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The CPI is used as a macroeconomic indicator and for adjusting dollar values

The CPI affects almost all Australians because of the many ways in which it is used. The two most common uses of the CPI are:

• As a macroeconomic indicator. The CPI, and other index series derived from CPI data, are used by the Government and economists to monitor and evaluate levels of inflation in the Australian economy. Inflation and the inflationary expectations of the Australian population play a major role in determining various aspects of Government economic policy, and in the business and investment decisions of private firms and individuals.

• As a means of maintaining dollar values. The value of many types of fixed payments such as social welfare benefits can be reduced over time when prices rise. The CPI is often used to adjust these payments to counter the effects of inflation, a process referred to as ‘indexation’. Indexation arrangements are also often applied to rental agreements, insurance coverages and child support payments.

There are many different price indexes available

Although the CPI is the most well known price index, it is but one of many produced by the ABS. Examples of other price indexes include:

• price indexes for materials used in, and articles produced by, manufacturing industries;

• materials used in building;

• export and import price indexes; and

• chained price indexes produced in conjunction with the Australian national accounts.