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Gross Domestic Product: September 2014 quarter
Embargoed until 10:45am  –  18 December 2014
Definitions

About gross domestic product

Gross domestic product (GDP) is New Zealand's official measure of economic growth.

Three different approaches can be taken to calculate GDP – the production approach, the expenditure approach, and the income approach. We use the production and expenditure approaches to calculate New Zealand's GDP on a quarterly basis. The production approach is available on a chain-volume basis, while the expenditure approach is on a chain-volume basis and in current prices. Chain-volume estimates have the effect of price change (inflation) removed from them.

The production approach to GDP measures the total value of goods and services produced in New Zealand, after deducting the cost of goods and services used in the production process. This is also known as the value-added approach.

The expenditure approach to GDP (also known as gross domestic expenditure or GDE) measures the final purchases of goods and services produced in the New Zealand domestic territory. Exports are added to domestic consumption, as they represent goods and services produced in New Zealand, while imports are subtracted. Imports represent goods and services produced by other economies.

Conceptually, both the production-based and expenditure-based GDP series measure economic growth, so should produce the same growth rates. However, as each series uses independent data and estimation techniques, some differences between the alternative measures arise. The expenditure-based series has historically shown more quarterly volatility and is more likely to be subject to timing and valuation problems. For these reasons, we prefer the production-based measure for quarter-on-quarter and annual changes.

More definitions

Broad industry groups: in tables 3, 4, 5, 6, 25, and 26, we combine industry groups to form the following broad groupings, based on the Australian and New Zealand Standard Industrial Classification 2006 (ANZSIC06):

  • primary industries (agriculture, forestry, and fishing; mining)
  • goods-producing industries (manufacturing; electricity, gas, water, and waste services; construction)
  • service industries (wholesale trade; retail, accommodation, and restaurants; transport, storage, and warehousing; finance and insurance services; rental, hiring, and real estate services; professional, scientific, technical, administration, and support services; public administration and safety; education and training; health care and social assistance; arts, recreation, and other services).

As well as these industrial groupings, there is an 'unallocated' category. This category includes taxes on production and imports (import duties, GST, and stamp duties) that are not allocated to industries.

Business investment: measures the investment of producers in land improvements; non-residential building; other construction; transport equipment; plant, machinery, and equipment; and intangibles (mining exploration and computer software).

Chain-volume series expressed in 2009/10 prices: are best described as annually reweighted, chained Laspeyres volume indexes. Series are expressed in 2009/10 dollars rather than as index numbers, since this has the advantage of showing the relative size of each component. Volume series were first expressed in 2009/10 prices in Gross Domestic Product: September 2014 quarter. Previously, we used 1995/96 prices.

See data quality for more information on chain-volume series under 'Constructing a chain-volume series'.

Change in inventories: is change in the value of inventories of raw materials, work-in-progress, and finished goods, over a given period. The change is measured in the appropriate prices in the market at the time additions and withdrawals are made. The correct valuation of the change in inventories requires continually updated data on the quantities of individual commodities held in stock, together with appropriate prices. As this data is rarely available, our usual practice is to revalue stocks at the end of the period. This is the best estimate of the physical change in stocks during a given period.

Durable goods: are goods that are not consumed in one use (eg appliances and electronic goods).

Gross fixed capital formation: producers' outlay on durable fixed assets, such as buildings, motor vehicles, plant and machinery, hydro-electric construction, roading, and improvements to land. 'Gross' indicates that consumption of fixed capital is not deducted from the value of the outlays.

Gross national disposable income (GNDI): is the income received (less income payable) by New Zealand residents, from both domestic and overseas sources, after taking account of income redistribution by way of international transfers, or gross national income plus net international transfers.

Household consumption expenditure (HCE): is an estimate of total expenditure by New Zealand resident households. It includes expenditure by New Zealand households overseas but does not include expenditure by overseas tourists in New Zealand.

Implicit price deflators: tables 23 and 24 contain implicit price deflators (IPDs) for expenditure on GDP and its components. IPDs provide a broad measure of price change for total economic activity and each of the expenditure components.

Low-value imports: are imports of goods purchased directly by New Zealand households that have a value of less than $1,000. We estimate these separately as they are not captured in the administrative data used to measure imports of goods.

Non-durable goods: are goods that are either consumed immediately in one use or within three years.

Real gross national disposable income (RGNDI): measures the real purchasing power of national disposable income, taking into account changes in the terms of trade, and real gains or losses from net investment and transfer income with the rest of the world. Effectively, it is a measure of the volume of goods and services New Zealand residents have command over.

See data quality for more information on calculating RGNDI under 'Calculating real gross national disposable income'.

Services: are products other than tangible goods. Services result from production activity that changes the conditions of the consuming units, or makes the exchange of products or financial assets possible.

Value added: is the value created by a process of production. Value added equals output minus intermediate consumption.

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