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6401.0 - Consumer Price Index, Australia, Jun 2008 Quality Declaration 
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 23/07/2008   
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MAIN CONTRIBUTORS TO CHANGE


CPI GROUPS

The discussion of the CPI groups below is ordered in terms of their absolute significance to the change in All groups index points for the quarter (see tables 6 and 7).

Weighted average of eight capital cities, Percentage change from previous quarter
Graph: Weighted average of eight capital cities, Percentage change from previous quarter



TRANSPORTATION (+3.1%)

The increase in transportation costs this quarter was mainly due to the rise in the price of automotive fuel (+8.7%). There were minor increases in most other categories of transportation, with motor vehicle repair and servicing (+0.8%) and other motoring charges (+0.8%) being the most significant. There was a small offsetting fall in the price of motor vehicles (–0.1%).

Automotive fuel prices rose in January (+1.3%), fell in February (–2.7%), then rose in March (+2.8%), April (+2.7%), May (+3.3%) and June (+7.5%). The automotive fuel expenditure class contributed 0.63 index points to the increase in the All groups CPI in June quarter 2008 and 1.23 index points to the through the year change.

The following graph shows the pattern of the average daily prices for unleaded petrol for the eight capital cities over the last fifteen months.

Diagram: TRANSPORTATION (+3.1%)

Over the twelve months to June quarter 2008, the transportation group rose 6.9%, with the main contributors being automotive fuel (+18.4%), motor vehicle repair and servicing (+3.4%), other motoring charges (+5.3%), urban transport fares (+4.9%) and motor vehicle parts and accessories (+5.0%). There was an offsetting fall in motor vehicles (–1.3%).


FINANCIAL AND INSURANCE SERVICES (+3.8%)

The rise in financial and insurance services this quarter is a result of increases in deposit and loan facilities (+9.5%) and insurance services (+2.5%), offset by a fall in other financial services (–2.9%).

The rise in the price of deposit and loan facilities has occurred at a time when banks are facing increased costs due to the global financial crisis. As foreshadowed in the March quarter 2008 publication, the ABS is continuing to work with data providers, and reviewing and updating where necessary, a range of methods relating to the collection and compilation of financial sector output, income, transactions, positions and prices. As a result of this work, this quarter's results include a correction for under–estimation in the previous quarters' estimates. This work is continuing and further improvements in sources and methods may lead to additional corrections.

The Appendix at page 34 explains the current approach used to construct the deposit and loan facilities index.

There has also been a review of the methodology used to calculate the index for other financial services. This has resulted in a correction to the index that impacts on the quarterly movement but does not impact on the through the year movement.

Over the twelve months to June quarter 2008, financial and insurance services rose 9.9%, with increases in the prices of all components – deposit and loan facilities (+16.2%), insurance services (+7.0%) and other financial services (+3.1%).


HOUSING (+1.1%)

The rise in housing this quarter was mainly due to rents (+2.2%) and house purchase (+1.0%). Electricity (–1.4%) provided a small offsetting fall.

The increase in average rents is the largest quarterly increase since March quarter 1989. Average rents rose in all capital cities, ranging from 1.0% in Hobart to 3.3% in Perth.

Increases in house purchase prices were recorded in all capital cities, ranging from 0.3% in Melbourne to 1.4% in both Brisbane and Adelaide.

Over the twelve months to June quarter 2008, the housing group rose 6.0%, mainly due to rents (+7.7%), house purchase (+5.0%) and electricity (+9.8%). Annually, the strongest increases in housing were in Brisbane (+8.0%), Canberra (+6.7%), Melbourne and Darwin (both +6.0%). Perth recorded the smallest increase (+4.8%).


HOUSEHOLD CONTENTS AND SERVICES (+1.6%)

Most categories of household contents and services rose this quarter with increases in furniture (+3.1%), other household supplies (+2.1%), towels and linen (+3.8%), glassware, tableware and household utensils (+2.6%), major household appliances (+1.8%) and floor and window coverings (+1.6%). There were no significant price falls.

The rises were largely due to the March quarter seeing the end of widespread discounting associated with post–Christmas and summer sales at major retailers in most cities. There were increases in gross child care fees and increases in the number of families exceeding thresholds for the Child Care Benefit as family income levels rose, meaning that the net benefit of the subsidy was reduced. This had the effect of a small increase (+1.2%) in out–of–pocket expenses.

Through the year to June quarter 2008, the household contents and services group fell 0.6%, mainly due to a fall of 28.7% in the net price of child care. This was due to the impact of the inclusion in the September quarter 2007 of the Child Care Tax Rebate (CCTR) as a rebate for the first time and the additional 10% indexation of the Child Care Benefit (CCB) rates on top of the usual annual CPI indexation.


ALCOHOL AND TOBACCO (+1.9%)

All four components in the alcohol and tobacco group rose in all cities this quarter with price increases in spirits (+6.1%), tobacco (+1.5%), wine (+1.7%) and beer (+0.5%).

This is the largest quarterly increase in the price of spirits since the series began in September quarter 1980 and was predominantly due to the introduction of an increased tax on all pre–mixed spirits from 27 April 2008.

The rises in tobacco prices are mainly due to the residual effects of the increase in the Federal excise tax in the March quarter 2008. The index for wine prices rose this quarter mainly due to the discontinuation of specials and some price rises. The increase in beer prices is also due to a combination of the discontinuation of specials and price rises, some of which may be attributable to the flow on effects of the excise increase in the March quarter.

Over the twelve months to June quarter 2008, the alcohol and tobacco group rose 4.8%, with increases for the year ranging from 3.0% for wine to 9.2% for spirits.


HEALTH (+2.4%)

The rise in health costs was largely due to an increase in hospital and medical services (+4.0%), and a less significant increase in dental services (+1.3%). These rises were partially offset by a fall in the net cost of pharmaceuticals (–0.9%), mainly due to the effect of the Pharmaceutical Benefits Scheme safety net.

Hospital and medical services rose mainly as a result of increases in private health fund premiums from 1 April 2008.

Through the year to June quarter 2008, the health group rose 4.8% due to increases in hospital and medical services (6.1%), dental services (+5.4%) and pharmaceuticals (+1.3%).


CLOTHING AND FOOTWEAR (+3.0%)

All categories of clothing and footwear rose this quarter, with the most significant contributions being accessories (+6.8%), men's outerwear (+4.9%), women's underwear, nightwear and hosiery (+4.0%) and children and infants' clothing (+3.8%).

The rises were due in part to prices rebounding from the end–of–summer season sales in the March quarter 2008, as well as the arrival of new winter season clothing.

Over the twelve months to June quarter 2008, prices of clothing and footwear rose 1.1%, with increases in most categories. Women's outerwear (–1.2%) provided an offsetting fall.


RECREATION (–0.2%)

The fall in recreation was due mainly to domestic holiday travel and accommodation (–2.0%) and audio, visual and computing equipment (–1.9%). The major offsetting price rises were in other recreational activities (+2.2%) and overseas holiday travel and accommodation (+1.0%).

Annually, Recreation rose 1.7% with the strongest rises being in overseas holiday travel and accommodation (+7.1%), other recreational activities (+6.6%), domestic holiday travel and accommodation (+2.1%) and sports participation (+6.3%).


FOOD (–0.1%)

The small fall in food prices was mostly due to falls in fruit (–7.4%) and vegetables (–6.5%) offsetting rises in most other food categories. The most significant rises were for take away and fast foods (+1.7%), ice cream and other dairy products (+6.4%), restaurant meals (+1.2%) and cakes and biscuits (+2.3%), due to price rises combined with some items returning from specials.

Fruit was in plentiful supply due to seasonal factors, including peak seasonal production for some fruits. Price falls were observed across a range of fruit, most significantly apples, bananas, pears and oranges. Some offsetting rises were observed for strawberries and rockmelons.

The fall in vegetable prices was due to plentiful supply and specials. The largest falls were observed for lettuce, broccoli, cauliflower and pumpkin. Small offsetting rises were observed for carrots and cabbages.

Over the year to June quarter 2008, food prices rose 3.9%, with significant contributions from take away and fast foods (+6.5%), restaurant meals (+4.5%), milk (+12.1%), cakes and biscuits (+8.2%), snacks and confectionery (+5.3%), cheese (+14.2%), poultry (+11.0%), bread (+6.8%) and soft drinks, waters and juices (+5.0%). There were offsetting annual falls in fruit (–12.7%), vegetables (–3.3%) and bacon and ham (–0.3%).


TRADABLES AND NON–TRADABLES

The non–tradables component (see table 8) of the CPI rose 1.4% in the June quarter. This component includes goods and services whose prices are largely determined by domestic price pressures and represents approximately 58% of the CPI. Within non–tradables, the services component rose 1.7%, mainly due to deposit and loan facilities, rents, hospital and medical services, insurance services and other recreational activities. The only significant offsets were provided by other financial services and domestic holiday travel and accommodation. The non–tradable goods component rose 0.7% mainly due to price increases for house purchase and take away and fast foods.

The tradables component of the All groups CPI rose 1.5%. 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 tradable goods component rose 1.6%, driven by increases in automotive fuel, with less significant contributions from furniture, spirits, accessories and tobacco. Fruit and vegetables provided the most significant offsetting falls.

Over the twelve months to June quarter 2008, non–tradables rose 5.6% and tradables rose 2.9%. This compares with rises of 5.0% and 3.3%, respectively, for these components through the year to March quarter 2008. The main drivers in non–tradables were deposit and loan facilities, rents, house purchase, hospital and medical services, take away and fast foods, and electricity. The net cost of child care provided a significant offset. Automotive fuel was the main contributor to the rise in tradables, with less significant contributions from overseas holiday travel and accommodation, tobacco and spirits. There were significant falls in audio, visual and computing equipment and fruit.


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