ANZSIC 2006: REDEFINING INDUSTRY FOR THE 21ST CENTURY Christian Galbraith Statistics New Zealand Private Bag 4741, Christchurch, New Zealand Telephone: (03) 964 8801 Email: [email protected] Statistics New Zealand and the Australian Bureau of Statistics are completing a joint review of their first harmonised industry classification, the Australian and New Zealand Standard Industrial Classification 1993 (ANZSIC93). This review has resulted in the development of the 2006 edition of the classification (ANZSIC 2006), which redefines industry for the 21st century. The aim of the review was to produce an up-to-date industry classification that was worth the costs of redevelopment and would meet the needs of its multiple users. The expected benefits of revising the standard industry classification include: improving the quality of macroeconomic measures; applying a more consistent conceptual basis to the classification; the recognition of new and emerging industries; better alignment with international classifications; and improved ability to measure alternative industries. This paper reports on the process of developing ANZSIC 2006 and includes discussion of the concepts, principles and objectives used in the development; significant changes and new industries; the proposed implementation strategy; and the support tools available to users once the classification is officially released in mid 2006. Introduction Statistics New Zealand and the Australian Bureau of Statistics (ABS) have nearly finished updating the Australian and New Zealand Standard Industrial Classification 1993 (ANZSIC93). The new edition of the classification (ANZSIC 2006) ensures that collections of macroeconomic statistics are in line with the 21st century economy. While a number of aspects underlie the need to revise the original ANZSIC, updating the classification to ensure relevance to the present-day economies of New Zealand and Australian was a key concern. This paper aims to inform readers on the process by which Statistics New Zealand revises major economic statistical classifications such as ANZSIC. It also aims to provide users of the classification and related data with information on the new classification and its impact on their work. The paper covers the history of the ANZSIC classification and the rationale and aims behind developing the 2006 edition, and it details the development process, new structure and significant changes from the original classification. It also discusses the process and the tools being developed to implement and provide for the ongoing use of ANZSIC 2006. History of the ANZSIC classification The first New Zealand Standard Industrial Classification (NZSIC) was issued in 1970 and based on the then current International Standard Classification of all Economic Activities Revision 2 (ISIC Rev. 2), adapted to suit the New Zealand economy. It replaced a modified form of the original 1948 edition of ISIC, which had been used by Statistics New Zealand from 1948. A second edition of NZSIC was produced in 1975 with more detail in some areas, and a third edition was produced in 1987. The second and third editions of NZSIC were also based on ISIC, Rev.2. During the late 1960s, the ABS (then named the Commonwealth Bureau of Census and Statistics) drew together the several distinct classifications in use in Australia to produce the first Australian Standard Industrial Classification (ASIC). The original 1969 edition of ASIC was based at the broader levels of ISIC, with some modification to allow for comparability with previously used classifications. Revised editions of the classification were released by the ABS in 1978 and 1983. In 1985, the ABS began a major review of ASIC. In 1990, when this review was still under way, the possibility of New Zealand and Australia using a common industrial classification was raised. As both agencies used similar principles in creating their national industrial classifications and were committed to harmonising statistics where practicable, developing a single classification that would meet the needs of both countries was agreed. The first edition of the joint classification (ANZSIC93) was released by the two agencies in 1993. In 1996, a New Zealand-use version (ANZSIC 1996) was produced by Statistics New Zealand. This contained minor revisions of the original ANZSIC in order to better meet the specific needs of this country. Further minor revisions have been made to reflect new economic activities that couldn’t be adequately classified elsewhere in the existing structure. ANZSIC 1996 is the current standard industrial classification in New Zealand, while Australia continues to use ANZSIC 1993. Uses of the ANZSIC classification Though primarily developed for the collection of statistical data by Statistics New Zealand and the ABS, the ANZSIC is used by a number of other government agencies, private businesses and other organisations in both New Zealand and Australia. Key users of the classification in the public sector include Inland Revenue (IRD) and the Accident Compensation Corporation (ACC) in New Zealand, and the Australian Tax Office (ATO). For example, ANZSIC is used by ACC as the basis for developing its Business Industry Descriptions, which are used to determine levies. This involves adjusting certain ANZSIC classes according to injury risk. Many other organisations and businesses use ANZSIC as an administrative tool, employing it in database management, for example. Another example of use is by researchers studying small and medium enterprises – in this case, it is used to select a survey sample of businesses in certain industries of interest. The Rationale and Aims of Developing ANZSIC 2006 Introducing a new classification is a major undertaking and involves reworking statistical collections and administrative database designs, and revising time series data. It has significant impact upon the production of statistics, the users of those statistics and those who use the classification for other purposes. The decision to review the existing industry classification was made in response to a number of factors that sufficiently justified change. The aim in producing ANZSIC 2006 was to develop a revised classification that was clearly worth the effort and costs associated with revision. The major factors influencing change and the subsequent aims of revision are discussed in detail below. Relevance All statistical classifications require periodic review to ensure their relevance to the real-world variables they are designed to measure. With industry, this is particularly important, given modern rates of economic change. While industry classifications are usually designed to incorporate future economic change, the degree to which they are able to achieve this is not always adequate. Industry classifications are also generally designed to be statistically balanced – this means that industries of similar economic size are given similar space within the classification. Growth in certain industries over time upsets this balance and is therefore, a key factor in updating classifications. These two factors were a major influence in the decision to develop ANZSIC 2006. To ensure macroeconomic statistics were collected on a basis that is relevant to the 21st century, the original ANZSIC developed during the late 1980’s and early 1990’s needed revising to reflect changes in production practices, the development of new products and services, and advances in technology since then. Areas of industry such as information and communication technology (ICT) have developed rapidly since the early 1990’s and now constitute a significantly larger proportion of total industry. Consequently, the original ANZSIC reflects neither the detail nor the size of this industry today. A central aim in developing ANZSIC 2006 was therefore, to produce an industry classification that reflects the structure of the 21st century economies of New Zealand and Australian. Substantial research was dedicated to researching changes in industry since the early 1990’s to achieve this aim. Effort has also been dedicated to ensuring that the classification will be relevant for years to come, by looking at expected long-term trends and allowing for the incorporation of new industries that are not currently covered. Better meeting the needs of users Meeting the needs of users is a critical consideration in the development of any classification. While ANZSIC is primarily designed for use by Statistics New Zealand in the production of statistics, meeting the needs of the variety of external users was attempted, where possible. This recognises the wide application of the classification and promotes further use, leading to increased standardisation. Both Statistics New Zealand and external users of the original ANZSIC had concerns about certain areas of the classifications. In particular, many users of the classification criticised its mix of supply and demand-side concepts, which led to the inconsistent and arbitrary treatment of certain industry activities. User needs for industry data have also changed since the development of the original ANZSIC. Therefore, revising the original ANZSIC was an opportunity to correct inconsistencies in the conceptual basis and assess the current needs of users. In many cases, the existing ANZSIC simply isn’t structured in a form that suits the purposes of particular users – many users require ‘alternative views’ of industry (such as a Tourism) that are not reflected in ANZSIC 1993. Again, this is due to the ANZSIC design being intended for the compilation of macroeconomic statistics. However, it was decided that the revised ANZSIC would be structured to better allow for the creation of alternative industry views for the ANZSIC classification. Another area where users sought improvement was the treatment of service industries. It was felt that ANZSIC 1993 did not adequately represent the importance of such industries, particularly given the growth in services since the early 1990’s. On the other hand, the ‘Manufacturing’ division was given a large amount of space and detail within the classification structure that did not necessarily reflect the modern New Zealand economy. The ANZSIC 2006 has been designed to encourage wide use, which improves standardisation. This has meant developing ANZSIC so that it is useful in its full form, but also so that it can be adjusted for specific use while remaining within the overall conceptual framework. Aligning with International Classifications Achieving alignment with international industrial classifications has been an ongoing issue for both the NZSIC and ANZSIC classifications. This is important in terms of statistical comparability and international reporting purposes, so the scheduled development of revision 4 of the ISIC classification was a key aspect in initiating the review of ANZSIC 1993. The initial aim was to align to the second level of ISIC Rev. 4 and use the development of ISIC Rev. 4 (which was happening simultaneously) for guidance in the development of the new ANZSIC. Developing ANZSIC 2006 ANZSIC 2006 has been jointly developed by a Statistics New Zealand / ABS team of classification experts. The new classification was drafted through a series of papers which summarised the research undertaken, discussed problematic issues and presented the proposed new structure. Each paper represented a proposed division (the broadest level of the hierarchical classification) for ANZSIC 2006. As the development process extended over a number of years, a 'holistic review' was conducted when the structure and content were being finalised to ensure consistency had been achieved across the entire classification. Some of the significant aspects of development are further discussed below. Conceptual framework and Principles All statistical classifications require the application of a general set of development principles in their production. These principles include that the classification categories are mutually exclusive, that the classifications are exhaustive in their coverage and that they reflect the real-world phenomena they measure. In addition to these, each classification follows specific principles related to its purpose. The development of an industry classification requires the use of a sound and consistently applied conceptual framework. In response to criticism of ANZSIC 1993's mix of supply and demand-side concepts, the application of a consistent conceptual framework was emphasised for 2006. This framework was based around a supply-side perspective, which is consistent with the conceptual basis of macroeconomic statistical collections such as the System of National Accounts. The supplyside concept was put into operation through the concept of 'production function' which, for ANZSIC means that industrial activities that use similar inputs and production processes to produce similar outputs are grouped together. This contrasts with a demand-side perspective, which would for example, look at similarities in the customer base of an industry. Another important aspect of the development framework was aligning with international classifications, which are important for statistical comparability purposes. The development of ISIC Rev. 4 was a major consideration in developing ANZSIC 2006, with the aim being to align at the second level of the classification. This has been achieved to a high degree. The development team also had significant input into consultation on the development of the latest ISIC, being able to draw upon recent experience. The latest North American Industrial Classification System (NAICS 2002) was also an important tool in developing ANZSIC 2006, as it was the most recently published industrial classification employing a strict production function concept. Consideration was also given to ensuring continuity with ANZSIC 1993. This recognised areas of the original classification that remained suitable for 2006 purposes and were important to users. It also assists in the production of reliable backcast statistical series. The conceptual framework outlined above, together with a set of guiding principles for classifying certain types of activities enables the often competing demands of relevance, comparability and continuity to be balanced. The framework was firstly used to provide guidance and structure to the development proposals. Secondly, it was used to provide stakeholders with a set of criteria on which to judge proposals, frame arguments and counter-proposals, and to assess the quality of recommendations and final decisions. Consulting Stakeholders A major input to the development process was feedback provided by users of the classification, industry experts and other stakeholders. This aspect was vital in ensuring that the classification would meet the needs of users and utilised the expert knowledge of those in particular fields. As each division paper was drafted, it was distributed to a list of relevant internal and external stakeholders for comment. External stakeholders consisted of users of the classification and industry organisations. Stakeholder feedback was incorporated into refining the papers before they were finalised. While a commitment to meeting the needs of users has been strong, the development process has emphasised an impartial and consistent treatment of industries across the classification. With increased interest in certain areas of industry in recent years, attempts have been made to model ANZSIC 2006 around the real-world size and structure of industries. The New Classification The development of ANZSIC 2006 is now complete, although minor adjustments are still possible. Work is now focusing on developing the necessary support tools to be released along with the new classification in mid 2006. While the full classification will not be released until then, the division and subdivision levels are published as an appendix to this paper. The application of the conceptual framework has been balanced with the practical considerations surrounding data availability. This meant that the way business units organise themselves and their accounting structures was considered in the development process. In addition, economic significance and homogeneity criteria were applied in the class development process. This was to guard against the creation of an unmanageable number of categories and to ensure categories contained a reasonably similar mix of activities. These were applied using proxies for measures of value added derived from economic data collected by both agencies. Structure and Size Like the original ANZSIC 1993, the 2006 edition contains four levels: divisions (the broadest level), subdivisions, groups and classes (the finest level). These various levels of detail cater to different statistical outputs and uses of the classification. The subclass level which was used to add further detail to ANZSIC 1996 is not required for ANZSIC 2006. Table 1 compares the division level of ANZSIC 2006 with ANZSIC 1993 / 1996 and shows that at this broad level, the new edition is reasonably aligned. The main difference is the splitting of the old division L 'Property and Business Services' into several new divisions. ANZSIC 2006 is, however, significantly different from the original classification when looking at the more detailed levels. Table 1. ANZSIC 2006 divisions compared to ANZSIC 1993 / 1996 ANZSIC 1993 ANZSIC 2006 A Agriculture, Forestry and Fishing A Agriculture, Forestry and Fishing B Mining B Mining C Manufacturing C Manufacturing D Electricity, Gas, Water and Waste Services D Electricity, Gas and Water Supply E Construction E Construction F Wholesale Trade F Wholesale Trade G Retail Trade G Retail Trade H Accommodation and Food Services H Accommodation, Cafes and Restaurants I Transport, Postal and Warehousing I Transport and Storage J Information Media and Telecommunications J Communication Services K Financial and Insurance Services K Finance and Insurance L Rental, Hiring and Real Estate Services L Property and Business Services M Professional, Scientific and Technical Services N Administrative and Support Services O Public Administration and Safety M Government Administration and Defence P Education and Training N Education Q Health Care and Social Assistance O Health and Community Services R Arts and Recreation Services P Cultural and Recreational Services S Other Services Q Personal and Other Services Table 2 compares the number of categories and size estimates at each level of ANZSIC 1993 and 2006. The number of categories at each level has increased, though mostly at the subdivision level. This substantial increase was driven mainly by the need for comparability with international classifications, the recognition of activities with significantly different production functions, and the promotion of economically significant industries to this level of the classification. Table 2. ANZSIC 2006 / 1996 size comparison Category ANZSIC Number of categories Divisions Subdivisions Groups Classes Total Australia Average value added ($m) Divisions Subdivisions Groups Classes New Zealand Average number of full- time equivalent employees Divisions Subdivisions Groups Classes ANZSIC 2006 ANZSIC 1993 Difference % change 19 86 214 506 825 17 53 158 465 693 +2 +33 +56 +41 +132 +12 +62 +35 +9 +19 27,634 6,105 2,453 1,038 30,885 9,907 3,323 1,129 -3,251 -3,802 -870 -91 -11 -38 -26 -8 83,995 18,557 7,458 3,154 93,877 30,112 10,101 3,432 -9,882 -11,555 -2,643 -278 -11 -38 -26 -8 Significant Changes and Developments from ANZSIC 1993 A major development under ANZSIC 2006 has been the creation of the ‘Information Media and Telecommunications’ division. This division is important in recognising significant growth and technological advancement in this industry since the original ANZSIC. While ANZSIC 1993 included a 'Communication Services' industry, ANZSIC has pulled together information-related services from a number of divisions to create a much more complete and up-to-date view of this industry. An important inclusion in this revised division was publishing, which was aligned with printing in the 'Manufacturing' division under ANZSIC 1993. Another important development is the far more complete treatment of Internet-related activities in this division. Under ANZISC 1993, the 'Business Property and Services' division was a large collection of often dissimilar activities. The revised edition has broken this into several new divisions: 'Rental, Hiring and Real Estate Services', 'Professional, Scientific and Technical Services' and 'Administrative and Support Services'. The measurement of activities in these areas should be greatly improved by the new structure. While the 'Wholesale Trade' and ‘Retail Trade' divisions remain largely similar to ANZSIC 1993, under 2006 the definitions have been better articulated and a number of activities are now treated more consistently with the definitions of these divisions. The new definitions better describe what constitutes a retailer and wholesaler, beyond the traditional distinction based on customers. For example, under the production function concept, retailers are distinguished from wholesalers because they tend to operate from different premises, aim to attract a high volume of walk-in customers and use direct marketing to the public and so forth. The treatment of commission-based and non-store trade has also been improved for 2006. A significant change from 1993 is the treatment of government-owned units undertaking regulatory, other public administration or general services delivery activities. Under the production function concept, ownership is not a criterion for classification and, therefore, a number of government units undertaking mainly service delivery activities will move from the central government area under 1993 to classification according to the type of service they are providing. An example of a new class influenced by the commitment to alternative views is ‘Scenic and Sightseeing and Transport’. This assists in compiling tourism-related statistics but also recognises the unique production function of activities in this class. The creation of a similar class in ISIC Rev. 4 was also an influence on its creation. Implementing ANZSIC Implementing a major new classification is a significant process that needs to be planned and managed adequately. Statistics New Zealand’s ANZSIC 2006 implementation project is well advanced in planning for the transition to the new classification. Lessons learnt in the ANZSIC 1993 implementation project have been an important input for 2006 and collaboration with external users is a key part of the project. Timeframe ANZSIC 2006 will be officially released in mid 2006. The transition to the new classification by Statistics New Zealand has been scheduled for 2006 to 2011. This coincides with a number of survey redevelopments, allows for necessary testing periods and is timed to ensure a smooth and gradual transition. The first use of ANZSIC 2006 will be in the next census, in March 2006. The census will collect industry data on both an ANZSIC 1996 and 2006 basis. This allows a further census collection of industry on a 1996 basis for time-series purposes and utilises the new ANZSIC, which will be available at that time. Review and development of data collections for compilation and output on an ANZSIC 2006 basis will take place between early 2006 and mid 2008. Late 2010 will see the release of GDP quarterlies and annuals on an ANZSIC 2006 basis, and by this stage most outputs will have published at least 12 months of data on a 2006 basis. External users will be shifting to the new classification at a variety of times after the official release in 2006 and will be well supported by Statistics New Zealand. Budget In the 2005 Budget, funding for implementing ANZSIC 2006 was secured under the Vote Statistics allocation. This covers across-government costs of the implementation phase over four years and will ensure the transition period is smooth and appropriately timed. User support tools To provide a smooth transition to the new classification and enable ongoing use, a variety of support tools are being developed to support the classification itself. Statistics New Zealand is dedicated to providing all the necessary tools for the practical use of the classification and to making these as accessible as possible. The majority of these will be available when the classification is officially released, while others depend on international developments and will be made available when completed. Classification Manual The classification manual is the main classification tool. This will accompany the official release in 2006 and will include discussions of statistical business unit models, the conceptual underpinning of the classification, significant changes from ANZSIC 1993 and the treatment of difficult activities, as well as the classification in detail, including class descriptors, primary activities and exclusions. The 2006 manual will contain significantly more conceptual discussion than the 1993 and 1996 editions in order to better support the classification. The manual will be available in print and in electronic format on the Statistics New Zealand website. Concordances (Correspondences) and Backcast Series Another key tool is the publishing of concordance or correspondence tables. These are vital for timeseries and comparability purposes, and detail how ANZSIC 2006 translates to ANZSIC 1993 and other relevant classifications. Commonly used concordances will be published in the manual, while others will be available electronically. A concordance to ISIC Rev. 4 will be made available once the classification is published in 2007. A significant amount of current statistical series will be backcast on an ANZSIC 2006 basis to assist in time-series analysis. These series will be released at various times in combination with the publishing of the ongoing series to which they belong. Activity Change Tables and Development Papers To supplement the concordances between ANZSIC 1993 and 2006, activity change tables detailing how original categories have been split will be published. These are designed to be simpler and more user-friendly than detailed concordances. The finalised division papers used in developing the classification will also be made available when the classification is released in 2006. The Internet is intended to be the central method of distributing ANZSIC 2006 information to users. All ANZSIC support tools will be available directly and free of charge on the Statistics New Zealand website (www.stats.govt.nz). Appendix Table 3. A 01 02 03 04 05 B ANZSIC 2006 divisions and subdivisions Agriculture, Forestry and Fishing Agriculture Aquaculture Forestry and Logging Fishing, Hunting and Trapping Agriculture, Forestry and Fishing Support Services Mining 06 07 08 09 10 C 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 D 26 27 28 29 E 30 31 32 F 33 34 35 36 37 38 G 39 40 41 42 43 H 44 45 I 46 47 48 Coal Mining Oil and Gas Extraction Metal Ore Mining Non-metallic Mineral Mining and Quarrying Exploration and Other Mining Support Services Manufacturing Food Product Manufacturing Beverage and Tobacco Product Manufacturing Textile, Leather, Clothing and Footwear Manufacturing Wood Product Manufacturing Pulp, Paper and Converted Paper Product Manufacturing Printing Petroleum and Coal Product Manufacturing Basic Chemical and Chemical Product Manufacturing Polymer Product and Rubber Product Manufacturing Non-metallic Mineral Product Manufacturing Primary Metal and Metal Product Manufacturing Fabricated Metal Product Manufacturing Transport Equipment Manufacturing Machinery and Equipment Manufacturing Furniture and Other Manufacturing Electricity, Gas, Water and Waste Services Electricity Supply Gas Supply Water Supply, Sewerage and Drainage Services Waste Collection, Treatment and Disposal Services Construction Building Construction Heavy and Civil Engineering Construction Construction Services Wholesale Trade Basic Material Wholesaling Machinery and Equipment Wholesaling Motor Vehicle and Motor Vehicle Parts Wholesaling Grocery, Liquor and Tobacco Product Wholesaling Other Goods Wholesaling Commission-based Wholesaling Retail Trade Motor Vehicle and Motor Vehicle Parts Retailing Fuel Retailing Food Retailing Other Store-based Retailing Non -store Retailing and Retail Commission-based Buying and/or Selling Accommodation and Food Services Accommodation Food and Beverage Services Transport, Postal and Warehousing Road Transport Rail Transport Water Transport 49 50 51 52 53 J 54 55 56 57 58 59 60 K 62 63 64 L 66 67 M 69 70 N 72 73 O 75 76 77 P 80 81 82 Q 84 85 86 87 R 89 90 91 92 S 94 95 96 Air and Space Transport Other Transport Postal and Courier Pick-up and Delivery Services Transport Support Services Warehousing and Storage Services Information Media and Telecommunications Publishing (except Internet and Music Publishing) Motion Picture and Sound Recording Activities Broadcasting (except Internet) Internet Publishing and Broadcasting Telecommunications Services Internet Service Providers, Web Search Portals and Data Processing Services Library and Other Information Services Financial and Insurance Services Finance Insurance and Superannuation Funds Auxiliary Finance and Insurance Services Rental, Hiring and Real Estate Services Rental and Hiring Services (except Real Estate) Property Operators and Real Estate Services Professional, Scientific and Technical Services Professional, Scientific and Technical Services (except Computer Systems Design and Related Services) Computer Systems Design and Related Services Administrative and Support Services Administrative Services Building Cleaning, Pest Control and Other Support Services Public Administration and Safety Public Administration Defence Public Order, Safety and Regulatory Services Education and Training Preschool and School Education Tertiary Education Adult, Community and Other Education Health Care and Social Assistance Hospitals Medical and Other Health Care Services Residential Care Services Social Assistance Services Arts and Recreation Services Heritage Activities Artistic Activities Sport and Recreation Activities Gambling Activities Other Services Repair and Maintenance Personal and Other Services Private Households Employing Staff References Department of Statistics (1987) Standard Industrial Classification 1987. Wellington: Department of Statistics. Australian Bureau of Statistics (1983) Australian Standard Industrial Classification 1983 Edition. Canberra: Australian Bureau of Statistics. Australian Bureau of Statistics & Statistics New Zealand (1993) Australian and New Zealand Standard Industrial Classification 1993 Edition. Canberra: Australian Bureau of Statistics, Wellington: Statistics New Zealand. Website: http://www.stats.govt.nz/statistical-methods/classifications/anzsic-1993.htm Statistics New Zealand (1996) Australian and New Zealand Standard Industrial Classification (New Zealand Version 1996). Wellington: Statistics New Zealand. Website: http://www.stats.govt.nz/statistical-methods/classifications/anzsic-nz-version-1996.htm International Standard Industrial Classification of all Economic Activities Revision 3.1 Website: http://unstats.un.org/unsd/cr/registry/regcst.asp?Cl=17 North American Industrial Classification System 2002 Website: http://www.census.gov/epcd/www/naics.html JEL Classification C82 Methodology for Collecting, Estimating, and Organising Macroeconomic Data Key Words ANZSIC 1993, ANZSIC 2006, Industrial Classification
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