Australian Bureau of Statistics
6419.0 - Producer and International Trade Price Indexes, 1995
Latest ISSUE Released at 11:30 AM (CANBERRA TIME) 13/02/1995 Ceased
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17.1. Apart from information on the variety of component series of index numbers, there is a potential demand for two other kinds of statistics relating to prices. These are:
17.2. For a large proportion of the items priced for the producer and foreign trade price indexes, it is not possible to calculate meaningful average prices. The reasons for this are:
17.3. As explained in Chapter 12, the ABS price indexes are designed to measure price change over time. To do this, samples of products are selected to provide representative indicators of price movement over time and not to measure the actual average price at any date. Thus the average price of the sample for instant coffee is simply the average of the prices of a number of the biggest selling brands and sizes, selected to measure price change for instant coffee. This average could, in no way, purport to be the overall average price for all sales of instant coffee. To calculate an actual average price would require prices to be collected for a much larger range of the brands and sizes of instant coffees produced.
17.4. Similarly, the samples of respondents from whom prices are collected are selected to provide representative measures of price change over time and not necessarily to provide accurate measures of the actual average price level for the item concerned. As a general rule, the sample required to provide a reliable measure of price change is smaller than that required to measure accurately price levels at a date. This reflects the fact that, in determining the size of the respective samples, two different sets of assumptions apply:
17.5. In general, the first set of assumptions can be met with a smaller size sample than the second.
17.6. There are also many items where it would not be practicable to calculate an average price for any recognisable thing which could be usefully composed. This may be because:
17.7. Example of such items include clothing, appliances, machinery and equipment, furniture and floor coverings.
17.8. Because of these considerations, the ABS does not calculate average prices from the producer and foreign trade price indexes. A limited number of average prices is available from the Consumer Price Index.
Spatial price indexes
17.9. The term spatial price indexes is used to describe indexes which measure the difference in prices between localities (i.e. differences across space) at a particular date - in contrast with the more common temporal price indexes which measure differences in prices over time in a particular locality. Although both the Materials Used in House Building and the Materials Used in Building Other than House Building indexes provide indexes for each capital city, they are temporal and not spatial. That is, they provide price movements over time for each city, not price movements between the cities.
17.13. In general, neither alternative (1) nor (2) could be regarded as providing a satisfactory basis (especially from the point of view of the locality whose sales/purchasing pattern was not taken into account). Alternative (3) would be regarded, at best, as a compromise which reduces, but does not eliminate, the shortcomings of (1) and (2). Extending the index to more than two localities compounds the difficulties.
17.14. Even if the problem of determining a regimen and weighting pattern for a set of spatial price indexes were to be resolved, there would still be a substantial practical problem in actually constructing such indexes because identical types of goods and services are not necessarily sold in each locality (i.e. the brands, styles, sizes, etc., differ from locality to locality). While this is not a problem in compiling temporal price indexes designed to measure price changes in each locality separately, it is a serious difficulty if the objective is to compare price levels between localities. Unless identical goods and services could be priced in each locality it would be necessary to assess the extent to which price differences reflect differences in quality or quantity and adjust prices accordingly before using them in the comparison.
17.15. Because of the difficulties mentioned above, the ABS has limited its involvement in spatial price indexes. The only such indexes the ABS produces are indexes of relative retail prices of food; generally the problems of obtaining prices for identical items in different localities are less serious in the case of food than in other areas of expenditure.
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