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6469.0 - Outcome of the 16th Series Australian Consumer Price Index Review, Dec 2010  
Latest ISSUE Released at 11:30 AM (CANBERRA TIME) 06/12/2010  First Issue
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EVALUATION

2.23 The international CPI Manual (ILO, 2004) does not promote any one single conceptual approach for compiling a CPI but leaves the decision up to individual countries to choose the approach which they believe best suits their principal uses. In practice, the conceptual distinctions between the three approaches are unimportant for most areas of household consumption.

2.24 However there are some circumstances under which the distinctions are important. OOH costs, as discussed above, are a key difference between alternative approaches.

2.25 The ABS undertook further analysis to ensure the current acquisitions approach for the measurement of OOH was defensible, and not impacting negatively on users of the CPI.

2.26 Analysis showed the CPI is sensitive to the choice of OOH measurement. Findings indicate, however, that using an alternative approach to housing in the headline CPI would not necessarily reduce public concern that housing costs are not captured adequately in the CPI (see Appendix 4).

2.27 The closest approximation for the measurement of consumer inflation for OOH is the acquisitions approach as alternative approaches capture asset prices (i.e. land), interest rate payments or non-market pricing, rendering them unsuitable for the principal purpose of measuring price inflation.

2.28 There is international support for the use of the acquisitions approach for general CPI construction and for OOH where the CPI is intended to be a measure of household consumer inflation. One barrier for countries attempting to produce OOH measurement on an acquisitions basis is the availability of data. Australian data sources are available to ensure this approach delivers accurate results.

2.29 Current methodology for the measurement of OOH is consistent with the principal purpose to measure household inflation.





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