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6428.0 - Information Paper: Price Index of Domestic Final Purchases, Australia, 2001  
Latest ISSUE Released at 11:30 AM (CANBERRA TIME) 17/07/2001   
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PREFACE

This paper introduces experimental index numbers for a new economy-wide Price Index of Domestic Final Purchases. It represents the last major element of the system of price indexes articulated in Information Paper: An Analytical Framework for Price Indexes in Australia (cat.no.6421.0) released in February 1997. The focus of this system of indexes is on the economy-wide analysis of inflation.

The experimental Domestic Final Purchases index is intended to complement other available indexes, in particular the Stage of Production Producer Price Indexes, the Wage Cost Index and the Export Price Index.

The system of complementary indexes, including those in this publication, is designed to enhance the means of studying price transmission processes in the Australian economy by providing analysts with measures which are presented from the perspectives of both producers and purchasers.

Considerable user consultation was undertaken in 1997 following the release of the analytical framework information paper, and then again after the release in 1999 of Information Paper: Producer Price Index Developments (cat.no.6422.0) which contained experimental Stage of Production producer price indexes.

The ABS is keen to continue the consultation process and to obtain users' reactions to the developments described in this paper, particularly on the issues raised in Section 12.

Comments and queries can be directed to:


Richard McKenzie
Director, Producer Price Indexes
Australian Bureau of Statistics
PO Box 10
BELCONNEN ACT 2616

Telephone: Canberra 02 6252 6170
Facsimile Canberra 02 6252 7060
Email: richard.mckenzie@abs.gov.au


SUMMARY

The ABS has traditionally published separate consumer, producer and international trade price indexes, each relating to a particular segment of economic activity. Information Paper: An Analytical Framework for Price Indexes in Australia (cat.no.6421.0) presented a proposal to enhance the analytical value of this information through drawing the series together, augmenting them with new data, and presenting them as a system of indexes designed to support the study of inflation.

This system is based on a market transactions approach which excludes transactions at prices that are not market determined, along with notional transactions such as the national accounts imputed dwelling rent.

Following extensive user consultation, the ABS commenced constructing the new indexes proposed in the analytical framework paper. This present information paper releases experimental index numbers for the new economy-wide Price Index of Domestic Final Purchases, representing the last major element of the system of indexes.

The Wage Cost Index (introduced in 1998), Producer Price Indexes for Selected Service Industries and Stage of Production Producer Price Indexes (both introduced in 2000), together with the long standing Export Price Index, represent the other major elements of the system of indexes, providing complementary views of the economy.

This paper describes the conceptual basis of the Domestic Final Purchases (DFP) index, and each of its components, and outlines its relationship to other price indexes, including the newly developed Stage of Production producer price indexes and the Consumer Price Index.

The DFP index has been constructed as an experimental measure, with the index items and weights derived from an analysis of detailed 1994-95 input-output tables. The use of the input-output system as the weighting data source provides the potential for regular chaining of the index once in production mode.

Index series have been compiled on a quarterly and annual basis commencing with September quarter 1996 and are presented in tables 9.1 and 9.2. An analysis of the new index and comparisons with other related indexes are then provided.

The compilation of the experimental indexes largely involved drawing on price data used in existing ABS price indexes. In the case of capital purchases, there may be data quality limitations associated with the use of proxy price series for some items which are not on the correct pricing basis.

Free version of Information Paper: Price Index of Domestic Final Purchases, Australia (cat. no. 6428.0) Acrobat (.pdf) file

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