INTRODUCTION OF THE 15TH SERIES AUSTRALIAN CPI
The CPI measures the change over time in the total price of a fixed basket of goods and services acquired by household consumers. The quantities underlying the base period expenditures remain fixed over the life of the basket, with the expenditures being updated by the movements in the price relatives in each period. It is important to update the basket and item weights periodically to reflect changes in the range of available goods and services and changes in household spending patterns.
The basket of goods and services at the expenditure class level in the Australian CPI is updated at approximately five yearly intervals. The current basket (14th series) was introduced in the September quarter 2000. The 15th series will be linked into the CPI in the September quarter 2005 issue of Consumer Price Index, Australia (cat. no. 6401.0).
EXPECTED CHANGES TO THE CPI
When new expenditure weights are introduced, the ABS typically undertakes a review of the CPI to ensure that it continues to serve its purpose as the best measure of household inflation. The 15th series is a minor review and accordingly, will not involve formal user consultation. The expected outcomes of the review are:
The most significant change to the structure of the CPI will be the introduction of a new group for Financial and insurance services. The existing insurance services price index will be moved from the Miscellaneous group into the Financial and insurance services group. Some other groups may also be affected by this restructure. Full details of changes in the structure of the CPI Groups will be presented in Information Paper: Introduction of the 15th Series Australian Consumer Price Index, 2005 (cat. no. 6462.0) which will be released in mid September 2005. In addition to providing details of the new structure, the Information Paper will also present the new weights to be used in the 15th series Australian CPI.
- update of the CPI basket and weighting patterns
- introduction of financial services into the CPI in a new group for Financial and insurance services
- introduction of a hedonic price index for computers.
An Information Paper: Experimental Price Indexes for Financial Services 1998 to 2003 (cat. no. 6413.0) was released in July 2004 and the experimental series has since been published quarterly in Experimental Price Indexes for Financial Services (cat. no. 6413.0.55.001). The coverage of the financial services price index is restricted to deposit and loan facilities provided to households by deposit-taking institutions, and services provided by stockbrokers and real estate agencies in respect of the acquisition and disposal of equities (shares) and real estate.
Details of the ABS approach to producing hedonic price indexes for computers are presented in Information Paper: The Introduction of Hedonic Price Indexes for Personal Computers, 2005 (cat. no. 6458.0), released in February 2005.
15TH SERIES SOURCES AND METHODS
The main data source for the 15th series weighting pattern will be the 2003-04 Household Income and Expenditure Survey (HIES). The HIES data will be supplemented or adjusted to allow for the following factors:
Significant changes in expenditure patterns between the time the HIES was undertaken and the link period for the CPI will also be taken into account.
- underreporting of alcohol and tobacco expenditures in the HIES;
- use of other data sources where HIES data are inadequate for CPI purposes, for example expenditure on net house purchase excluding land and the Higher Education Contribution Scheme (HECS);
- HIES expenditures that are not recorded on an acquisitions basis, for example insurance
- HIES expenditures that appear "abnormal" (excessively high or low); and
- price movements between time of purchase and reporting in the HIES for those items collected in HIES with a recall period of more than one quarter;
The link period for the 15th series will be the June quarter 2005. HIES expenditures in 2003-04 will be revalued to CPI link period prices to maintain the underlying 2003-04 quantities.
When a new series is introduced it is linked to the previous series without affecting the index numbers in the link (or overlap) period.
Initially, 1989-90 will continue as the reference base year when the 15th series based on 2003-04 weights is introduced in September quarter 2005. The CPI will be re-referenced to a 2003-04 base year during 2006.
The weights for the special and analytical indexes will also be updated with the introduction of the 15th series. The most significant change to the classification of items within the special series will result from the introduction of the new Financial services and insurance group.
The release dates for 15th series publications will be:
Mid September 2005
Late October 2005
Information paper: Introduction of the 15th Series Australian Consumer Price Index (cat. no. 6462.0)
26th October 2005
A Guide to the Consumer Price Index, 15th Series (cat. no. 6440.0);
Concordance with Household Expenditure Classification (cat. no. 6446.0.55.001);
Consumer Price Index, Australia (cat. no. 6401.0).
Readers requiring further information about the introduction of the 15th series Australian CPI should contact Steve Whennan on Canberra (02) 6252 6251, or email <email@example.com>.