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6470.0 - Information Paper: Introduction of the 16th Series Australian Consumer Price Index, 2011  
Latest ISSUE Released at 11:30 AM (CANBERRA TIME) 22/09/2011  First Issue
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MEDIA RELEASE
22 September 2011
Embargo: 11.30 am (Canberra time)
117/2011

ABS to update the CPI basket

The September quarter 2011 issue of the Australian Consumer Price Index to be released 26 October 2011, will incorporate several key recommendations from the Outcome of the 16th Series Australian Consumer Price Index Review by the Australian Bureau of Statistics (ABS). The changes are described in an information paper: Introduction of the 16th Series Australian Consumer Price Index released today by the Bureau.

The main outcome will be to update the household expenditure weights applied to the different goods and services in the CPI basket to reflect current patterns of household expenditure. A comparison between the previous household expenditure weights (June quarter 2005) and the new household expenditure weights (June quarter 2011) is included in Appendix 3 of the release. For example, household expenditure is now relatively higher on restaurant meals and lower on beef and veal.

Previously published headline CPI (All groups CPI) will not be revised as a result of the changes. The All groups CPI for the June quarter 2011 was 0.9% for the quarter, and 3.6% through the year.

The CPI has been reviewed 16 times since its introduction in 1960; these reviews make sure that the CPI basket remains relevant to Australian purchasing patterns.

Today's information paper presents the new CPI expenditure weights which will be used from the September quarter 2011, details the methods used in deriving the weights and highlights major shifts in weights.

The ABS produces, together with the quarterly headline CPI, a suite of related indexes that help users understand the pattern of inflationary pressures in the Australian economy. The information paper describes the composition of these series. Following the recommendation of the 2010 Review, the ABS has decided to remove the indirect charges for deposit and loan facilities from the headline CPI pending improvements to the methodology and underlying data sources. In the meantime a new analytical series will be produced - the All groups CPI including Deposit and loans (indirect charges).

The information paper also provides a mock–up of the revised format of the September quarter 2011 publication and downloadable spreadsheets to enable users to become familiar with them before the release date.

Further information is in the Information Paper: Introduction of the 16th Series Australian Consumer Price Index, Australia, September 2011 (cat. no. 6470.0).


Background about today's Information Paper

The 2010 Review was the first major review of the CPI in over a decade following a minor review in 2005. "The openness of this review facilitated a lively discussion about the concepts, methods and data sources that make up the CPI. This ensured that we had a comprehensive understanding of the needs of the community before we made important decisions on a main economic indicator", said Brian Pink, Australian Statistician.

Key outcomes from the 2010 Review include:
  • Endorsement of the principal purpose of the CPI as a general measure of household inflation. The current conceptual approach to measuring the CPI will be retained.
  • The ABS acknowledges that price indexes are used for many purposes, so the current suite of living cost indexes will continue. Where there is a clearly demonstrated need, and funding provided, other complementary quarterly price indexes will be produced for particular population subgroups.
  • From the September quarter 2011, the indirectly measured component of financial services will be removed from the headline CPI until such time that methods and data sources are sufficiently robust for reintroduction to the CPI. A new analytical series, comprising the All groups CPI inclusive of indirectly measured financial services, will be published.
  • The publication Average Retail Prices of Selected Items, Eight Capital Cities (cat. no. 6403.0.55.001) will be discontinued after the June quarter 2011 issue.

Implementation of other key outcomes would involve additional costs and appropriate funding is required before they can be progressed. These include:
  • production of a high quality CPI monthly rather than quarterly, as at present, to support more timely and responsive economic management, and
  • increasing the frequency with which expenditure weights are updated, from 6 yearly to 4 yearly, to mitigate the risks arising from potential upward bias in the index.

Further outcomes from the 2010 Review are detailed in the Information Paper: Outcome of the 16th series Australian Consumer Price Index Review, December 2010 (cat. no. 6469.0).
The ABS will release an updated Guide to the Consumer Price Index, 16th Series, 2011 (cat. no. 6440.0) in conjunction with the release of the 16th series CPI on 26 October 2011.

A detailed description of CPI concepts, the data used in compiling it, and the methodology underlying the CPI can be found in Australian Consumer Price Index: Concepts, Sources and Methods, 2009 (cat. no. 6461.0), which will be updated over the next few months to reflect the changes made during the 16th series review. It will be released on 7 December 2011.

Media note:
Please ensure when reporting on ABS data that you attribute the Australian Bureau of Statistics (or the ABS) as the source.

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