 95 | 94 | 100 | 973 | ||||||
| — | — | — | — | 257 | ||||||
| — | — | — | — | 214 | ||||||
| 23 | 1 | 19 | 3 | 104 | ||||||
| 20 | — | 7 | 2 | 61 | ||||||
| 315 | 96 | 119 | 105 | 1,608 | ||||||
|
Note: Primary industry comprises agriculture and mining. Secondary industry comprises manufacturing, construction, electricity, gas and water. | ||||||||||
|
(a) Compensation of employees comprises wages and salaries, as well as other labour costs, such as employer contributions to superannuation funds and employers premiums for workers’ compensation schemes. | ||||||||||
|
(b) Gross operating surplus is the operating surplus (a measure of profit) before deduction of items such as depreciation (which reflects the consumption of fixed capital) and interest on loans. | ||||||||||
| Source: ABS, Australian National Accounts: Input-Output Tables, 1996-97 (data available on request). | ||||||||||
The value of output of secondary industry ($301,000m) is also shown at the bottom of the column headed ‘Secondary’. This is because this column of the table shows all of the inputs that secondary industry used to produce the $301,000m of output. As gross operating surplus is also defined as an input, the cost of inputs equals the value of output. For instance, secondary industry purchased $27,000m of goods from primary industry and paid out $53,000m in labour costs.
The use of input-output tables for analysis purposes requires the assumption that fixed amounts of inputs are required to produce a given output. For example, if secondary industry was to increase its output by $301, it is assumed that it would have to purchase an extra $27 of output from primary industry and an extra $56 from tertiary industry (as shown in the column headed ‘Secondary’ in the table). It would also have to pay an extra $53 in wages, salaries and other labour costs to produce this output.
The goods that secondary industry purchased from other industries to enable it to increase its output by $301 would also have to be produced. For example, tertiary industry would have to increase its output by $56. However, for the tertiary industry to increase its output by $56, it would have to purchase about $0.28 of goods from primary industry and $4.60 of goods from secondary industry (these figures are derived from the column headed ‘Tertiary’ in table 1). These extra purchases would, in turn, induce additional production. This extra demand for goods to enable this initial increase ($301) to be met is termed the ‘production induced effects’.
In producing the extra output of $301, secondary industry would pay an extra $53 in labour costs and other industries would also have to pay extra wages and salaries to satisfy the production induced effects. The extra pay would lead to an increase in consumption expenditure as employees seek to spend some of this additional money. Thus, the extra income would lead to extra demand for goods and services which also require additional production. The extra demand created for consumption goods is termed the ‘consumption induced effects’.
Thus, the total increase in output as a result of an increase in demand of $301 from goods for secondary industry is more than $301 due to the production induced effects and the consumption induced effects.
An ‘output multiplier’ shows the relationship between the initial increase in output required from an industry and the total increase in output by all industries. Note that this multiplier involves double-counting as the increased output of one industry can be used as an input into another industry and so can be counted more than once. For this reason, this multiplier must be used with care as it overstates the economic impact resulting from the initial increase in output (caused, for example, by a new project).
The problem of double-counting can be avoided by using a ‘gross value added multiplier’ (the gross value added by an industry excludes the value of goods and services provided by other industries that is used in producing the output). The gross value added multiplier shows the relationship between the initial increase in output required from an industry and the total increase in gross value added by all industries. The gross value added multiplier for secondary industry (as defined in table 1) in 1996-97 was 1.32. This number cannot be seen in the table, but can be calculated using matrix algebra as described in Information Paper: Australian National Accounts: Introduction to Input-Output Multipliers (ABS Cat. no. 5246.0). A value of 1.32 means that the increase in value added required from all industries in Australia to satisfy an increase in demand of $301 for output from secondary industry was (1.32 x $301), or $397. This increase of $397, which excludes double-counting, is approximately the amount by which Gross Domestic Product (GDP) increases if there was this increase in demand.
Multipliers can also be calculated for other aggregates that vary with output, such as employment. Consequently, it is possible to calculate an ‘employment multiplier’ which shows the number of extra persons employed for an initial expenditure of $1m on output from an industry. Note that businesses may respond to an increase in demand in a number of ways. For example, for short-term events, businesses may not take on extra staff but cater for the change in demand by paying overtime. Thus, even though full-time equivalent (FTE) employment (as measured by the employment multiplier) would increase, the actual number employed may remain relatively unchanged. Similarly, if businesses respond to the change in demand by employing part-time workers, the actual number employed may not change by the full number of new jobs created, as some of these people may have another job elsewhere.
There are some qualifications which must be attached to any analysis which uses multipliers. These arise because of the basic input-output assumption that the change in output of any industry will lead to the same proportional change in the quantities of all inputs the industry uses, including labour. This assumption rules out the possibility of economies of scale and the substitution of imports for local production. Multipliers do not take into account any unused capacity that the industry may have, nor do they make allowances for other possible responses by firms (e.g. if more production capacity is required, it is assumed to occur, rather than prices increasing or the demand being met by imports).
Another assumption of input-output analysis is that the mix of inputs remains stable over time. This assumption is important because the tables are published about three years after the year to which the data apply (due to the large amount of information that must be gathered and the time delays in obtaining some of these data).
Changes to the tax system since 1996-97, when the latest input-output tables were compiled, means that this assumption may not be correct. The introduction of the Goods and Services Tax in July 2000 and the reduction in wholesale sales tax will have affected some of the costs of inputs faced by firms (some inputs will have risen in price while others, such as motor vehicles, which were previously subject to wholesale sales tax will have fallen in price). Consequently, since 1996-97 firms may have changed the composition of their input mix to achieve lower costs of production. As well, consumers may have changed their expenditure patterns to purchase more goods and less services, as some goods, previously subject to wholesale sales tax, are now cheaper while services are now dearer. It is not possible to quantify the effect these changes would have on the size of the multipliers and, for this reason, extra caution should be taken when using multipliers based on data collected prior to the introduction of the Goods and Services Tax.
As well, the mix of inputs that an industry uses may be affected by changes in technology. This is particularly so in industries which are subject to rapid technological change such as those involving communications and pay TV. However, generally, the technology used by most industries is fairly stable so this is not a serious shortcoming.
Despite these shortcomings, multipliers derived from 1996-97 input-output tables can provide an indication of how a change in demand (e.g. an increase in exports of manufactured goods) would impact on the economy today.
Each year the ABS prepares input-output tables and multipliers for Australia. The most detailed tables show 106 industry sectors (compared with the three simplified industry sectors shown in table 1).
Table 2 shows output, gross value added and employment multipliers for Australia for 1996-97 for each of the 106 industry sectors, as calculated by the ABS. It should be noted that some of the input-output industry sectors correspond to single classes of the Australian and New Zealand Standard Industrial Classification (ANZSIC). However, it is not practicable to have an input-output industry sector for each ANZSIC class. Consequently, most input-output industry sectors are an amalgamation of ANZSIC classes.
Most of the output multipliers in the table have a value between two and three. Because the gross value added multipliers avoid double-counting, they are smaller than the output multipliers, with the vast majority having a value between one and one and a half. Most of the FTE employment multipliers lie in the range of 15 to 25. For example, the FTE employment multiplier for motion picture, radio and television services is 21. This can be interpreted as 21 FTE jobs being created for a duration of 12 months for every $1m of initial expenditure on the motion picture, radio and television services industry.
The multipliers shown in table 2 indicate the impact on the national economy of the initial increase in demand. The equivalent multipliers for a State or region would be smaller than these because all the economic activity generated by the initial increase in demand would not be confined to the State or regional economy. For example, the employment multiplier for a State or region within Australia by necessity will be smaller than the national employment multiplier because some of the employment created in Australia will occur outside of the region being studied. In general, if a large proportion of the initial expenditure involves importing goods and services from outside of the region of interest, the multipliers will have relatively low values because the flow-on effects are inversely related to the proportion of inputs that must be sourced from outside the region.
|
Australian production |
Output |
Gross value |
FTE employment multiplier | |
|
Input-output industry sector |
$’000m |
|||
|
Agriculture, forestry and fishing |
||||
|
Sheep |
3.6 |
2.33 |
1.21 |
22 |
|
Grains |
7.0 |
2.12 |
1.16 |
20 |
|
Beef cattle |
3.1 |
2.43 |
1.25 |
28 |
|
Dairy cattle |
3.0 |
2.77 |
1.25 |
24 |
|
Pigs |
0.6 |
2.76 |
1.30 |
22 |
|
Poultry |
1.4 |
2.81 |
1.31 |
18 |
|
Other agriculture |
9.1 |
2.30 |
1.23 |
20 |
|
Services to agriculture; hunting and trapping |
3.0 |
3.02 |
1.50 |
23 |
|
Forestry and logging |
1.1 |
2.97 |
1.37 |
24 |
|
Commercial fishing |
2.3 |
2.65 |
1.17 |
16 |
|
Mining |
||||
|
Coal; oil and gas |
19.5 |
2.20 |
1.26 |
9 |
|
Iron ores |
3.6 |
2.44 |
1.28 |
11 |
|
Non-ferrous metal ores |
10.2 |
2.59 |
1.25 |
13 |
|
Other mining |
3.4 |
2.42 |
1.21 |
13 |
|
Services to mining |
5.1 |
2.94 |
1.40 |
17 |
|
Manufacturing |
||||
|
Meat and meat products |
10.4 |
3.46 |
1.43 |
25 |
|
Dairy products |
7.0 |
3.35 |
1.32 |
21 |
|
Fruit and vegetable products |
3.4 |
3.11 |
1.34 |
17 |
|
Oils and fats |
0.9 |
3.09 |
1.23 |
16 |
|
Flour mill products and cereal foods |
3.2 |
3.02 |
1.32 |
18 |
|
Bakery products |
3.1 |
3.20 |
1.46 |
25 |
|
Confectionery |
1.3 |
3.02 |
1.35 |
19 |
|
Other food products |
9.2 |
3.22 |
1.36 |
19 |
|
Soft drinks, cordials and syrups |
2.2 |
3.32 |
1.36 |
19 |
|
Beer and malt |
2.4 |
2.83 |
1.30 |
14 |
|
Wine and spirits |
2.5 |
2.78 |
1.29 |
17 |
|
Tobacco products |
1.0 |
2.46 |
1.13 |
13 |
|
Textile fibres, yarns and woven fabrics |
3.0 |
3.26 |
1.42 |
22 |
|
Textile products |
1.7 |
2.95 |
1.30 |
24 |
|
Knitting mill products |
0.9 |
3.18 |
1.40 |
19 |
|
Clothing |
4.2 |
2.87 |
1.21 |
25 |
|
Footwear |
0.6 |
2.93 |
1.31 |
26 |
|
Leather and leather products |
0.9 |
3.47 |
1.34 |
27 |
|
Sawmill products |
2.5 |
2.81 |
1.35 |
20 |
|
Other wood products |
3.7 |
3.08 |
1.41 |
22 |
|
Pulp, paper and paperboard |
2.0 |
2.64 |
1.19 |
14 |
|
Paperboard containers, paper bags and sacks |
3.2 |
2.58 |
1.16 |
15 |
|
Printing and services to printing |
7.5 |
2.78 |
1.30 |
20 |
|
Publishing; recorded media and publishing |
7.9 |
2.72 |
1.36 |
18 |
|
Petroleum and coal products |
10.6 |
2.07 |
0.71 |
6 |
|
Basic chemicals |
6.2 |
2.78 |
1.14 |
14 |
|
Paints |
1.5 |
2.50 |
1.11 |
14 |
|
Medicinal and pharmaceutical products; pesticides |
5.2 |
3.00 |
1.24 |
17 |
|
continued on next page ...... | ||||
|
Australian production |
Output multiplier |
Gross value added multiplier |
FTE employment multiplier | ||||
|
Input-output industry sector |
$’000m |
||||||
|
Soap and detergents |
1.1 |
2.84 |
1.15 |
16 | |||
|
Cosmetics and toiletry preparations |
0.9 |
2.99 |
1.24 |
18 | |||
|
Other chemical products |
1.8 |
2.79 |
1.17 |
15 | |||
|
Rubber products |
1.6 |
2.76 |
1.26 |
18 | |||
|
Plastic products |
6.2 |
2.74 |
1.21 |
17 | |||
|
Glass and glass products |
1.1 |
2.78 |
1.31 |
21 | |||
|
Ceramic products |
1.3 |
2.77 |
1.39 |
22 | |||
|
Cement, lime and concrete slurry |
3.3 |
3.22 |
1.40 |
17 | |||
|
Plaster and other concrete products |
1.9 |
3.06 |
1.41 |
19 | |||
|
Other non-metallic mineral products |
1.1 |
3.07 |
1.40 |
19 | |||
|
Iron and steel |
10.6 |
3.12 |
1.34 |
17 | |||
|
Basic non-ferrous metals and products |
12.9 |
3.18 |
1.25 |
13 | |||
|
Structural metal products |
5.9 |
3.29 |
1.43 |
21 | |||
|
Sheet metal products |
3.2 |
3.18 |
1.40 |
20 | |||
|
Fabricated metal products |
5.2 |
3.09 |
1.43 |
24 | |||
|
Motor vehicles and parts; other transport equipment |
15.3 |
2.65 |
1.09 |
17 | |||
|
Ships and boats |
2.0 |
2.90 |
1.21 |
15 | |||
|
Railway equipment |
0.9 |
3.28 |
1.40 |
17 | |||
|
Aircraft |
1.5 |
2.90 |
1.45 |
17 | |||
|
Photographic and scientific equipment |
1.4 |
2.78 |
1.34 |
20 | |||
|
Electronic equipment |
4.8 |
2.36 |
1.08 |
13 | |||
|
Household appliances |
3.0 |
2.99 |
1.15 |
18 | |||
|
Other electrical equipment |
4.3 |
2.94 |
1.27 |
19 | |||
|
Agricultural, mining and construction machinery; lifting and material handling equipment |
3.9 |
3.10 |
1.32 |
21 | |||
|
Other machinery and equipment |
4.0 |
2.92 |
1.35 |
22 | |||
|
Prefabricated buildings |
0.6 |
3.04 |
1.33 |
20 | |||
|
Furniture |
4.4 |
3.13 |
1.42 |
28 | |||
|
Other manufacturing |
1.4 |
2.80 |
1.31 |
23 | |||
|
Electricity, gas and water supply |
|||||||
|
Electricity supply |
15.2 |
2.36 |
1.28 |
11 | |||
|
Gas supply |
1.7 |
2.51 |
1.39 |
15 | |||
|
Water supply, sewerage and drainage services |
6.5 |
2.24 |
1.23 |
11 | |||
|
Construction |
|||||||
|
Residential building construction |
26.0 |
2.82 |
1.31 |
17 | |||
|
Other construction |
37.7 |
2.92 |
1.47 |
24 | |||
|
Wholesale trade |
|||||||
|
Wholesale trade |
58.9 |
3.24 |
1.57 |
23 | |||
|
Retail trade |
|||||||
|
Retail trade |
45.7 |
3.25 |
1.66 |
34 | |||
|
Repairs |
|||||||
|
Mechanical repairs |
11.8 |
2.34 |
1.35 |
18 | |||
|
Other repairs |
7.0 |
2.15 |
1.27 |
20 | |||
|
continued on next page ...... | |||||||
|
Australian production |
Output multiplier |
Gross value added multiplier |
FTE employment multiplier | |
|
Input-output industry sector |
$’000m |
|||
|
Accommodation, cafes and restaurants |
||||
|
Accommodation, cafes and restaurants |
29.3 |
3.00 |
1.46 |
25 |
|
Transport and storage |
||||
|
Road transport |
21.8 |
2.87 |
1.44 |
21 |
|
Rail, pipeline and other transport |
7.4 |
3.27 |
1.66 |
23 |
|
Water transport |
2.9 |
2.47 |
1.04 |
13 |
|
Air and space transport |
12.7 |
3.08 |
1.42 |
16 |
|
Services to transport; storage |
18.5 |
2.47 |
1.45 |
15 |
|
Communication services |
||||
|
Communication services |
24.8 |
2.54 |
1.41 |
17 |
|
Finance and insurance |
||||
|
Banking |
18.3 |
2.61 |
1.55 |
19 |
|
Non-bank finance |
7.1 |
2.78 |
1.45 |
19 |
|
Insurance |
12.2 |
2.76 |
1.68 |
17 |
|
Services to finance, investment and insurance |
9.8 |
1.90 |
1.38 |
14 |
|
Property and business services |
||||
|
Ownership of dwellings |
56.0 |
1.39 |
1.05 |
2 |
|
Other property services |
39.0 |
3.26 |
1.53 |
17 |
|
Scientific research, technical and computer services |
21.5 |
2.69 |
1.52 |
21 |
|
Legal, accounting, marketing and business management services |
32.4 |
2.85 |
1.56 |
22 |
|
Other business services |
17.8 |
3.14 |
1.46 |
25 |
|
Government administration and defence |
||||
|
Government administration |
31.5 |
3.23 |
1.75 |
27 |
|
Defence |
8.8 |
3.16 |
1.60 |
25 |
|
Education |
||||
|
Education |
27.0 |
3.04 |
1.97 |
33 |
|
Health and community services |
||||
|
Health services |
33.2 |
2.96 |
1.87 |
29 |
|
Community services |
6.7 |
3.26 |
1.61 |
36 |
|
Cultural and recreational services |
||||
|
Motion picture, radio and television services |
4.8 |
2.82 |
1.44 |
21 |
|
Libraries, museums and the arts |
3.0 |
2.75 |
1.65 |
27 |
|
Sport, gambling and recreational services |
9.3 |
2.82 |
1.39 |
22 |
|
Personal and other services |
||||
|
Personal services |
5.8 |
2.66 |
1.44 |
35 |
|
Other services |
11.2 |
3.01 |
1.82 |
28 |
|
Source: ABS, Australian National Accounts: Input-Output Tables, 1996-97 (data available on request). | ||||
The Industry Classification of the Australian Culture and Leisure Classifications (ABS Cat. no. 4902.0) lists industries consisting of organisations for which the main activity is the production or provision of culture and leisure goods and services.
The culture-related industries (as defined by this classification) are contained in the following input-output sectors:
The ABS does not prepare input-output tables showing specific culture-related industries such as libraries or museums because there are insufficient data available on the goods and services used by these industries. The data needed to accurately produce multipliers at this level include:
Given that this detailed information is not available (as it requires in-depth surveys of the culture-related industries), one alternative is to estimate the input mix of each culture-related industry based on data gathered in collections such as the 1996-97 ABS Service Industry Surveys as well as unpublished input-output data. Where these data sources are not sufficient, the assumption can be made that the input mix is the same as for the input-output sector to which the industry belongs. For example, for those parts of the input mix for museums which are not known, it can be assumed to be the same as for the entire sector, Libraries, museums and the arts. However, as the mix of inputs used by museums would differ somewhat from some other industries in this sector (e.g. music and theatre productions), the resulting multipliers should be regarded as indicative only and so should be treated with caution.
Table 3 shows estimated output, gross value added and FTE employment multipliers for Australia for selected culture-related industries based on this additional information and allocating inputs to industries on a pro rata basis where no alternative information was available. The gross value added multiplier for the overall culture-related industries was estimated at 1.39. This means that if the demand for cultural goods and services increased by $1m, then gross value added by all industries would increase by $1.39m (and therefore Australia’s gross domestic product would increase by a similar amount). Of the culture-related industries, the estimated gross value added multiplier was highest for Film and video production and distribution (1.80) and Music and theatre productions (1.79). The FTE employment multiplier for the culture-related industries was estimated to be 22, which was slightly higher than for most other industries. Of the culture-related industries, the FTE employment multiplier was highest for Architectural services (38), Film and video production and distribution (37), and Music and theatre productions (34).
|
Australian production(a) |
Output |
Gross value |
FTE employment | |
|
$m |
||||
|
Printing |
4,861 |
2.75 |
1.29 |
22 |
|
Newspaper printing/publishing |
4,462 |
2.70 |
1.33 |
19 |
|
Other periodical publishing |
1,240 |
2.74 |
1.31 |
18 |
|
Book and other publishing |
1,894 |
2.76 |
1.29 |
17 |
|
Architectural services |
1,107 |
3.03 |
1.60 |
38 |
|
Advertising services |
3,342 |
2.93 |
1.41 |
19 |
|
Commercial art and display services |
1,246 |
2.86 |
1.49 |
24 |
|
Film and video production and distribution |
474 |
3.05 |
1.80 |
37 |
|
Motion picture exhibition |
545 |
2.61 |
1.28 |
19 |
|
Radio and TV services |
3,328 |
2.83 |
1.39 |
19 |
|
Libraries and museums |
783 |
2.98 |
1.74 |
30 |
|
Parks and gardens |
591 |
2.65 |
1.64 |
25 |
|
Music and theatre productions |
397 |
3.09 |
1.79 |
34 |
|
Creative arts |
463 |
2.59 |
1.55 |
28 |
|
Services to the arts |
601 |
2.50 |
1.40 |
21 |
|
Video hire outlets and photographic studios |
1,044 |
2.68 |
1.38 |
26 |
|
All cultural industries |
26,377 |
2.79 |
1.39 |
22 |
|
(a) Australian production of input-output products primary to the industry. | ||||
|
Source: Based on ABS data, including the Australian National Accounts and the Service Industry Surveys. | ||||
The following example shows how multipliers can be used to summarise the economic impact of an initial increase in demand for the output of an industry.
Suppose a foreign film company decides to shoot a feature film in Australia and this involves expenditure of $20m in Australia. Then the economic impact can be estimated as:
|
Increase in output |
$20m x 3.05 (i.e. $61m—note that this includes some double-counting) |
|
Increase in gross value added |
$20m x 1.80 (i.e. $36m—this is approximately the increase in GDP) |
|
Increase in employment |
20 x 37 (i.e. the equivalent of 740 people employed |
A practical example of the use of multipliers is provided in an economic impact study of the 1996 Adelaide Festival. It shows how multipliers were used to assess the impact of the Adelaide Festival of Arts on gross value added, income and employment in South Australia.
Some of the cultural industries are involved in the wholesaling and retailing of cultural goods (e.g. literature wholesaling and retailing). In the Australian National Accounts, wholesaling and retailing activities are viewed to be the provision of services because the product is not significantly transformed in these activities. One of the consequences of this treatment is that the valuations in the tables referred to in this report show industry flows at ‘basic prices’, which is the amount receivable by the producer, less any tax payable, plus any subsidy. For many industries, this differs from the price paid by the purchaser because of taxes and subsidies, transport and insurance costs, and wholesale and retail margins.
For each of the culture-related industries, the value of output at purchasers’ prices in
1996-97 was identical to the value at basic prices (i.e. the percentage margin was zero), except for:
When analysing the impact that an initial change in demand for these industries has on the economy, the initial change should be split up into its components, with the component showing output at basic prices being adjusted by the relevant industry multiplier (shown in table 3), the wholesale margin component being adjusted by the multiplier for the wholesale trade industry (shown in table 2) and the retail margin component being adjusted by the multiplier for the retail trade industry (shown in table 2).
For example, suppose we are trying to measure the economic impact on the national economy of staging an arts festival and a survey of attendees indicates that overseas visitors who came specifically for the festival spent $10m while in Australia and that this initial expenditure of $10m comprised:
The expenditure on books should be broken down into the retail margin component, the wholesale margin component and the amount received by the book publisher (say $0.1m, $0.1m and $0.3m respectively.
|
|
|
|
Gross |
Gross |
|
Accommodation and meals |
5.0 |
Accommodation, cafes and restaurants |
1.46 |
7.300 |
|
Tickets to arts festival |
2.5 |
Music and theatre productions |
1.79 |
4.475 |
|
Personal services |
1.2 |
Personal services |
1.44 |
1.728 |
|
Transport |
0.8 |
Road transport |
1.44 |
1.152 |
|
Books |
||||
|
Book retailers |
0.1 |
Retail trade |
1.66 |
0.166 |
|
Book wholesalers |
0.1 |
Wholesale trade |
1.57 |
0.157 |
|
Book publishers |
0.3 |
Book and other publishing |
1.29 |
0.387 |
|
Total |
10.0 |
15.365 | ||
The table shows that in this example, gross domestic product would have increased by approximately $15.4m as a result of the initial expenditure of $10m by overseas visitors to the festival.
Multipliers can be used in assessing the effects on the economy resulting from a change in demand. They are useful for calculating the effects on the country of an increase in exports, or looking at the economic impact of a special event, such as a major festival.
Multipliers can be used to provide an indication of the impact on the economy of a change in exports, an increase in investment, or the staging of a special event. However, their use to support an argument to justify an increase in government expenditure on culture is more difficult to sustain in an environment where government expenditure is stable. This is because in such instances, an increase in government expenditure in one sector, such as culture, may be offset by reduced expenditure on another sector (e.g. health). Therefore, the net impact may not be large (only to the extent by which the culture multipliers are larger than the multipliers for the sector with reduced funding).
Yet, it should be remembered that a multipliers argument for increased cultural funding by governments is based on the economic benefits only. There are non-economic benefits that flow from increased expenditure on culture which by their nature are not easily measurable, such as giving people a sense of identity, encouraging self expression and creativity, creating and preserving Australia’s heritage and traditions, as well as providing an enjoyable experience.
The main advantage of using input-output tables and input-output multipliers is that they provide an objective method of assessing the impact on the economy of an initial change in demand (e.g. as a result of an increase in investment or exports). This assessment can be made in terms of the impact on output, value added, employment, etc.
The estimates of multipliers for the culture-related industries presented in table 3 are indicative only but show that there are some variations in the values of multipliers among the different culture-related industries. Consequently, the use of these multipliers should lead to more accurate estimates of the impact of culture-related projects and events on the national economy.
|
ANZSIC classes |
An ANZSIC class is the most detailed dissection of the industry shown in the Australian and New Zealand Standard Industrial classification (ANZSIC) (see Australian and New Zealand Standard Industrial Classification, 1993 Edition (ABS Cat. no. 1292.0). |
|
Australian production |
This is the value of goods and services produced by the Australian economy. It can be calculated as the total of intermediate uses and other inputs (compensation of employees, gross operating surplus etc.). |
|
Basic prices |
The basic price is the amount receivable by the producer from the purchaser for a unit of a good or service produced (minus any tax payable, plus any subsidy receivable). It excludes any transport charges invoiced separately by the producer. |
|
Compensation of employees |
Compensation of employees is the total remuneration, in cash or in kind, payable by an enterprise to an employee in return for work done by the employee during the accounting period. It is further classified into two sub-components: wages and salaries; and employers’ social contributions (payments by employers which are intended to secure for their employees the entitlement to social benefits should certain events occur, or certain circumstances exist, that may adversely affect their employees’ income or welfare—namely work-related accidents and retirement). Compensation of employees is not payable in respect of unpaid work undertaken voluntarily, including the work done by members of a household within an unincorporated enterprise owned by the same household. Compensation of employees excludes any taxes payable by the employer on the wage and salary bill (e.g. payroll tax, fringe benefits tax). |
|
Final demand |
Final demand is the demand for goods and services that are not used up in the production process. |
|
Final consumption |
This is the net expenditure on goods and services by public authorities, other than those classified as public corporations, which does not result in the creation of fixed assets or inventories or in the acquisition of land and existing buildings or second-hand assets. It comprises expenditure on compensation of employees (other than those charged to capital works etc.), goods and services (other than fixed assets and inventories) and consumption of fixed capital. Expenditure on repair and maintenance of roads is included. Fees etc., charged by general government bodies for goods sold and services rendered are offset against purchases. |
|
Final consumption |
This is the net expenditure on goods and services by persons and expenditure of a current nature by private non-profit institutions serving households. It excludes expenditures by unincorporated businesses and expenditures on assets by non-profit institutions. Also excluded are maintenance of dwellings (treated as intermediate expenses of private enterprises), but personal expenditure on motor vehicles and other durable goods and the imputed rent of owner-occupied dwellings are included. The value of ‘backyard’ production (including food produced and consumed on farms) is included in household final consumption expenditure and the payment of wages and salaries in kind (e.g. food and lodging supplied free to employees) is counted in both household income and household final consumption expenditure. |
|
Full-time employment |
This comprises employed persons who usually work 35 hours or more a week (in all jobs) and those who, although usually working less than 35 hours a week, worked 35 hours or more during the week before interview. |
|
Full-time equivalent |
Employment can be measured on a full-time equivalent basis, that is, the full-time equivalent of part-time employment is added to full-time employment. For the estimates in this report, the full-time equivalent of part-time employment is assumed to be 50% of the part-time employment. |
|
Goods and services tax |
There were major changes to the Australian tax system from 1 July 2000 with the introduction of The New Tax System. A major feature of the new arrangements was the introduction of a goods and services tax (GST), which affected the prices of a broad range of goods and services in the economy. The GST replaced wholesale sales taxes and a number of other taxes on production and imports, although not all of these taxes were abolished from 1 July 2000. The introduction of the GST was accompanied by reductions in personal income tax rates and increases in social security payments. There were also changes to company tax arrangements. The GST is a tax of 10 per cent on the price of most goods and services in Australia, including those that are imported. It does not apply to sales of goods or services that are either exempt (GST-free) or input-taxed. Businesses charge GST on goods and services sold to other businesses and to consumers. In most cases, businesses are able to offset the GST they pay on acquisitions, such as purchases of intermediate inputs and capital expenditure, against the GST they collect on their sales. This offset is referred to as an input-tax credit. Businesses remit the net amount of GST collected to the Australian Taxation Office. If the input-tax credit of a business exceeds the amount of GST that it has collected on its sales then it receives a refund for the difference. As such, the GST is ultimately paid by the final consumer. Under most circumstances, sales between businesses are effectively GST-free. |
|
Gross domestic product |
Gross domestic product is the total market value of goods and services produced in Australia within a given period after deducting the cost of goods and services used up in the process of production, but before deducting allowances for the consumption of fixed capital. |
|
Gross operating surplus |
Gross operating surplus is a measure of the surplus accruing to owners from processes of production before deducting any explicit or implicit interest charges, rents or other property incomes payable on the financial assets, land or other tangible non-produced assets required to carry on the production and before deducting consumption of fixed capital. |
|
Gross value added |
Gross value added is defined as the value of output at basic prices minus the value of intermediate consumption at purchasers’ prices. Basic prices valuation of output removes the distortion caused by variations in the incidence of commodity taxes and subsidies across the output of individual industries. |
|
Input-output industry |
This classification is based on the Australian and New Zealand Standard Industrial Classification, 1993 (ABS Cat. no. 1292.0) but in some respects departs from that classification to ensure that the industry sector corresponds as closely as possible to the production of products primary to that industry. |
|
Input-output table |
An input-output table is a means of presenting a detailed analysis of the process of production and the use of goods and services (products) and the income generated in the production process. It can be either in the form of: (a) supply and use tables; or (b) symmetric input-output tables. This report shows only symmetric input-output tables. |
|
Purchasers’ prices |
This is the amount paid by the purchaser, excluding any deductible tax, in order to take delivery of the good or service at the time and place required by the purchaser. |
|
Supplying industry |
This is the industry which provides goods and services for use by other industries or to meet final demand. |
|
Using industry |
This is the demand for goods and services by industries for use in the further production of goods and services. |
The culture-related industries (as used in this report) were based on the Australian and New Zealand Standard Industrial Classification (ANZSIC), which was developed with the aim of grouping business units that carry out similar economic activities. The definitions of these industries are shown below.
|
Printing |
This industry consists of units mainly engaged in commercial or job printing (including commission printing of paper stationery), including printing on to textiles or other surfaces. |
|
Newspaper printing and publishing |
This industry consists of units mainly engaged in printing or publishing |
|
Other periodical publishing |
This industry consists of units mainly engaged in publishing magazines, bound periodicals, or periodicals issued less frequently than weekly. |
|
Book and other publishing |
This industry consists of units mainly engaged in publishing books, sheet music, maps or other printed articles. |
|
Architectural services |
This industry consists of units mainly engaged in providing architectural services (including architectural consultancy services, architectural drafting services and town planning services). |
|
Advertising services |
This industry consists of units mainly engaged in providing advertising services (except sale of advertising space in their own publications or broadsheets). It includes advertising agency services, advertising placement services and advertising preparation services. |
|
Commercial art and display services |
This industry consists of units mainly engaged in providing graphic design services, or signwriting or ticket writing on a custom or order basis. |
|
Film and video production and distribution |
This industry consists of units mainly engaged in film and video production or film and video distribution. Film and video production This consists of units mainly engaged in the production of motion pictures on film or video tape for theatre or television projection. It also includes such services as casting, film editing and titling. Film and video distribution This consists of units mainly engaged in leasing or wholesaling motion pictures on film or video tape to organisations for exhibition or sale. It also includes agents mainly engaged in leasing and wholesaling films and videos to organisations. |
|
Motion picture exhibition |
This industry consists of units mainly engaged in screening motion pictures on film or video tape (e.g. cinemas and drive-ins). |
|
Radio and TV services |
This industry consists of units mainly engaged in radio or television broadcasting. Radio broadcasting This consists of units mainly engaged in radio broadcasting, including units involved in the collection of news for radio services, and the production of radio programs, whether live or on tape or other recording medium, for the unit’s own use. Television broadcasting This consists of units mainly engaged in television broadcasting. This industry includes the production of television programs, whether live or on tape or other recording medium, for the unit’s own use. This industry also includes the collection of news for television broadcasting. |
|
Libraries and museums |
This industry consists of units mainly engaged in providing library or museum services. Libraries This consists of units mainly engaged in acquiring, collecting, organising, conserving and loaning library materials such as books, magazines, manuscripts, musical scores, maps or prints. It includes archival services, film libraries, mobile libraries and photographic libraries. Museums This consists of units mainly engaged in operating museums of all kinds (including art museums). This industry also includes units mainly engaged in historical house operation. |
|
Parks and gardens |
This industry consists of units mainly engaged in the operation of zoological gardens, botanical gardens, aquariums, flora and fauna reserves, national parks and wildlife sanctuaries. |
|
Music and theatre production |
This industry consists of units mainly engaged in providing live theatrical or musical presentations (including concerts, opera, ballet and drama). |
|
Creative arts |
This industry consists of units mainly engaged in musical composition, the literary arts, and visual arts such as painting, drawing, sculpture, pottery, etc. |
|
Services to the arts |
This industry consists of units mainly engaged in:
|
|
Video hire outlets and photographic studios |
This industry consists of units mainly engaged in:
|
Australian Bureau of Statistics (1993), Australian and New Zealand Standard Industrial Classification, 1993 Edition (ABS Cat. no. 1292.0), Canberra.
Australian Bureau of Statistics (1995), Information Paper: Australian National Accounts: Introduction to Input-Output Multipliers (ABS Cat. no. 5246.0), Canberra.
Australian Bureau of Statistics (1998), Commercial Art Galleries, Australia, 1996-97
(ABS Cat. no. 8651.0), Canberra.
Australian Bureau of Statistics (1998), Employment in Selected Culture/Leisure Occupations, Australia, 1996 (ABS Cat. no. 6273.0), Canberra.
Australian Bureau of Statistics (1998), Film and Video Production and Distribution, Australia, 1996-97 (ABS Cat. no. 8679.0), Canberra.
Australian Bureau of Statistics (1998), Libraries and Museums, Australia, 1996-97 (ABS Cat. no. 8649.0), Canberra.
Australian Bureau of Statistics (1998), Motion Picture Exhibition, Australia, 1996-97 (ABS Cat. no. 8654.0), Canberra.
Australian Bureau of Statistics (1998), Performing Arts Industry, Australia, 1996-97 (ABS Cat. no. 8697.0), Canberra.
Australian Bureau of Statistics (1998), Radio and Television Services, Australia, 1996-97 (ABS Cat. no. 8680.0), Canberra.
Australian Bureau of Statistics (1998), Sound Recording Services, Australia, 1996-97
(ABS Cat. no. 8555.0), Canberra.
Australian Bureau of Statistics (1998), Zoos, Parks and Gardens, Australia, 1996-97
(ABS Cat. no. 8699.0), Canberra.
Australian Bureau of Statistics (2000), Australian System of National Accounts: Concepts, Sources and Methods, 2000 (ABS Cat. no. 5216.0), Canberra.
Australian Bureau of Statistics (2001), Australian National Accounts: Input-Output Tables, Australia, 1996-97 (ABS Cat. no. 5209.0), Canberra.
Australian Bureau of Statistics (2001), Australian National Accounts: Input-Output Tables, Product Details, 1996-97 (ABS Cat. no. 5215.0), Canberra.
Australian Bureau of Statistics (2001), Australian Culture and Leisure Classifications
(ABS Cat. no. 4902.0), Canberra.
Corcoran K., Allcock A., Frost T. and Johnson L. (eds) (1999), BTR Occasional Paper No. 28, Valuing Tourism: Methods of Tourism Research, Bureau of Tourism Research, Canberra.
South Australian Tourism Commission, Department for the Arts and Cultural Development and the Australia Council (1996), 1996 Adelaide Festival: an economic impact study, prepared by Market Equity SA Pty Ltd and Economic Research Consultants, Adelaide.
United Nations (1999), Department of Economic and Social Affairs, Studies in Methods, Series F, No. 74, Handbook of Input-Output Table Compilation and Analysis, New York.