Australian Bureau of Statistics
Import Price Index
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NAME OF ORGANISATION
· to support inflation monitoring and analysis of the economy as a whole; and
· for contract adjustment purposes ie as the basis for "rise" and "fall" clauses in legal contracts.
The Import Price Index measures changes in prices of imports of merchandise into Australia. The index numbers for each quarter relate to prices of imports landed in Australia during the quarter. The Import Price Index excludes the following items (representing less than 5% of the value of merchandise imported during the weighting period) because of the inherent difficulties in pricing the items to constant quality
· jewellery and other articles of precious metal, n.e.s.
· military equipment
· commodities not classified according to kind
· works of art, collectors' pieces, antiques
· railway vehicles
· ships of various types
The annual reweighting and chaining process involves a number of steps in order to provide new weights each year. The annual reweighting and chaining process involves a number of steps in order to provide new weights each year. The weighting basis for the Import Price Index are derived from the average value of import items during the latest financial year. This means, for example, that the weights for the Import Price Index are effectively determined using average quantities from 2011–12 and prices from the June quarter 2012. Indexes derived by using the new weights for the September quarter 2012 are then linked to the already published June quarter 2012 (link period) levels which were derived using the previous series weights. Using this methodology, long–term chain linked series can be constructed over time on a consistent reference base for continuity and user convenience, but using annually refreshed weights. The index reference period for each index series is: 2011–12 = 100.0 even though the weights are updated each year.
In general, prices of individual shipments are obtained from major importers of the selected items and relate to the quarter in which the imported merchandise physically arrives in Australia.
As the prices used in the indexes are expressed in Australian currency, changes in the relative value of the Australian dollar and overseas currencies can have a direct impact on price movements for the many commodities that are bought and sold in currencies other than Australian dollars. Prices reported in a foreign currency are converted to Australian dollars using relevant exchange rates. Where imports or exports are transacted in prices expressed in terms of a foreign currency and forward exchange cover is used, the prices in the indexes exclude the forward exchange cover. As noted, imports are priced on a country of origin basis. Therefore the exchange rates applied are impacted by the differences between the date of transaction (ownership change) and the shipping time from the country of origin to Australia.
The main pricing methodology used is specification pricing, under which a manageable sample of precisely specified products is selected, in consultation with each reporting business, for repeat pricing. In specifying the products, care is taken to ensure that they are fully defined in terms of all the characteristics which influence their transaction prices. As such, all the relevant technical characteristics need to be described (e.g. make, model, features) along with the unit of sale, type of packaging, conditions of sale (e.g. delivered, payment within 30 days), etc. The goods are also specified by country and market in order to lessen the impact of price variations attributable solely to changes over time in the mix of countries, or markets.
When the quality or specifications of an item being priced change over time, adjustments are made to the reported prices so that the index captures only pure price change. That is, any element of price change attributable to a change in quality is removed. If there is an increase (decrease) in the quality of an item, then the price index is adjusted downwards (upwards) to reflect the 'worth' of the quality change. This technique is known as pricing to constant quality.
The main outputs are presented in the quarterly International Trade Price Indexes, Australia (ABS Cat. no. 6457.0).
Other concepts (summary)
The Import Price Index, Australia, was reviewed in 2000 with a new series (the current series) introduced from September quarter 2000, with the reference base 1989–90 = 100.0 with the weights based on Australian imports for 1999–2000.
From September quarter 2012, the index reference period has been updated to 2011–12 = 100.0 with the weights based on Australian imports for 2011–2012. This index is annually re–weighted and chained (in the September quarter of each year).
Data availability comments
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This page last updated 31 October 2012