Robert Ewing

Steptember & the National Accounts

I’m participating in Steptember this year, and I’d really like your support.

But the more important question is – how does this fit into the national accounts?

For every $100 I raise (up to $3000) for Steptember I’m going to write a post unpacking one of the many scary abbreviations and acronyms used in economic statistics. Today I’m going to talk about the dreaded NPISH, as this answers the question on where Steptember fits in.

Steptember raises money for “research, treatment, services and assistive technologies to help people with cerebral palsy”. But that raises a bit of a puzzle for the expenditure side of the national accounts – you might recall that we break GDP up into a few major components – household spending, government spending, investment spending and net exports. The research bit is easy (that’s a type of investment spending) – but what about the rest?

It feels a little bit like Government spending, as it’s like the assistance provided through programs like Medicare or the NDIS. But it’s not being provided by the Government, so including it here would distort statistics like the size of Government in the economy.

It’s also a little bit like household spending, as it’s spending money on things like home care and equipment that a household might do themselves. But if we ask households about their spending they wouldn’t include this, so we would at least need some additional source of information if we’re going to put it here.

The national accountants answer is to create a new type of consumption – Final Consumption by Non-Profit Institutions Serving Households, or NPISH. When the money raised in Steptember is spent on these goods and services for people with Cerebral Palsy, it’s put into this category.

In practice in Australia’s case, we include this in the Household Final Consumption Expenditure estimates in the quarterly and annual GDP publications. It needs to be measured separately to other parts of household consumption which raises a problem – how can we measure this? There are a lot of providers of different sizes out there, and as their activities are not for profit it can be hard to measure the division of activity.

The answer is to take a simpler approach – we take the amount transferred into the NPISH sector by households, governments and corporations, and then subtract from that what’s spent on investment like research or buildings. That gives an estimate for how much is spent on final consumption by the NPISH sector.

So, to answer the question, how does your donation to Steptember show up in the national accounts? Partly in expenditure on R&D, and partly in the NPISH part of household consumption as services are provided.

Next up, depending on donations – what on earth is CIF/FOB?