By Hans Hoegh-Guldberg (Economic Strategies)
Last updated: 29 April 2007
This page refers to Estimating the value of the music sector in the context section, which provides further explanations. We stress that the estimation process can only produce ‘ballpark’ figures, and that progressive statistical collections will be needed as recommended in the statistical framework report described in The music sector defined.
The current page discusses the summary statistics available to estimate the music sector, statistics that need to be shown though they are background rather than intrinsic to the music sector. The statistics have been analysed and the results attached (Tables 1.1.1.1 and 1.1.1.2, and Chart 1.1.1.1). The first step is to convert the original estimate for 1984-85 to 2005-06 prices (relating to fiscal years ended June). The general data source for these calculations was the Australian Bureau of Statistics publication, Australian System of National Accounts, 2005-06, reissued on 1 November 2006 (Cat 5206.0).
- The most comprehensive report containing an economic valuation of the Australian music sector was published in 1987 by the Australia Council (Hans Hoegh-Guldberg, The Australian music industry). It found that the estimated value added to the Australian economy through music-related activities in 1984-85 was $1.545 billion at the then current prices.
- According to the 1987 report, the estimated music product represented 0.7% of the 1984-85 GDP. This is close to what the national accounts currently allow us to estimate, as $1.585 billion is 0.69% of the most recent published GDP at the then current prices ($231.337 billion).
- However, the correct measure is percent of total gross value added at basic prices (GVA), rather than percent of GDP. At constant 2004-05 prices (1) GVA accounted for 89.0% of total GDP in 1984-85 with the other component, indirect taxes less subsidies, making up the remaining 11%. The estimated music GVA represented 0.77% of total GVA at basic prices in 1984-85.
- The ratio in 1984-85 between constant-price GDP at 2004-05 prices, and current-price GDP, was 1.9778; that is, prices almost doubled over these twenty years according to the ABS chain-price index. The index increased by a further 4.8% in 2005-06 for both GVA and GDP. Applying these ratios, the estimated music product in 1984-85 at 2005-06 prices was $3.285 billion (1.585 x 1.9778 x 1.048).
The next step involves judging whether the music sector has kept or changed its share of the total economy, 0.77% of the total gross value added (GVA), which rose to $886 billion in 2005-06 (at 2005-06 prices):
- The following indicative long-term growth trends assist the perspective: GDP at constant prices rose by 3.21% per annum between 1974-75 and 2005-06 according to the national accounts, total GVA by 3.36% pa, and the GVA for culture and recreation by 3.28% pa (Table 1.1.1.1).
- As a first approximation based on the similarity of the total trends and the trend in the culture and recreation industry group, this suggests that music may have just maintained its share of total GVA, that is .77%. The implication is that the music sector contributed just under $7 billion to the 2005-06 economy ($6.82 billion), compared with $3.28 billion in 1984-85. This represents a 108% increase, in parallel with total GVA.
- So, according to this, the economic contribution of the music sector in 2005-06 was 108% larger than in 1984-85. However, if we look at the graphs of the GDP and GVA data it appears that all three were above their long-term trends in the mid-eighties but culture and recreation especially so (Chart 1.1.1.1 shows the fluctuations in the two GVA series).
- On a point-to-point basis (the year 2005-06 compared with the year 1984-85), all three fell short of their long-term trend growth rates – but especially the recreation and culture industry which grew by only 92% between 1984-85 and 2005-06. This raises the question whether the growth in the music sector fell short of the growth in total gross value added (and GDP).
- This is doubtful. Music activities represents a minority of the total recreation and culture industry group but contributes to many other industries specified in the national accounts. The music sector is potentially measurable through a so-called satellite national account, which shows how a particular set of activities contributes to the conventional industries listed in the accounting framework. (Satellite accounting is discussed here.) It is difficult or impossible to estimate from our current statistical knowledge how these other contributions may have grown. So, unfortunately, we have no real basis for postulating that the music sector has performed better or worse than the economy as a whole.
- It is also evident from Table 1.1.1.2 and Chart 1.1.1.1 that even the culture and recreation industry group, as measured in the national accounts, may have returned to the higher growth rates of past years, and the low point-to-point increase gives a wrong impression because the estimate was made between a high-performance year (1984-85) and one just below the annual 3.3% trendline (Chart 1.1.1.1). Any other point-to-point calculation would have shown the culture and recreation industry group in a more favourable light, and its long-term growth since 1974-75 is almost identical with total GVA growth. As Table 1.1.1.2 demonstrates, summary statistical measures generally show greater volatility from year to year than is the case for total GVA, and GDP.
Conclusion
There are two reasons why the contribution of music to the Australian economy in 2005-06 may have differed from the estimated 6.8 billion Australian dollars. First, as shown above, the music sector may have grown at a different rate from the total economy. We need to develop other statistics to learn more about this. Secondly, it is unlikely that the 1987 study captured the entire music sector as now defined. On the latter score at least, the $6.8 billion gross music product for 2005-06 represents a conservative estimate.
Comparison with other industries
Anyhow, the music sector emerges with a substantial economic contribution comparable with conventional industries of recognised significance listed in the national accounts. The last part of the main paper in the context section shows that the music sector compares well in terms of contribution to the national economy with a range of industry groups represented in the national accounts.
(1) GVA statistics at current prices are only available since 1989-90. However, examination of the ratio of GVA to GDP from that year to 2005-06 shows the average ratio to be similar whether measured in current or constant prices. The average for the former was 91.61% and for the latter 91.46%. There has been no apparent trend in either ratio since 1990-91, whereas there was a jump between 1986-87 and 1990-91 in the constant-price series from a level typically around 89%. We have no choice but to assume that a similar jump would have occurred in the current-price series, had it been available.
