national accounts

NATIONAL ACCOUNTS

National accounts are designed to provide a system ie summary of national economic activity and have been developed to facilitate the practical application of economic theory. At their summary level, the national income, expenditure and product accounts reflect the key economic flows of the Keynesian system: production, income, consumption, investment and saving.

At their more detailed level they are designed to present a statistical picture of the structure of the economy and the detailed processes that make up domestic production and its distribution.

The national accounts show key account aggregates which are generally accepted as indicators of the state of the economy. Trend in national income and in related aggregates such as gross domestic product give an immediate indication of how-the economy fared in the past year and provide a basis for predicting what is hoped to be achieved in the coming year.

PURPOSES OF NATIONAL ACCOUNTS

Within the constraints of the principles and practice of business and government accounting, national accountants attempt to construct a statistical picture of the key economic processes centred around the measurement of market-based activity (ie activity associated with the production of goods and service resulting in income generation, sales to overseas markets, domestic consumption and capital formation).

National income and other indicators of economic growth measure an important aspect of a country's well-being. However, they do not necessarily provide an indicator of the ultimate (but less quantifiable) objectives relating to the improvement of the welfare or `quality of life' status of the people.

USE OF NATIONAL ACCOUNTS IN DECISION MAKING

National Accounts are powerful tools of policy . In one form or another they find their way into activities such as the following;

Quarterly national accounts are well established in Australia as a central organising framework for monitoring the current performance of the economy (eg, in regard to the pattern of inc me flows, the strength and composition of demand, capital formation and output).

In terms of short-term forecasting of economic activity, the quarterly and annual national income, expenditure and product accounts provide and anticipate impending crisis situations.
The national accounts provide the general setting for planning and property investment.
The models for forecasting economic activity and for simulating the effects of policy on the behaviour of the economy are heavy users of the disciplined data available in the national accounts.
Studies of the structure of income, of the imposition of demand, and of the industrial composition of production a necessarily based on national income, expenditure and product accounts and input-output studies. The accounts can tell the property professional a great deal about this directly and provide a framework for the more detailed supporting statistics.

contributions to international organisations (eg, the United Nations) and eligibility for international aid depend on national accounting measures, such as gross national product per capita. Investigations by aid agencies invariably begin with a study of the economy in ter of standard national accounting presentations.

INDIRECT USES OF NATIONAL ACCOUNTS

There are many other areas of application of national accounts in planning and management.

In a sense, all uses of economic statistics are made against the background of the economic relationships exhibited a system of national accounts. This is true even where the national accounts of a country are not well developed in terms of the number and detail the accounts and tables presented, or where the estimates have a considerable element of conjecture because of the poor quality of the supporting basic statistics. In such cases, the accounts at least show the logical relationships between the various economic flows and provide orders of magnitude which may set the particular use of economic statistics into a broad perspective and guard against gross misunderstanding of their meaning.
In addition to the direct use of national accounts est ates in economic planning and management at various levels, the accounts have indirect but important uses. Thus the accounts are also in demand as a tool for illustrating economic theory. In fact, much of the treatment of national accounts in economics textbooks has tended to concentrate on using them to illustrate macro-economic theory rather than to teach national accounting as such. In the development of the national accounts the identities of Keynes' General Theory of Employment, Interest and Money have been a strong influence on their design.

The national accounts are also used as a framework for the coordination of statistical systems. With the growing emphasis extending and integrating the various forms of national accounting here are few areas of economic statistics which do not provide at least so e building blocks for constructing national accounting statistics or related analyses of them. In consequence the availability of the national accounts` definitional system and the pressure placed on existing statistical programs to provide the data for compiling national accounts estimates make the national accounts a powerful force in the integration of statistical collections.