SEPTEMBER QTR 2007 MAIN CONTRIBUTORS TO CHANGE
CPI GROUPS
Weighted average of eight capital cities, Percentage change from previous quarter
The discussion of the CPI groups below is ordered in terms of the absolute significance of each expenditure group to the change in All groups index points (see tables 6 and 7).
HOUSING (+1.8%)
All categories of housing recorded price rises this quarter. Main contributors to the increases were increases in rents (+1.6%), house purchase (+1.0%), electricity (+4.3%), property rates and charges (+4.5%) and water and sewerage (+5.5%).
Average rents rose in every capital city, with the highest increases in Brisbane (+2.4%), Perth (+2.0%), Sydney (+1.5%) and Melbourne (+1.4%). Adelaide showed the lowest rent increase of 0.6%.
Increases in house purchase prices were recorded in all capital cities, ranging from 0.6% in Melbourne to 2.8% in Darwin.
Annual reviews of prices by State and local government authorities and utility providers led to a number of price rises. Electricity prices rose in Canberra (+18.2%), Brisbane (+11.6%), Sydney (+7.6%) and Darwin (+5.2%), were unchanged in Adelaide, Perth and Hobart, and fell in Melbourne (-2.3%) due to the Winter Energy Concession. Property rates and charges rose in all capital cities with increases ranging from 3.2% in Canberra to 6.3% in Hobart. Water and sewerage prices also rose in all capital cities, with increases ranging from 3.0% in Sydney to 10.9% in Brisbane.
Through the year to September quarter 2007, the housing group rose 4.2%. This rise was mainly attributable to rents (+5.8%) and house purchase (+3.5%).
FOOD (+1.9%)
The main contributors to the rise in food prices for the quarter were fruit (+9.6%) and vegetables (+7.9%). There were small offsetting falls in a number of items but none were individually significant.
Bananas were the main driver of the rise in fruit prices. Banana prices rose in July, then fell in August and September. Significant offsetting price falls were observed for citrus fruit and berries. The rise in vegetable prices was due mainly to price increases for fresh vegetables, particularly salad vegetables. Unseasonal weather and disease were reported as factors contributing to price rises in both fruit and vegetables.
The 1.8% rise in food prices over the twelve months to September quarter 2007 is mainly due to increases in prices of vegetables (+21.5%), take away and fast foods (+4.0%), restaurant meals (+3.7%) and bread (+7.9%). Fruit (-25.5%) provided the major offsetting annual fall, driven by lower through the year prices for bananas.
HOUSEHOLD CONTENTS AND SERVICES (-2.4%)
The major contributor to the fall in household contents and services this quarter was child care (-33.4%), with less significant falls in furniture (-1.5%), towels and linen (-4.6%) and toiletries and personal care products (-0.8%). There were no significant price increases. The fall in child care reduced the September CPI increase by -0.2 percentage points (-0.29 index points).
Child care costs are calculated on a net basis in the CPI. A change in the eligibility criteria for the Child Care Tax Rebate (CCTR) that took effect in the quarter has brought it in-scope of the CPI for the first time. There has also been an additional 10% indexation of the Child Care Benefit (CCB) this quarter, on top of the usual CPI indexation. These changes and their treatment in the CPI are discussed in the Appendix to this issue.
Without the inclusion of the CCTR in the CPI this quarter, child care would have fallen 4.9% and contributed 0.0 percentage points (-0.04 index points) to the movement in the All groups CPI.
Through the year to September quarter 2007, the household contents and services group fell 1.6% due mostly to the fall in the net price of child care.
FINANCIAL AND INSURANCE SERVICES (+2.0%)
There were price rises in all categories of financial and insurance services this quarter. Deposit and loan facilities rose 2.2%, other financial services increased 2.3% and insurance services increased 1.0%.
Over the twelve months to September quarter 2007, financial and insurance services rose 3.2% due mainly to increases in the prices of deposit and loan facilities and other financial services.
RECREATION (+1.4%)
The rise in recreation was due mainly to overseas holiday travel and accommodation (+4.2%), with less significant increases in prices for domestic holiday travel and accommodation (+1.8%), sports participation (+4.0%) and other recreational activities (+1.7%). The only significant offsetting price fall was in audio, visual and computing equipment (-2.5%).
Overseas holiday travel and accommodation rose in line with the normal seasonal pattern, with price rises in fares and accommodation for most destinations. Increases were observed in all cities, ranging from 2.3% in Brisbane and Sydney to 7.0% in Adelaide.
Annually, Recreation rose 1.6% with the strongest rises in overseas holiday travel and accommodation (+5.8%), domestic holiday travel and accommodation (+3.0%), other recreational activities (+4.3%), sports participation (+5.4%) and pets, pet food and supplies (+6.7%). The most significant price fall was in audio, visual and computing equipment (-9.7%).
TRANSPORTATION (-0.7%)
The fall in transportation costs this quarter was almost entirely due to the fall in the price of automotive fuel (-3.7%). Most other categories in transportation rose, with other motoring charges (+2.6%) and motor vehicle repair (+1.0%) being the most significant.
Automotive fuel prices rose in April (+1.2%) and May (+3.7%), fell in June (-0.3%), July (-3.4%) and August (-2.2%) then rose in September (+0.7%). The automotive fuel expenditure class contributed -0.25 index points to the overall 1.1 index points change in the All Groups CPI in September quarter 2007 and -0.46 index points to the through the year change. The fall in automotive fuel reduced the September quarter CPI increase by -0.2 percentage points.
The following graph shows the pattern of the average daily prices for unleaded petrol for the eight capital cities over the last fifteen months.
In the twelve months to September quarter 2007, the transportation group fell (0.9%), entirely due to the fall in automotive fuel (-6.7%). There were rises in the price of motor vehicle repair and servicing (+3.0%), other motoring charges (+4.6%) and motor vehicle parts and accessories (+4.6%).
ALCOHOL AND TOBACCO (+0.6%)
The alcohol and tobacco group rose this quarter with tobacco (+0.9%) and beer (+0.7%) providing the most significant contributions. Wine prices fell slightly (-0.4%).
The rises in tobacco and beer prices are attributed to the excise increase in August along with prices in some cities returning from specials. There were small increases in prices of spirits.
Over the year to September quarter 2007, the alcohol and tobacco group rose 3.1%, with rises in all categories except wine, which showed no change over the year.
HEALTH (-0.5%)
The decrease in health costs was largely due to a fall in the net cost of pharmaceuticals (-4.5%), with some offset from increases in the prices of dental services (+1.5%) and hospital and medical services (+0.5%).
The fall in the net cost of pharmaceuticals was due to the cyclical effect of the Pharmaceutical Benefits Scheme safety net. There were widespread price rises across all cities in most dental services. The net cost of hospital and medical services rose due to the combined effect of gross price increases across all services, a fall in the percentage of services that are Bulk Billed, offset by the cyclical effect of the Medicare Plus Safety Net.
Through the year to September quarter 2007, the health group rose 4.3%, due to increases in all components, with an increase in net hospital and medical services (+5.3%) being the most significant.
EDUCATION (-1.0%)
The fall in education was entirely due to the 4.9% fall in the price of preschool and primary education. This was due to the increase in child care benefits that apply for children in pre-school. The changes to the child care rebate and their impact on the CPI are discussed in further detail in the Appendix to this issue.
CLOTHING AND FOOTWEAR (+0.4%)
The rise in prices of clothing and footwear this quarter was due to small increases in a number of categories, with the end of the mid-year sales and the introduction of new season's lines. The only significant fall was in women's outerwear (-1.1%).
Over the twelve months to September quarter 2007, the cost of clothing and footwear rose 1.0%.
TRADABLES AND NON-TRADABLES
The tradables component (see table 8) of the All groups CPI rose 0.2% in the September quarter 2007. This component includes goods and services whose prices are largely determined on the world market and represents approximately 42% of the weight of the CPI. The main contributors to the increase were fruit, vegetables and overseas holiday travel and accommodation. The most significant offsets were automotive fuel and pharmaceuticals.
The non-tradables component of the CPI rose 1.1% in the September quarter. This component includes goods and services whose prices are largely determined by domestic market and represents approximately 58% of the CPI. Within non-tradables, the services component rose 0.9%, mainly due to increases in deposit and loan facilities, rents, other financial services, property rates and charges and domestic holiday travel and accommodation. The major offset was provided by the fall in the net price of child care. The non-tradable goods component rose 1.5% mainly due to house purchase, electricity and water and sewerage.
Through the year to September quarter 2007, non-tradables rose 3.5% while tradables fell 0.3%. This compares with rises of 3.5% and 1.0%, respectively, for these components through the year to June quarter 2007.
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