A National Supply and Demand Account

(Or Profit and Loss Account)

For the Commonwealth of Australia for the Year ended 30 June 2020

 

	Section A – Aggregate Personal Income available for Consumption
	Item	Notes	$AUD Billions
	Wages and Salaries	P&L 1	798.1
	Personal Dividend Income	P&L 2	37.9
	Personal Interest Income (monetary received only)	P&L 3	32.7
	Social Security and Insurance	P&L 4	161.4
	Less Individual Income tax paid	P&L 5	-235.9
	Less State and Local Government Fees and Charges and other Commonwealth taxes on individuals	P&L 6	-156.8
	Proprietor’s Income	P&L 7	160.8
	Household Debt Servicing Payments	P&L 8	-67.8
	Superannuation and Life Insurance receipts in cash less direct personal contributions	P&L 9	65.1
	Total Aggregate Personal Income available for Consumption		795.5
	Section B – Gross Consumer Production
	Personal consumption component of GDP (actual)	P&L 10	1047.5
	Net Consumer Goods Imported (food, beverages, automotive products and other items) less exports of same = 100.4 less 65.1	P&L 11	35.3
	Gross Consumer Production available for purchase		1082.8
	Deficit of consumer purchasing power in the year to 30th June 2020		287.3

1

NOTES

P&L 1 . The ABS figure for Wages and Salaries of $953.9 billion (ABS Table 36, Line 71, as adjusted in March 2022) includes secondary income deemed to be part of wages and salaries. Superannuation contributions from employers are included, although these will not be available to consumers for decades. From the ABS Table 36, total Social Benefits and Assistance paid by employers, though not quantifying superannuation, and including the Medicare Levy, is given as $145.9 billion. In addition to this Workers’ Compensation of $9.9 billion which is paid by employers is deemed to be wage payments. These two figures totalling $155.8 billion must be deducted from wages proper. Actual wages and salaries paid directly to employees therefore are $798.1 billion.

P&L 2 and 3.   ABS Table 36 gives personal income from dividends and interest as $38.4 and $32.7 billion respectively. It also gives a figure for the reinvestment of these as $0.5 billion. As reinvested income is not available as purchasing power for consumption this amount has been deducted from dividends to reflect this.

P&L 4.   Itemised from ABS Table 36: Workers’ Compensation $9.8 B, Non-life insurance net claims over premiums ($48.4 minus $42.7) to equal $5.7 B, and Social Benefits (or social security) of $145.9 to total $161.4 billion.

P&L 5 .  The ABS Table 36 gives income tax paid by individuals as $235.9 billion.

P&L 6 .  The link https://alga.asn.au/facts-and-figures/ from the Australian Local Government Association gives Local Government rates collected as $18.9 billion in 2018-19.

The link https://www.abs.gov.au/statistics/economy/government/taxation-revenue-australia/latest-release  gives total taxation in Australia in 2020 as $552.0 billion.

It also gives Company Income Tax as “down $7.1 billion which is minus 7.5%.” Therefore the size of this tax is ($7.1 billion divided by 7.5 and X by 100) and equals $94.6 billion.

GST is given as down $1.1 billion or 1.7%. Its size is therefore $1.1 billion divided by 1.7 and X by 100 and so GST was $64.7 billion.

This account measures income available against consumer goods and services offering. Direct tax impacts by reducing income, and indirect taxes such as GST by increasing prices. As GST is reflected in increasing the value of consumer production available it is not also deducted from income.

Other taxes paid by individuals therefore equals $552.0 billion, less individual income tax already given in the account of $235.9 billion, less Company tax of $94.6 billion, and GST of $64.7 billion

P&L 7.   ABS Table 36, line 71.

P&L 8 .  The ABS Table 36, under Secondary Income Payable (other current taxes) gives interest paid on Dwellings and Consumer Debt as $52.8 and $6.5 billions respectively. Interest paid on Unincorporated Enterprises and rent on Natural Assets are given as $7.5 and $1.0 billions respectively. As these detracted from personal purchasing power in the year to 30^th June 2020, the total given is minus $67.8 billion

A deduction for principle repaid in the year upon previous consumption should also be made here, as it is not available for present consumption. This figure is, however, unavailable.

P&L 9 . The purpose of this item is to determine the impact of superannuation upon personal purchasing power. This requires the discovery of the amount of superannuation payouts, and a figure for individual contributions into superannuation.

The rate of employer contributions into Superannuation was 9.5% of wages which is, from P&L 1, $798.1 billion. Employer contributions were therefore $75.8 billion.

In the ABS Table 29 Superannuation is not differentiated from Life Insurance, as is the case throughout the ABS statistical offerings. Total contributions into Super’ and Life Insurance is given as $169.8 billion. By deducting the employer contribution of $75.8 billion going into superannuation we arrive at a figure of $94 billion for individual contributions into them.

Claims against both Superannuation funds and Life Insurance is given as $159.1 billion. Net receipts to persons were therefore $159.1 minus $94 billion, or $65.1 billion.

It should be noted here that this was an unusual period with the Covid pandemic causing heightened superannuation withdrawals, and an unusual increase in these funds flowing to individuals.

P&L 10 and 11   This data was confirmed in an email from Dom Williams [ mailto:dom.williams@abs.gov.au ] on the 31^st of March 2021 giving the links https://www.abs.gov.au/statistics/economy/national-accounts/australian-system-national-accounts/latest-release and also https://www.abs.gov.au/statistics/economy/international-trade/balance-payments-and-international-investment-position-australia/latest-release
2

What this Account Means

The fact that consumer products produced by the Australian people were $287.3 billion more that were the inducements to produce it by way of incomes distributed, has enormous significance. If a company paid its employees $X to produce, and the value produced was $X+Y, its profit would equal $Y. If all the profit were distributed as a dividend, then the dividend per share would be Y divided by the number of shares.

Since there were 25.69 million Australians in 2020, the surplus of consumer production over their available incomes to purchase it of $287.3 billion, amounted to $11,183.33 for every person, or to $44,733 per family of four.

Whilst it seems to be an impossibility that this situation could be survived, this is managed by Australian indebtedness increasing. We must borrow to buy our profit, because while we have it in goods, we don’t have it in cash. Australian indebtedness has increased every year since federation in 1901, and when its increase is insufficient, we go into recession.

By visiting the “Debt Clock” at http://australiandebtclock.com.au/  its “necessary” continual increase may be observed. At some point on the 4^th March 2022 Total Government Debt was $1,476 billion and Total Private Debt was $5,175 billion for $6,651 billion in all. Dividing this by the population gives every person’s share (adults and children too) of the debt as $249,194.

If Governments regularly did these type of Profit and Loss Accounts for their nations, the practice of financing the necessary consumption increases by increasing indebtedness to the banking system may be reconsidered. It is, at least theoretically, possible to create and issue money debt free when extra funds are necessary to augment consumption.

Accounts such as this raise the question of what it might mean in terms of public policy.

The Purpose and Utility of this Account

The purpose of this account is to measure the income available to the Australian people in a period (2020), against the consumer goods available in that same period. This provides the most accurate indication as to whether an increase in credit is needed to facilitate the full consumption of desirable goods and services. Further, it quantifies this need and helps to establish a credit policy which neither causes demand pull inflation nor a recession in the economy.

For this reason, it offers an important guide to policy makers in determining the optimum increase, or in extremely rare occasions decrease, in the money supply and credit made available.

No official account of this type has been done in Australia up to 2022. This being so, the statistics of the Australian Bureau of Statistics are not always constructed in a way most useful to producing this account. This often compels, necessarily, extrapolation and assumption which brings statistical approximation. No apology is made for these limitations to the account’s accuracy, quite the contrary, really, as these demonstrate and evidence the need for “custom made” data suited to our purpose.

Juxtaposing the aggregate consumer goods produced and available, against the inducement paid to produce them in the form of incomes, while it measures supply in the form of goods, and effective demand which is incomes, allows the account to be properly seen as a National Profit and Loss Account constructed from the point of view of Australia’s people, who, properly considered, are the nation’s shareholders, all holding one share each at par value.

When the decision was made to do the first ever National Profit and Loss Account, it was for the United States in the year 2014. At the outset the concepts and principles to be employed were set forth. They are reproduced here to assist in conceptualising the accounts intent.

3

Principles Adopted in the Preparation of this Account

1.      The purpose of production is consumption.

2.      The cost of production is consumption (that is, the consumption appertaining to it).

3.      The purpose of a national economy is the objective good of its people (i.e. to deliver the goods and services that they need to survive and flourish, while calling upon the least amount of labour and resource consumption). This excludes employment, corporate profits or economic growth per se as the end social objects.

4.      Calculations of Gross Domestic Production are measures of human activity, not of results or outcomes from this activity considered in terms of human satisfaction.

5.      That National Supply and Demand Accounts, (the commercial equivalents of which are Profit and Loss Accounts), though nowhere in existence, when constructed from the perspective of accessing the economic satisfaction of its national proper persons, are the best measure of a Nation’s economic performance. Just as company accounts are done from the perspective of shareholders, this account is from the perspective of a Nation’s people, not its management or clients.

6.      This account has been constructed with a view to ascertaining aggregate personal income available to enable personal access to the gross national consumer production available.

7.      While all GDP ($17,393.1 billion in the US in 2014) is ultimately paid for by consumers, either in prices or taxes, capital goods have been removed from this account as their inclusion in prices, usually as deprecation charges, does not take place until a later period of time.

8.      GDP treats exports as increased production activity, while this account treats exports as a decrease in production availability.

9.      It was resolved, as a principle, to proceed in spite of analytical difficulty. National accounts as currently available, while no doubt approximately accurate for their intended purpose, are careless in differentiating out proper person’s receipts, for example, from “private” receipts. As a result the GDP component “Personal Interest Income” is given as $1,300.9 billion, while “Personal Interest Payments” are $254.2 billion and Mortgage Interest Payments are $387.0 billion for a total of $641.2 billion. This implies a clearly inaccurate situation where proper persons have loaned out over twice the sum of their debts. Thankfully this conundrum was resolved by accessing http://www.bea.gov/iTable/iTableHtml.cfm?reqid=9&step=3&isuri=1&903=288  which enabled imputed interest which is now present in current interest income to be expunged. Imputed interest is not purchasing power available to consumers until a later period of time.

10.  Notwithstanding the dearth of clear data specific to proper persons, and differentiating them from private corporations in many items, this account was persisted with, not because of its likelihood of achieving accuracy but because of its absence, and in the hope of advancing the realisation that the true measure of an economy’s performance in terms of human outcomes (see 3 above) is calculable (and probably only calculable) along the approximate lines used here. This Account can at least provide a template which with refinement and correction, and perhaps one day specifically Government generated data to its purpose, will be able to more accurately inform us. Input with this intent would be most welcome.

 

Those wishing to access the full 2014 Profit and Loss Account for the United Stated in 2014 can do so at http://www.socialcredit.com.au/uploads/NationalAccountsPrototype.pdf 

           It is exceedingly strange that Governments do not make every effort to share the good news that our economies are profitable beyond $11,000 each, which surely, we would all be happy to know.                                        Compiled and presented by Charles Pinwill

4