4.4 The Deposit and loan facilities index was implemented as part of the 15th series CPI in 2005 following the outcomes of the last major CPI review (the 13th series review, 1998). Prior to implementing the index in the CPI, the ABS published an experimental series for the Deposit and loan facilities index. Despite some early concerns from users about the index, the series generally was well behaved.
4.5 Volatility in the index during the global financial crisis (GFC) prompted concerns from users about the behaviour of the index. Recent experience has shown that movements in the index are highly sensitive to the detailed level of data available from financial institutions. The behaviour of related indexes during periods of heightened financial market volatility prompted a broader international debate surrounding the measurement of FISIM.
4.6 There was strong support during the 16th series CPI review for a detailed reassessment of the Deposit and loan facilities index. The ABS decision to remove the indirect fees component of the index is a result of in-depth analysis and close consultation with users and data providers. The decision to change this aspect of the CPI is a significant outcome from the review and reflects an on-balance assessment based on a range of information. Despite concerns about the accuracy of the index, users acknowledged the importance of including these services in the CPI.
4.7 Work is underway to strengthen data sources and implement improved methodologies with the intention to reintroduce the indirect fees component in the future. The ABS is currently involved in ongoing discussions within the international statistical community to resolve methodological issues. This work may take some time to complete. In the interim, the ABS will publish an analytical series of the All groups CPI inclusive of indirect fees from the 16th series.