What is the difference between output, value added and GRP?

Output is the total value of everything sold by businesses located in your area. Value added is what is left once businesses subtract what they bought from other businesses. Output counts the same dollar several times as it moves along a supply chain; value added counts it once, which is why value added is the measure that sums towards GRP and GDP.

Key concepts

Output (sales)

Output, labelled sales or output in Economic Profile, is an estimate of the total value of sales at factor cost – that is, excluding indirect taxes such as GST – plus the value of government services that are not sold. It measures local production: what businesses located in the area produce, similar to 'Australian production' in the ABS Input-Output tables. Some providers instead report a total-supply figure that also includes competing imports, which for import-heavy industries such as manufacturing can be close to double the local production figure – so output figures are not always comparable between providers. The value of inputs bought from other businesses is included, so when a builder buys timber from a local supplier, the timber's value appears in both businesses' output.

Value added

Value added is the same sales figure less the purchases of inputs from other businesses. 'Gross' means no further deduction is made for depreciation. Because every dollar is counted only once, value added is the measure to use when you want to know an industry's real contribution to the local economy.

How the two relate

Output is always larger than value added, and the gap varies a lot by industry, depending on how input-intensive the industry is. As a rough guide, value added is typically around a quarter of output for manufacturing and construction; half for retail trade and public administration; and three quarters for labour-intensive services such as health care – though this varies by region, depending on the mix of businesses within each industry. This is why a council should never rank industries on output when the question is their contribution to the economy – output rankings systematically favour input-heavy industries such as construction and manufacturing. For the same reason, never compare your own output figure against another council's value added figure.

Is total value added the same as GRP?

Not quite. Headline GRP is industry value added plus the ownership of dwellings component – the value accruing to owners of dwellings, whether as actual rent received by landlords or imputed rent for owner occupiers, attributed to where the dwelling is. So total industry value added is not quite the same thing as GRP, and the difference is this housing component rather than any missing industry.

This is also a common source of confusion when reconciling industry tables against other sources. The ABS national and state accounts treat ownership of dwellings as an industry in its own right, outside Rental, Hiring and Real Estate Services. Economic Profile does not treat it as an industry – no jobs or businesses attach to it, because it is an accounting convention that imputes the value of housing services – so it is reported as a separate component outside the industry table. The value is the same; it sits in a different place.

Where to find these measures in Economic Profile

Economic Profile's economic value topic covers GRP, value added, output and local sales. Economic Profile publishes industry-level data annually by multiple measures for each two-digit ANZSIC (Australian and New Zealand Standard Industrial Classification) industry, so you can read an industry's contribution on value added as well as output.

Frequently asked questions

Q: Which measure should I use to show an industry's importance to our economy?

A: Value added. It counts each dollar once, so it reflects the industry's genuine contribution. Output is useful for understanding the scale of an industry's sales and its supply chain, but it overstates input-heavy industries in any ranking.

Q: Why is output so much bigger than value added for construction?

A: Construction buys a large share of its inputs – materials, subcontractors, equipment – from other businesses, and those purchases are inside its output figure. Once they are subtracted, its value added is a much smaller share – as a rough guide, around a quarter of output, though this varies by region.

Q: If I add up value added for every industry, why doesn't it equal GRP?

A: Headline GRP includes the ownership of dwellings component, which sits outside industry value added. The gap between your total and the published GRP is largely that housing component.