6419.0 - Producer and International Trade Price Indexes, 1995  
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Contents >> Chapter 12. Price collection


12.1. ABS producer and international trade price indexes measure price changes, over time, in broad sectors of the Australian economy and foreign trade. Transactions for each of those sectors may cover purchases and sales of thousands of different items at a wide variety of prices. The sheer volume and complexity of these transactions means that it is impossible to collect prices for every item or to take into account every price at which items are sold. Consequently, it is necessary to adopt a sampling approach, i.e. to price a sample of items from a sample of respondents.

Sample approach used

12.2. ABS price indexes are based on judgement samples, where the sample is selected on the basis of the knowledge and judgement of staff compiling the index. The alternative of using probability (or scientific) sampling would be far more difficult and expensive to use. In particular:

      • actors other than sales volume are important when selecting items and respondents. These include availability of prices on an ongoing basis, degree of price dispersion and the pricing behaviour of respondents.
      • judgement sampling is more practical in the day to day operations of price collection, where items and respondents regularly need to be replaced.

12.3. Interviews with respondents, market reports, foreign trade and manufacturing census data and other information all help to form the basis for the selection and ongoing maintenance of samples of respondents and items (specifications) for pricing. This information is essential in developing a comprehensive understanding of the market and making appropriate judgements in the sample selection process.

12.4. The effectiveness of this sample approach depends on the representativeness at each level of an index. A 'chain of representativeness' approach is adopted in which:
      • key commodities are selected to adequately represent the price movements for all the commodities which come within the scope of the particular price index;
      • respondents are selected to adequately represent all the suppliers/users of the selected commodities;
      • specifications are selected from each respondent to adequately represent the whole product range within the selected commodity description; and
      • transaction prices are obtained for each selected specification which best represent the price movements of all transactions in the selected specification.

12.5. The use of judgement sampling has implications for the selection of replacement specifications or respondents. Generally, specifications and respondents will be representing a category of specifications or respondents, not just themselves (e.g. a respondent may represent medium sized firms or a specification may represent a broader product grouping). Therefore the selection of replacements takes into account these characteristics and, as far as possible, ensures that they are still covered by the new specification or respondent.

Establishing and maintaining samples

12.6. Price indexes are only as valid as the samples of prices upon which they are based. Consequently, in selecting the samples for index items with a large weight in a published series, the aim is to cover those businesses accounting for a high proportion of sales or purchases of the products making up the index item. For less significant items, coverage may be fairly low but care is taken to ensure that the selected businesses are representative of all the businesses trading in the item.

12.7. Price reporting by businesses is initiated by a personal visit by an ABS officer. The selection of a particular specification for pricing is made in consultation with the respondent. The aim is to identify particular products that will best reflect the price movements of all the products sold or purchased by the business which are within the scope of the relevant index item.

12.8. Price indexes aim to reflect changes in market transaction prices. Thus, the specifications identify the precise terms under which transactions are typically made. Prices collected take account of discounts, surcharges, conditions of sale, order sizes, type of customer, etc. List prices are only used where most transactions in a specification occur at the list price.

12.9. When selecting specifications to be priced the following factors are considered:

      • the relative importance of the item in an index; more important items are given greater attention.
      • the degree of homogeneity within the index item; more homogeneous items require smaller samples.
      • influences which can cause prices of some specifications to move differently from others within the item; it is important to reflect all the significant influences in the sample.
      • the extent to which the specification can be expected to be continuously available for pricing; preference is given to specifications for which transaction prices are available on a continuous basis.
      • whether the specification can be clearly described in terms of quantity and quality, so that prices can be collected over time for an item of constant quality.

12.10. Over time, the samples of respondents and specifications may become unrepresentative, or the proportions in which they are combined to calculate the index numbers may become outdated. The samples of respondents and specifications are therefore reviewed regularly to ensure that they remain representative. When new or changed samples are incorporated in the index the resulting index numbers are adjusted to ensure that only price movements, and not any effect of the sample change, are shown.

Price collection procedures

12.11. Prices for the Producer and Foreign Trade Price Indexes are predominantly collected using mail questionnaires. A small number of prices are collected from administrative sources, e.g. the Wool Market Indicator, rather than directly from businesses.

12.12. Each questionnaire is specific to a particular respondent and uses terminology agreed with the respondent. They describe in detail the specifications being priced and the basis on which the prices are to be reported. This facilitates the accurate reporting of prices while minimising the burden on the respondent.

Price collection timetable

12.13. Price collection is spread over the three months of the quarter. However, there are some items subject to significant price variation throughout the quarter. Examples include agricultural materials and metal ores and concentrates. In these cases, prices are collected at the end of each quarter and respondents are asked to report average prices applicable during that period.

12.15. In a very small number of cases, such as for sugar cane where prices are known to be set once each year, prices are collected annually.

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