3.11 Given the strong demand from key users and the results from the research undertaken, the ABS supports the view that Australia would be best served by a monthly CPI.
3.12 A monthly CPI would improve the timeliness and quantity of data available to policy makers. The series would better conform to the IMF and ILO guidelines, which would improve international comparability. While the full benefits to the Australian economy are difficult to quantify at this early stage, one benefit for the RBA would be the ability to adjust the official cash rate target in response to a more timely indicator of inflationary trends available one month after the reference period rather than the current delay of up to three months. An adjustment of 25 basis points on the cash rate target results in changes of the order of several hundreds of millions of dollars in interest payments by Australian households. Discussions with the Bank of England have confirmed the value of the monthly CPI in the UK. They noted a number of historical occasions in which the absence of a monthly CPI would have meant delays in adjusting monetary policy settings, at considerable cost to the national economy.
3.13 The ABS has evaluated the viability of producing the CPI on a monthly basis and can produce a monthly CPI measure of equivalent quality to the current quarterly measure. The monthly CPI would be constructed taking international best practice into consideration, e.g. released within one calendar month of the end of the reference period. The index would cover all private households in the eight capital cities. Further details are outlined in Appendix 5.
3.14 A monthly CPI is expected to be first published within two to three years of receiving the required funding, estimated at an initial investment of $6 million, and an additional cost of $15 million per annum. It is estimated that it would take one year to evaluate and improve CPI price samples, increase the number of staff and to implement computer systems. The ABS then requires at least a year to run the monthly series parallel to the current quarterly series to evaluate the quality and robustness of the index. This would also ensure that a ‘percentage change from the corresponding month of the previous year’ figure can be included in the first monthly release.
3.15 The monthly index numbers as well as percentage change from the previous month and corresponding month of the previous year would be released. They would be released for the eight capital cities and the weighted average of the capital cities to the expenditure class level.
3.16 In addition to publishing monthly and annual CPI figures, the quarterly CPI headline index number will be made available. The existing quarterly indexes (i.e. March, June, September and December) will continue to be published. They will be calculated as an arithmetic average of the three monthly index numbers.