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6427.0.55.003 - Information Paper: Review of the Producer and International Trade Price Indexes, 2011  
Latest ISSUE Released at 11:30 AM (CANBERRA TIME) 02/09/2011  First Issue
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APPENDIX 1 – VALUATION BASIS FOR AUSTRALIAN PRODUCER AND INTERNATIONAL TRADE PRICE INDEXES


The following indexes are the major PPIs and ITPIs released by the ABS:


STAGE OF PRODUCTION (SOP) PRODUCER PRICE INDEXES

Presented by stage of production, industry of origin, and destination within the economy

In concept the valuation basis of the SOP indexes is basic prices (see Valuation paragraphs 'a – e' below). However, the use of component series from existing ABS price collections in some cases results in the pricing basis diverging from this ideal. For example, imports are priced on a 'free-on-board' (f.o.b) basis, not 'cost, insurance, freight' (c.i.f), which approximates basic prices.


MANUFACTURING INDUSTRIES PRODUCER PRICE INDEXES

Materials Used in Manufacturing Industries (MUMI) – an input price index

Articles Produced by Manufacturing Industries (APMI) – an output price index

Basic prices are used for the output index and purchasers' prices for the input index (see Valuation paragraphs 'a – e' below). Therefore, as far as possible, ex-factory prices are included in the output index. Delivered into factory prices are included in the input index.


CONSTRUCTION INDUSTRY PRODUCER PRICE INDEXES

Materials Used in House Building – an input price index

Selected output within the Construction Industry – an output price index

The pricing basis is basic prices for the output indexes and purchasers' prices for the input index (see Valuation paragraphs 'a – e' below). Therefore, as far as possible, builders' selling prices are reflected in the output index, and delivered on-site prices are reflected in the input index.


MINING INDUSTRIES PRODUCER PRICE INDEXES

Materials Used in Coal Mining – an input price index

The pricing basis of the index is purchasers' prices (see Valuation paragraphs 'a – e' below) and, as far as possible, the prices included in the index are for items delivered to the mine site or to the primary storage area for a group of mines.


COPPER MATERIALS PRICE INDEXES

Copper Materials Used in the Manufacture of Electrical Equipment – an input price index

The pricing basis of the index is purchasers' prices (see Valuation paragraphs 'a – e' below).


SERVICE INDUSTRIES PRODUCER PRICE INDEXES

For services indexes, prices used in the indexes relate to the amount received by the service provider. Additional information on the service indexes is provided below.

Selected output within the following ANZSIC Divisions:

Transport, postal, and warehousing – an output price index
Information media and telecommunications – an output price index
Rental, hiring, and real estate service – an output price index
Professional, scientific, and technical services – an output price index
Administrative and support services – an output price index
Public administration and safety – an output price index (however this index is not currently published)
Accommodation and food services – an output price index
Other services – an output price index


FURTHER INFORMATION ON THE SERVICES PPIs

Service PPIs first began to be developed by the ABS in 1995 with first publication following in the March Quarter of 2000. Following the implementation of ANZSIC06, all available series have been reweighted using 2001–02 Input-Output data. Ongoing series retained an index reference period of 1998–99 = 100.0, whilst new series resulting from the implementation of ANZSIC06 have a reference period of 2001–02 = 100.0.

Indexes have been developed progressively for significant ANZSIC06 Services divisions. The ABS has at this point developed and published indexes for selected products primary to:

  • Division H – Accommodation and food services. This index is not currently published.
  • Division I – Transport (freight only), postal, and warehousing. Indexes are published for nine out of 14 subdivisions.
  • Division J – Information media and telecommunications. Indexes are produced for two out of 10 subdivisions.
  • Division L – Rental, hiring, and real estate services. Indexes are produced for five out of seven subdivisions.
  • Division M – Professional, scientific, and technical services. Indexes are produced for six out of 11 subdivisions.
  • Division N – Administration and support services. Indexes are produced for three out of five subdivisions.
  • Division O – Public administration and safety. Indexes are produced for one out of four subdivisions.
  • Divisions S – Other services. Indexes are produced for one out of nine subdivisions.

    There are no service PPIs for:
  • Division K – Financial and insurance services.
  • Division P – Education and training.
  • Division Q – Health care and social assistance.
  • Division R – Arts and recreation services.


INTERNATIONAL TRADE PRICE INDEXES

Import Price Index (IPI) – an input price index

Export Price Index (EPI) – an output price index.

Imports are priced on a 'free on board' (f.o.b.), country of origin basis. Therefore freight and insurance charges involved in shipping products from foreign to Australian ports are excluded from the prices used in the index, as are Australian import duties and taxes. Exports are priced on a f.o.b. basis at the main Australian ports of export. Exports are exempt from taxes on products.


VALUATION
  1. The valuation basis for the transactions covered by an output index is basic prices, defined as the amount received by the producer exclusive of any taxes on products and transport and trade margins (i.e. the pricing point is ex-factory, ex-farm, ex-service provider, etc.).
  2. On the other hand, an input index has a valuation basis of purchasers' prices, defined as the amount paid by the purchaser inclusive of any non-deductible taxes on products and transport and trade margins (i.e. the prices recorded in the index should be those relating to products delivered into store, delivered on-site, etc.).
  3. In reality, industry practice may mean that it is sometimes necessary to diverge from the conceptual ideal in order to obtain actual transaction prices. For example, although the pricing point for the output index Price Indexes of Articles Produced by Manufacturing Industries is ex-factory, in cases where costs such as handling and distribution are built into the manufacturer's selling price, they will be included in the index.
  4. Similarly, for input indexes such as the Price Index of Materials Used In House Building, which has a pricing point of delivered on-site, it has sometimes been necessary to use the nearest actual transaction price available, e.g. prices of products supplied and fixed.
  5. The GST is excluded from all the prices recorded in the current PPIs because it is deductible on business-to-business transactions. In the case of service industry output indexes relating to business-to-household transactions, the GST is also excluded because the pricing basis is basic prices (i.e. exclusive of product taxes).

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