1. Background
The Overseas Trade in Services Price Indexes were first developed in 1999 to complement existing price and volume indexes for merchandise trade. Statistics New Zealand has been progressively reviewing the services price indexes since 2005 to ensure they remain relevant. Personal travel is a strong and dynamic export industry, with a large number of service providers and a strong number of foreign visitors to New Zealand. In terms of weight, personal travel accounted for 51.8 percent of total exports of services as at the June 2006 quarter. The education-related travel price index is a main sub-index of the total personal travel exports index. As part of the redevelopment project (please see Price Index News April 2007), the redeveloped education-related travel index was implemented in the June 2005 quarter.
Please see the appendix for more information on the redevelopment project and the structure of services price indexes.
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2. Classifications and scope
Classifications
Overseas trade in services price indexes follow the fundamental principles of the Balance of Payments Manual, fifth edition (BPM5) for definition of services for trade. The Balance of Payments Sources and Methods: 2001, published by Statistics New Zealand, defines travel services as "services acquired for personal use by New Zealanders travelling abroad, or foreigners travelling in New Zealand". A traveller is defined as a person who intends to stay for less than one year in a country of which he/she is not resident, for any purpose.
Travel is divided into two main categories, business travel and personal travel.
Business travel covers individuals travelling abroad for all types of business activity, employees of international organisations on official travel and employees doing work for enterprises that are not resident in the economies in which the work occurs.
Personal travel covers travellers going abroad for purposes other than business. Reasons include leisure activities such as holidays, participation in sports and other recreational and cultural activities, visiting friends and families.
Education and health-related travellers are also included within personal travel. Education-related travel covers all expenditure by students, such as fees and living expenses. Health-related travel covers all expenditure by medical patients, such as accommodation and living expenses, as well as hospital charges and physician fees.
Please see the diagram in the appendix which illustrates the current structure of the export travel indexes.
Following the General Agreement on Trade in Services (GATS) classification recognised by the World Trade Organisation and used as conceptual models in BPM5 and the 1993 System of National Accounts (SNA 93), education services fit into four modes of international trading of services:
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consumption abroad where an international student will come to New Zealand to study
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cross border supply where e-learning or correspondence takes place and neither the student nor the provider moves countries
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commercial presence where an education provider establishes a presence in the country in which the student lives, such as an offshore campus
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presence of natural persons where a provider moves to the country of the student to provide the service.
BPM5 classifies education services as consumption abroad (that is, education-related expenditure), thus this formed the scope of the redevelopment.
The expenditure by international students (including fees and accommodation), forms the exports of travel services. Students are recorded as travellers regardless of their length of stay because their centre of economic activity remains in their home country, not the country they are currently living in.
Scope: exclusions
According to the Balance of Payments Sources and Methods, there are exceptions, such as:
- offshore education (that is, cross border supply, commercial presence and presence of natural persons) is out of scope. This comprises services supplied between residents and non-residents relating to education, such as correspondence courses and education via the Internet or television, as well as by teachers who supply services directly in the host economies.
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3. Sample design and weighting structure
Sampling
The design of the Commodity Price Survey is mainly dependent on the methodology of the redevelopment project and sampling design. Sampling was mainly based on the size of the education providers, as measured by Statistics NZ's Business Frame and other external data sources.
The sampling process was considered important for the project to ensure that the services being surveyed are representative of the real economy.
Weighting structure
To select representative education providers for the Commodity Price Survey, the weighting structure was used as a basis. The weight structure for the export education-related travel index is divided into four main types of activities:
- tuition fees
- rent
- expenditure on food and beverages
- other expenditure.
For determining weights for tuition fees, export revenue was collected from the Ministry of Education outlining the revenue earned from tuition fees from foreign-fee paying students in 2004. This information, collected annually by the Ministry of Education, is used to form the overall weights for different types of providers: universities, private training establishments, secondary schools, polytechnics, primary schools and colleges of education.
The export revenue information is then broken down into respondents. Various data sources were used to rank providers within the categories according to international student numbers. A critical assumption here is that the higher the international student numbers, the higher the revenue earned from tuition fees. The providers with the highest student numbers were chosen as respondents for collection of representative prices.
After using various data sources to estimate living costs and expenditure for international students, respondents were selected based on their size (that is, revenue earned). Information about living costs and expenditure by international students was informed by a report prepared by Infometrics Consulting for the New Zealand International Education Marketing Network, funded by the Asia 2000 Foundation, entitled Economic Impact Analysis of Foreign Fee Paying Students. The report estimated expenditure on living costs by international students, creating a ratio of expenditure on tuition fees to expenditure on living expenses.
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4. Main pricing methods
The education-related travel index uses actual prices that foreigners pay to the education providers. Normally prices are set up by the providers and listed. These are referred to as 'menu' prices, where the providers set the prices for a fixed period of time and consumers pay as listed.
The Commodity Price Survey collects actual prices from various providers of education services to foreign students. One-off programmes or courses are excluded from the sample, as it is difficult to define these types of education services in a way that is comparable over time.
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5. Collection of information and specification of services
The most important objective of the redevelopment project was to ensure that the education services selected for price collection are representative of the real world.
In consultation with respondents, and using other data sources Statistics New Zealand set up specific service descriptions to collect prices for. Some important factors that determine the descriptions for fees collected from international students are:
- education provider
- course
- length of course (for example, annual, or a certain number of weeks)
- age group of student (for pre-tertiary education services).
For the redeveloped export education-related travel index, prices are collected through the Internet mostly for fees paid by international students. Because fees are normally set annually and are freely available on the Internet, data can be collected without burdening respondents. This collection method is becoming more common.
Selected consumers price index (CPI) sub-indexes are used to represent expenditure on rent, food and beverages, and other goods and services. Using existing indexes instead of surveying additional respondents also decreases respondent burden, while at the same time makes use of representative prices. The CPI is collected and published quarterly.
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6. Improvements
There are four main improvements from the redevelopment for education-related travel export index.
- The biggest improvement made for this index was in reducing respondent burden by collecting data via the Internet.
- The redeveloped index has more specific and detailed price descriptions which are more representative.
- Weights were updated according to the significance of the specific service providers, based on the number of international students.
- The methodology has been updated using various external data sources.
Precise specification of education-related services is necessary to maintain the quality of the indexes, and Statistics New Zealand has ongoing quality monitoring programme to ensure that this is achieved.
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7. Appendix
The redevelopment project
The Overseas Trade in Services Price Indexes were first developed in 1999 to complement existing price and volume indexes for merchandise trade. Statistics New Zealand has been progressively reviewing the services prices indexes since 2005 to ensure that they remain relevant.
The services redevelopment project, which is being implemented on a rolling basis, aims to:
- review and update the sample of service prices included in the indexes to ensure the product specifications remain representative
- review and update the sample of respondents, to ensure it adequately covers the importers and exporters of services
- reweight the lower levels of the indexes (below the published level), to ensure they reflect the relevant patterns of transactions
- re-express the services price indexes on a June 2002 quarter base.
However, the project excludes any changes to the scope of services covered by the indexes and the conceptual basis of the indexes.
The structure of services indexes
Figure 1 illustrates how the Overseas Trade in Services Price Indexes are structured, using education-related travel services as an example.
Figure 1
This structure is identical for imports and exports for education-related travel services. Sometimes the index structure may differ, depending on the industry for imports and exports. The published levels are level 1 (total export services or import services) and level 2 (transport, travel, government and other).
The redevelopment project's focus is to reweight level 5, the lowest level of the index structure (above the surveyed prices). The surveyed prices which feed into level 5 are being updated and reweighted. The levels above (levels 2 to 4) are reweighted every June quarter, mainly using balance of payments information.
Table 1
Table 1 is a summary of weights as at the June 2006 quarter. The services indexes are an annually chain-linked Laspeyres price index series. Weights are determined by the relative importance of services and businesses within the service industry and the weights are updated every June quarter. Information from balance of payments and various surveys, censuses and other sources is used to determine the weights.
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