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1301.0 - Year Book Australia, 2008  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 07/02/2008   
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Contents >> Prices >> Consumer price index (CPI)

CONSUMER PRICE INDEX (CPI)

The description of the CPI commonly adopted by users is in terms of its perceived uses; hence the frequent references to the CPI as a measure of inflation, a measure of changes in purchasing power, or a measure of changes in the cost of living. The concept adopted in Australia for the CPI is a measure of changes, over time, in the prices of a basket of goods and services acquired by households in the eight capital cities in Australia. As such, the CPI has been designed as a general measure of price inflation for the household sector.

The simplest way of thinking about the CPI is to imagine a basket of goods and services of the kind typically acquired by Australian households. As prices vary, the total cost of this basket will also vary. The CPI is simply a measure of the changes in the cost of this basket as the prices of items in it change.

From the September quarter 2005 onwards, the total basket is divided into the following 11 major commodity groups: Food; Alcohol and tobacco; Clothing and footwear; Housing; Household contents and services; Health; Transportation; Communication; Recreation; Education; and Financial and insurance services. These groups are, in turn, divided into 33 subgroups and the subgroups into 90 expenditure classes.

In addition to the aggregate 'All groups' index, indexes are also compiled and published for each of the groups, subgroups and expenditure classes for each state capital city, Darwin and Canberra. National indexes are constructed as the weighted average of the indexes compiled for each of the eight capital cities.

The 15th Series CPI is the latest of a number of retail/consumer price indexes that have been constructed for various purposes by the ABS. (More information about the CPI can be found in Australian Consumer Price Index: Concepts, Sources and Methods (6461.0).)

Price movements by city

Table 29.1 presents All groups CPI numbers for each of the eight capital cities and for the weighted average of the eight capital cities, together with percentage changes.

29.1 CONSUMER PRICE INDEX, Capital cities(a)

Sydney
Melbourne
Brisbane
Adelaide
Perth
Hobart
Darwin
Canberra
Weighted
average
of eight
capital
cities

Index Number(b)

2002-03
141.1
139.7
140.7
142.7
136.8
139.1
136.8
139.7
140.2
2003-04
144.1
142.8
144.8
147.0
139.6
142.6
138.7
143.4
143.5
2004-05
147.7
145.7
148.5
150.4
144.0
147.1
141.8
146.7
147.0
2005-06
152.1
150.2
153.2
155.2
150.1
151.8
146.5
151.9
151.7
2006-07
156.2
154.2
158.3
159.2
156.1
155.7
152.9
156.4
156.1

Change from previous financial year (%)

2002-03
2.8
3.3
3.2
4.0
2.8
3.3
2.3
3.3
3.1
2003-04
2.1
2.2
2.9
3.0
2.0
2.5
1.4
2.6
2.4
2004-05
2.5
2.0
2.6
2.3
3.2
3.2
2.2
2.3
2.4
2005-06
3.0
3.1
3.2
3.2
4.2
3.2
3.3
3.5
3.2
2006-07
2.7
2.7
3.3
2.6
4.0
2.6
4.4
3.0
2.9

(a) All group index numbers. Reference base year is 1989-90 = 100.0.
(b) Arithmetic average of quarterly index numbers for financial year.
Source: Consumer Price Index, Australia (6401.0).


The capital city indexes measure price movements over time in each city individually. They can not be used to compare price levels between capital cities. For example, the index for Sydney in 2006-07 of 156.2, compared with the corresponding index for Darwin of 152.9, does not mean that prices in Sydney are higher than those in Darwin. It simply means, since the reference base period (1989-90), prices in Sydney have increased by a greater percentage than those in Darwin (56.2% compared with 52.9%).

Price movements by broad commodity group

Table 29.2 presents, for the weighted average of the eight capital cities, index numbers for each of the 11 major commodity groups of the 15th Series CPI and for All groups, together with percentage changes.

29.2 CONSUMER PRICE INDEX, Major commodity groups(a)

Food
Alcohol
and
tobacco
Clothing
and
footwear
Housing
Household
contents
and
services
Health
Trans-
portation
Commun-
ication
Rec-
reation
Educa-
tion
Financial
and
insurance
services
(b)
All groups

Index Number(c)

2002-03
147.9
208.9
113.3
115.1
121.0
181.5
140.6
108.5
131.9
210.0
na
140.2
2003-04
152.3
217.8
112.7
120.2
121.1
193.9
142.0
110.0
130.0
223.3
na
143.5
2004-05
154.8
225.4
110.8
124.8
120.7
204.3
146.8
111.1
130.7
238.7
na
147.0
2005-06
162.3
233.1
109.2
129.3
122.2
213.5
155.5
109.5
132.0
253.2
101.2
151.7
2006-07
172.4
240.6
108.4
133.7
124.6
223.5
158.0
110.8
133.8
264.6
103.0
156.1

Change from previous financial year (%)

2002-03
3.6
2.9
0.8
3.6
1.1
6.8
2.4
3.1
2.6
5.0
na
3.1
2003-04
3.0
4.3
-0.5
4.4
0.1
6.8
1.0
1.4
-1.4
6.3
na
2.4
2004-05
1.6
3.5
-1.7
3.8
-0.3
5.4
3.4
1.0
0.5
6.9
na
2.4
2005-06
4.8
3.4
-1.4
3.6
1.2
4.5
5.9
-1.4
1.0
6.1
na
3.2
2006-07
6.2
3.2
-0.7
3.4
2.0
4.7
1.6
1.2
1.4
4.5
1.8
2.9

na not available
(a) Weighted average of the eight capital cities. Reference base year is 1989-90 = 100.0.
(b) The Financial and insurance service group was introduced in September quarter 2005 with a reference base of June quarter 2005 = 100.0. There are no historic data for this series.
(c) Arithmetic average of quarterly index numbers for financial year.
Source: Consumer Price Index, Australia (6401.0).

Price movements for selected household types

Graph 29.3 and table 29.4 present analytical indexes specifically designed to measure changes in living costs for four selected household types: Employee households; Age pensioner households; Other government transfer recipient households; and Self-funded retiree households.

29.3 Analytical Living Cost Indexes for selected household types(a) - June 1999 to June 2007
Graph: 29.3 Analytical Living Cost Indexes for selected^household types(a)—June 1999 to June 2007


These indexes represent the conceptually preferred measures for assessing the impact of changes in prices on the disposable incomes of households. In other words, these indexes are particularly suited for assessing whether or not the disposable incomes of households have kept pace with price changes, that is whether living costs are being maintained. The CPI, on the other hand, is designed specifically to measure price inflation for the household sector as a whole and, as such, is not the conceptually ideal measure for assessing the impact of price changes on the disposable incomes of households. The most notable differences are that living cost indexes include interest charges but do not include house purchases, while inflation indexes do not include interest charges but do include house purchases.
29.4 ANALYTICAL LIVING COST INDEXES FOR SELECTED HOUSEHOLD TYPES(a)

Employee
Age pensioner
Other government
transfer recipient
Self-funded retiree
CPI(b)(c)

Index number(d)

2002-03
114.9
116.3
115.9
115.2
115.9
2003-04
118.1
119.0
118.6
117.7
118.6
2004-05
121.7
121.8
121.6
120.3
121.5
2005-06
126.1
126.3
126.1
124.4
125.3
2006-07
131.0
131.1
130.9
128.4
129.0

Change from previous year (%)

2002-03
3.3
3.2
3.1
3.3
3.1
2003-04
2.7
2.3
2.4
2.1
2.3
2004-05
3.0
2.3
2.6
2.2
2.4
2005-06
3.7
3.7
3.7
3.4
3.2
2006-07
3.9
3.8
3.8
3.3
2.9

(a) Reference base is June quarter 1998 = 100.0.
(b) The CPI has been re-referenced from 1989-90 = 100.0 to June quarter 1998 = 100.0 for ease of comparison with the living cost indexes for household types.
(c) The CPI is designed to measure price inflation for the household sector and not changes in living costs.
(d) Annual average of quarterly index numbers.
Source: Analytical Living Cost Indexes for Selected Household Types (6463.0), data derived from selected CPI price movements and the expenditure patterns for the relevant households.


For more information about these indexes see the article Price impacts on the living costs of selected household types in Year Book Australia 2005.

Between 2005-06 and 2006-07 changes in living costs ranged from a low of 3.3% for Self-funded retiree households to a high of 3.9% for Employee households. The CPI rose by 2.9% over the same period. Over the period from 1998-99 to 2006-07, changes in living costs for all four household types are similar to the change in the CPI. Changes in living costs ranged from 28.0% for Self-funded retiree households to 30.4% for Employee households. The CPI rose by 28.1%. Long-term price series

Although the CPI has only been compiled from 1948, an approximate long-term measure of retail price change has been constructed by linking together earlier selected retail price index series (table 29.5). The index numbers are expressed on the reference base year 1945 = 100.0. The successive series are:
  • from 1901 to 1914, the A series retail price index
  • from 1914 to 1946-47, the C series retail price index
  • from 1946-47 to 1948-49, a combination of the C series index (excluding rent) and the housing group of the CPI
  • from 1948-49 onwards, the CPI.

For more information about these former retail price index series see the article History of retail/consumer price indexes in Australia in Year Book Australia 2005.

Graph 29.6 shows the annual percentage changes derived from this retail/consumer price index series for the period 1905-2006.

29.5 RETAIL/CONSUMER PRICE INDEX NUMBERS(a)(b)

Year
Index no.
Year
Index no.
Year
Index no.
Year
Index no.

1901
47
1931
78
1961
252
1991
1 898
1902
50
1932
74
1962
251
1992
1 917
1903
49
1933
71
1963
252
1993
1 952
1904
46
1934
73
1964
258
1994
1 989
1905
48
1935
74
1965
268
1995
2 082
1906
48
1936
75
1966
276
1996
2 136
1907
48
1937
78
1967
286
1997
2 141
1908
51
1938
80
1968
293
1998
2 159
1909
51
1939
82
1969
302
1999
2 191
1910
52
1940
85
1970
313
2000
2 289
1911
53
1941
89
1971
332
2001
2 389
1912
59
1942
97
1972
352
2002
2 462
1913
59
1943
101
1973
385
2003
2 530
1914
61
1944
100
1974
443
2004
2 588
1915
70
1945
100
1975
510
2005
2 658
1916
71
1946
102
1976
579
2006
2 753
1917
75
1947
106
1977
650
1918
80
1948
117
1978
702
1919
91
1949
128
1979
766
1920
103
1950
140
1980
844
1921
90
1951
167
1981
926
1922
87
1952
196
1982
1 028
1923
89
1953
205
1983
1 132
1924
88
1954
206
1984
1 177
1925
88
1955
211
1985
1 257
1926
90
1956
224
1986
1 370
1927
89
1957
229
1987
1 487
1928
89
1958
233
1988
1 594
1929
91
1959
237
1989
1 714
1930
87
1960
245
1990
1 839

na not available
(a) Reference base year is 1945 = 100.0.
(b) The index numbers from 1901 to 1980 relate to the weighted average of six state capital cities; and from 1981 to the weighted average of eight capital cities. Index numbers are for calendar years.
Source: ABS data available on request, Consumer Price Index.

29.6 Retail/Consumer Price Index, annual changes
Graph: 29.6 Retail/Consumer Price Index, annual changes



International comparisons

In analysing price movements in Australia, an important consideration is Australia's performance relative to other countries. However, due to the many differences in the structure of the housing sector in different countries and in the way housing is treated in their CPIs, a simple comparison of All groups (or 'headline') CPIs is often inappropriate. In order to provide a better basis for international comparisons, the Seventeenth International Conference of Labour Statisticians (2003) adopted a resolution which called for countries, where possible, to compile and provide for dissemination to the international community an index that excludes housing and financial services.

Table 29.7 presents indexes for selected countries on a basis consistent with the resolution and broadly comparable to the Australian series 'All groups excluding Housing and Financial and insurance services'.
29.7 CONSUMER PRICE INDEX, International comparisons(a)(b)

2002-03
2003-04
2004-05
2005-06
2006-07

Index Numbers

Australia
144.6
147.3
150.3
155.2
159.8
Canada
135.2
136.9
139.3
142.2
143.8
Germany
127.4
128.9
131.1
133.1
135.0
Hong Kong
159.0
158.5
161.2
162.6
164.7
Indonesia
495.8
524.4
560.2
646.6
nya
Japan
106.4
106.1
106.2
106.1
nya
Korea, Republic of
190.9
197.4
204.9
210.4
215.4
New Zealand
130.1
130.5
132.9
136.8
139.5
Singapore
122.4
124.2
125.6
126.9
nya
Taiwan
130.5
131.1
134.7
138.2
138.4
United Kingdom
145.8
147.9
149.7
152.8
nya
United States of America
138.9
141.8
146.2
152.6
155.6

Change from previous year (%)

Australia
3.0
1.9
2.0
3.3
3.0
Canada
3.8
1.3
1.8
2.1
1.1
Germany
1.1
1.2
1.7
1.5
1.4
Hong Kong
-2.0
-0.3
1.7
0.9
1.3
Indonesia
8.2
5.8
6.8
15.4
nya
Japan
-1.2
-0.3
0.1
-0.1
0.1
Korea, Republic of
3.2
3.4
3.8
2.7
2.4
New Zealand
1.9
0.3
1.8
2.9
2.0
Singapore
0.4
1.5
1.1
1.0
nya
Taiwan
-0.1
0.5
2.7
2.6
0.1
United Kingdom
1.6
1.4
1.2
2.1
nya
United States of America
1.8
2.1
3.1
4.4
2.0

nya not yet available
(a) Reference base year is 1989-90 = 100.0.
(b) All groups excluding Housing and Financial and insurance services.
Source: Consumer Price Index, Australia (6401.0).





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