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2 Capital city indexes used by the CPI are based on the 2011 Australian Statistical Geography Standard (ASGS) Greater Capital City Statistical Areas. The capital city indexes measure price movements over time in each city individually. They do not measure differences in retail price levels between cities.
3 Further information about the CPI is contained in Consumer Price Index: Concepts, Sources and Methods (cat. no. 6461.0).
4 The frequency of price collection by item varies as necessary to obtain reliable price measures. Prices of some items are volatile (i.e. their prices may vary many times each quarter) and for these items frequent price observations are necessary to obtain a reliable measure of the average price for the quarter. Each month prices are collected at regular intervals for goods such as alcohol, men's and women's clothing, project homes, motor vehicles, petrol and holiday travel and accommodation. In the case of transactions data, revenue and quantity data are collected on a weekly basis. For most other items, price volatility is not a problem and prices are collected once a quarter. There are a few items where prices are changed at infrequent intervals, for example education fees where prices are set once a year. In these cases, the frequency of price collection is modified accordingly.
5 In order to facilitate a more even spread of field collection workload, the number of items for which prices are collected quarterly is distributed roughly equally across each month of each quarter. In all cases, however, individual items are priced in the same month of each quarter. For example, items for which prices are collected in the first month of the September quarter, July, are also priced in the first month of subsequent quarters, namely October, January and April.
6 There are 87 expenditure classes (that is, groupings of like items) in the 17th series CPI and each expenditure class has its own weight, or measure of relative importance. In calculating the index, price changes for the various expenditure classes are combined using these weights.
7 Changes in the weighting pattern have formerly been made at approximately six yearly intervals to take account of changes in household spending patterns. From the introduction of the 17th series CPI in December quarter 2017, the weights are now updated annually. The Household Expenditure Survey (HES) is used to re-weight the CPI in the years where it is available, currently six-yearly. In inter-HES years, Household Final Consumption Expenditure (HFCE) data from the National Accounts is used as the primary data source for updating the weights. The CPI now comprises seventeen series of price indexes which have been linked to form a continuous series. The current and historical weighting patterns for the CPI for the weighted average of the eight capital cities are published in Consumer Price Index: Historical Weighting Patterns, 1948 - 2017 (cat. no. 6431.0). The 17th series weighting pattern for the weighted average of eight capital cities and for each of the eight capital cities, as well as each city's percentage contribution to the weighted average, are also published in the Consumer Price Index: 17th Series Weighting Pattern (cat. no. 6473.0). Both publications are available on the ABS website <http://www.abs.gov.au>.
ANALYSIS OF CPI CHANGES
8 Movements in indexes from one period to another can be expressed either as changes in index points or as percentage changes. The following example illustrates the method of calculating changes in index points and percentage changes between any two periods:
less December Quarter 2016 = 110.0 (see Table 1)
Change in index points = 2.1
Percentage change = 2.1/110.0 x 100 = 1.9% (see Table 2)
PERCENTAGE CHANGES ARE CALCULATED TO ILLUSTRATE THREE DIFFERENT KINDS OF MOVEMENTS IN INDEX NUMBERS:
9 Percentage changes are calculated to illustrate three different kinds of movements in index numbers:
10 Table 7 provides a detailed analysis, for the weighted average of eight capital cities, of movements in the CPI since the previous quarter, including information on movements for groups, sub-groups and expenditure classes. It also shows the contribution which each makes to the total CPI. For instance, the dairy and related products sub-group contributed 1.11 index points to the total All groups index number of 112.1 for the December Quarter 2017. The final column shows contributions to the change in All Groups index points by each group, sub-group and expenditure class.
11 Various series are presented in Table 8 in this publication to assist users analyse the CPI. Some of the analytical series are compiled by taking subsets of the CPI basket, and most are self-explanatory, such as 'All groups CPI excluding food and non-alcoholic beverages'. (A complete list of CPI groups, sub-groups and expenditure classes is contained in Tables 6 and 7). Other series and their composition are described below:
12 The International trade exposure series was reviewed and updated for the December quarter 2016. There were eight changes of classification outlined in the September quarter 2016 feature article 'Review of the Consumer Price Index International Trade Exposure Series' (cat. no. 6401.0): breakfast cereals; waters, soft drinks and juices; gas and other household fuels; therapeutic appliances and equipment; and newspaper, magazines and stationery were reclassified from non-tradables to tradables: and spirits; tobacco; and pharmaceutical products were reclassified from tradables to non-tradables. These changes are included from the December quarter 2016. The historical tradables and non-tradables series will not be revised. A description of which expenditure classes are tradables or non-tradables is published in the Appendix of the December quarter 2017 issue of Consumer Price Index, Australia (cat. no 6401.0).
13 Published index numbers, except for the underlying trend series, are rounded to one decimal place. Percentage change movements are calculated from the index numbers and then rounded to one decimal place. Rounding errors can occur, causing discrepancies (e.g. when calculating percentage changes of aggregates and their components). Underlying trend series, 'Trimmed mean' and 'Weighted median' index numbers are published to four decimal places. Percentage change movements are calculated from the published index numbers and rounded to one decimal place.
SEASONALLY ADJUSTED INDEXES
14 Seasonally adjusted estimates are derived by estimating and removing systematic calendar related effects from the original series. In most economic data these calendar related effects are a combination of the classical seasonal influences (e.g. the effect of the weather, social traditions or administrative practices such as government charges increasing on 1 July each year) plus other kinds of calendar related variations, such as Easter or the proximity of significant days in the year (e.g. Christmas). In the seasonal adjustment process, both seasonal and other calendar related factors evolve over time to reflect changes in activity patterns. The seasonally adjusted estimates reflect the sampling and non-sampling errors to which the original estimates are subject.
15 The CPI uses a concurrent seasonal adjustment methodology to derive the adjustment factors. This method uses the original time series available at each reference period to estimate seasonal factors for the current and previous quarters. Concurrent seasonal adjustment is technically superior to the more traditional method of reanalysing seasonal patterns once each year because it uses all available data to fine tune the estimates of the seasonal component each quarter. With concurrent analysis, the seasonally adjusted series are subject to revision each quarter as the estimates of the seasonal factors are improved. In most instances, the only significant revisions will be to the combined adjustment factors for the previous quarter and for the same quarter in the preceding year as the reference quarter (i.e. if the latest quarter is December quarter 2017 then the most significant revisions will be to September quarter 2017 and December quarter 2016). The seasonal patterns are also reanalysed on an annual basis or when there are known changes to regular events. This can lead to additional revisions.
16 Autoregressive integrated moving average (ARIMA) modelling can improve the revision properties of the seasonally adjusted and trend estimates. ARIMA modelling relies on the characteristics of the series being analysed to project future period data. The projected values are temporary, intermediate values, that are only used internally to improve the estimation of the seasonal factors. The projected data do not affect the original estimates and are discarded at the end of the seasonal adjustment process. From the December quarter 2012, the Consumer Price Index uses ARIMA modelling where appropriate for individual time series. The ARIMA model is assessed as part of the annual reanalysis. For more information on ARIMA modelling see Feature article: Use of ARIMA modelling to reduce revisions in the October 2004 issue of Australian Economic Indicators (cat. no. 1350.0).
17 The ABS applies seasonal adjustment to the expenditure class components of the CPI which are found to be seasonal, and then aggregates the seasonally adjusted and non-seasonally adjusted components to calculate the All groups CPI, seasonally adjusted, Trimmed mean and Weighted median estimates. The seasonally adjusted expenditure class components are available in Table 13 - CPI expenditure classes and selected analytical series, seasonally adjusted index numbers, weighted average of eight capital cities. The seasonal factors used to derive these seasonally adjusted indexes are available in Table 14 - CPI expenditure class, combined seasonal adjustment factors, weighted average of eight capital cities. For more information about seasonal adjustment of the CPI please refer to Information Paper: Seasonal Adjustment of Consumer Price Indexes, 2011 (cat. no. 6401.0.55.003).
18 In analysing price movements in Australia, an important consideration is Australia's performance relative to other countries. However, a simple comparison of All groups (or headline) CPIs is often inappropriate because of the different measurement approaches used by countries for certain products, particularly housing and financial and insurance services. To provide a better basis for international comparisons, the 17th International Conference of Labour Statisticians adopted a resolution which called for countries to 'if possible, compile and provide for dissemination to the international community an index that excludes housing and financial services' in addition to the all-items index.
19 CPI original indexes are revised only in exceptional circumstances, such as to correct a significant error. As is the case with all price indexes, the index reference period (i.e. the period in which the index is set equal to 100.0) will be changed periodically. The index number levels for all periods will be changed by this process and it may also result in differences, due to rounding, between the percentage changes published on the old base and those on the new base. Seasonally adjusted indexes (including the Trimmed mean and Weighted median) for some quarters will be revised as extra quarters are included in the series analysed for seasonal influences (see paragraphs 14 to 17).
20 Current publications and other products released by the ABS are listed on the ABS website <http://www.abs.gov.au>. The ABS also issues a daily Release Advice on the website which details products to be released in the week ahead.
21 Users may also wish to refer to the following publications and other data products that are available free of charge from the ABS website:
22 As well as the statistics included in this publication, there is more detailed data for each capital city available on the ABS website. Inquiries should be made to the National Information and Referral Service on 1300 135 070.
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