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12.1. ABS producer and international trade price indexes measure price changes, over time, in broad sectors of the Australian economy and foreign trade. Transactions for each of those sectors may cover purchases and sales of thousands of different items at a wide variety of prices. The sheer volume and complexity of these transactions means that it is impossible to collect prices for every item or to take into account every price at which items are sold. Consequently, it is necessary to adopt a sampling approach, i.e. to price a sample of items from a sample of respondents.
12.2. ABS price indexes are based on judgement samples, where the sample is selected on the basis of the knowledge and judgement of staff compiling the index. The alternative of using probability (or scientific) sampling would be far more difficult and expensive to use. In particular:
12.3. Interviews with respondents, market reports, foreign trade and manufacturing census data and other information all help to form the basis for the selection and ongoing maintenance of samples of respondents and items (specifications) for pricing. This information is essential in developing a comprehensive understanding of the market and making appropriate judgements in the sample selection process.
12.4. The effectiveness of this sample approach depends on the representativeness at each level of an index. A 'chain of representativeness' approach is adopted in which:
12.5. The use of judgement sampling has implications for the selection of replacement specifications or respondents. Generally, specifications and respondents will be representing a category of specifications or respondents, not just themselves (e.g. a respondent may represent medium sized firms or a specification may represent a broader product grouping). Therefore the selection of replacements takes into account these characteristics and, as far as possible, ensures that they are still covered by the new specification or respondent.
Establishing and maintaining samples
12.6. Price indexes are only as valid as the samples of prices upon which they are based. Consequently, in selecting the samples for index items with a large weight in a published series, the aim is to cover those businesses accounting for a high proportion of sales or purchases of the products making up the index item. For less significant items, coverage may be fairly low but care is taken to ensure that the selected businesses are representative of all the businesses trading in the item.
12.10. Over time, the samples of respondents and specifications may become unrepresentative, or the proportions in which they are combined to calculate the index numbers may become outdated. The samples of respondents and specifications are therefore reviewed regularly to ensure that they remain representative. When new or changed samples are incorporated in the index the resulting index numbers are adjusted to ensure that only price movements, and not any effect of the sample change, are shown.
Price collection procedures
12.11. Prices for the Producer and Foreign Trade Price Indexes are predominantly collected using mail questionnaires. A small number of prices are collected from administrative sources, e.g. the Wool Market Indicator, rather than directly from businesses.
12.13. Price collection is spread over the three months of the quarter. However, there are some items subject to significant price variation throughout the quarter. Examples include agricultural materials and metal ores and concentrates. In these cases, prices are collected at the end of each quarter and respondents are asked to report average prices applicable during that period.