The Australian Statistician, Bill McLennan, announced today that the Consumer Price Index (CPI) will be changed from September quarter 1998, to provide a general measure of price inflation for the household sector.
As a result, the major changes are that all households will be covered by the new CPI, owner-occupier housing costs will be represented by new dwelling purchases (excluding land) and interest rates will be excluded from the index.
The changes follow extensive public consultation over the past six months as part of the latest periodic review of the CPI.
"The decisions which have been taken represent an on-balance view of what sort of CPI is best suited to meet the varying requirements of the Australian community now and into the next century," Mr McLennan said.
"Historically, the CPI was designed as a measure of changing living costs of wage and salary earner households. The CPI was a key input into centralised wage setting processes."
"Our consultation has shown that the CPI is now increasingly seen as a measure of price change for the household sector as a whole."
The Statistician said other changes will also be made to the CPI. One such change is the inclusion of some new items in the CPI "basket" reflecting changes in consumption patterns since the previous CPI review.
"I thank all those people who made submissions to the CPI review and to members of the CPI Review Advisory Group who assisted in drawing together user views," Mr McLennan said.
A further information paper will be released in September 1998, prior to the release of the September quarter 1998 CPI, which will provide details of the final composition of the 13th series CPI.
The Statistician's decisions on the CPI review are outlined in Information Paper: Outcome of the 13th Series Australian Consumer Price Index (cat. no. 6453.0) released today.
A summary of the major changes being made to the CPI is attached.
Changes coming for the Consumer Price Index
KEY DECISIONS - OUTCOME OF THE 13TH SERIES AUSTRALIAN CPI
- The 13th series Consumer Price Index (CPI) will be specifically designed to provide a general measure of price inflation for the household sector as a whole. Accordingly, the ABS will adopt the acquisitions approach for the construction of the index and utilise a weighting pattern representative of all private households in the eight capital cities. The most noticeable changes from the current CPI will be the exclusion of mortgage interest and consumer credit charges from the index and the inclusion of net expenditure on new dwellings (excluding land).
- The population coverage of the CPI will be expanded from the current restriction to wage and salary earner households to cover all private households in the eight capital cities. This will result in the population coverage increasing from 29% to 64% of Australian private households.
- The CPI will continue to be compiled and published quarterly.
- A ninth major commodity group, Financial services, will be incorporated into the index, comprising specific fees and charges paid in respect of financial services together with the cost of financial intermediation services.
- Home computers and software, tertiary education fees and domestic services will be added to the index, but gambling will continue to be excluded.
- The Selected State and local government charges index and the index of imported items will be dropped. Both indexes will be replaced by more appropriate indexes to be developed in consultation with users. State and local government charges and imported items will continue to be included in the CPI.
- In light of the decision to change the design of the CPI to provide a better measure of price inflation for the household sector as a whole, the ABS will review the allocation of the CPI price sample across the capital cities with a view to optimising the national estimate. This work will be undertaken as resources permit and will involve further consultation with key stakeholders.
- The ABS will proceed to develop a measure of underlying inflation for the household sector in accordance with the proposals contained in Information Paper: An Analytical Framework for Price Indexes in Australia (Cat. no. 6421.0). The most significant characteristic of this measure is that it will net out the effects of changes in indirect taxes.
- The ABS will also develop analytical indexes specifically designed to measure changes in the cost of living of subgroups in the population. These indexes will be constructed on an outlays basis and will be published at approximately annual intervals.
- The ABS will introduce the facility to compile spatial comparisons of price levels in the eight capital cities as resources permit.
- The 13th series CPI will be introduced in the September quarter 1998 and will be linked to the 12th series CPI at the June quarter 1998.
Complete copy of this Information Paper is available on this site.