Backcasting Time Series

During 2008 SNA / ANZSIC 06 Implementation

Michael Davies,

Division Head,

Macroeconomic Statistics Division,

Australian Bureau of Statistics

September 20141

2008 SNA / ANZSIC 06 backcasting

• Implementation of 2008 SNA and ANZSIC 06 – a fundamental reworking of the Australian National Accounts

• Annual benchmark series backcast from 1994-95 to 2007-08

• Annual series backcast from 1959-60 to 1993-94

• Quarterly series backcast from September quarter 1959 to June quarter 2009

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Challenges (1)

• The new industry classification system is fundamentally different to the previous industry classifications

• Starting periods for national accounts series across individual components and underlying data sources vary significantly

• Historical series are divided into two periods:• ‘Live’ compilation period – in which time series can be

recalculated in response to changes in standards & classifications;

• Maintained compilation period – in which no detailed data available making impossible to ensure changes in standards & classifications are represented

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Challenges (2)

• Most input data series were not available for the full time period (only capital expenditure data went back to 1959-60)

• There was often little information available for constructing historic estimates for new series such as R&D

• There were significant breaks and inconsistencies between historical series and new series

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Backcasting & Splicing Principles

• Backcasting involves removing breaks in series between ‘live’ and ‘maintained’ periods in national accounts

• Converting growth levels of historical series into those comparable with that for new estimates while keeping growth rates of the former intact

• The following splicing principles were adopted• Undertaking splicing at lowest feasible level• The results should be economically plausible

• No unusual seasonal variation at the splicing point

• Pragmatic approach for extrapolating time series in ‘maintained’ periods in case of no historical data

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Bridging

• Bridging involves converting historical data in old industry classifications into series in new industry classifications

• This is done using known relationships between series in a common period (“bridging factors”) to extrapolate time series in new industry standards in ‘maintained’ periods

• Bridging factors are calculated over several time periods to remove influence of short-term volatility

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Managing the backcasting process

• Closely managing the incorporation of backcast data into the national accounts

• Using common techniques as far as possible to help ensure the coherence of the results

• Maintaining flexibility and finding the right balance between backcasting approaches

• Ensuring that the results were plausible and that economic history, particularly quarterly growth rates, did not change unless affected by 2008 SNA implementation (e.g. capitalisation of R&D)

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