6421.0 - Information Paper: An Analytical Framework for Price Indexes in Australia, 1997  
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Contents >> Glossary and references


Basic prices
The value of a commodity at basic prices is equal to its value when it leaves the producer, before the application of indirect taxes (less subsidies) and trade and transport margins.

Chain index
A continuous index number series formed by linking new index series, which reflect a changed weighting pattern, to previous index series, on a regular and frequent basis (e.g. annually).

Corporate sector
This sector comprises corporations which may be defined as legal entities, created for the purpose of producing goods or services for the market, that may be the source of profit or other financial gain to its owner(s). Corporations may be public or private, financial or non-financial. Quasi-corporations which are unincorporated enterprises that function as if they were corporations are also included in the corporate sector.

Employee households
Households which obtain at least 75% of their total income from wages or salaries, but excluding the top 10% (in terms of income) of such households. The CPI population group is metropolitan employee households.

Fixed-weighted index
An index in which the weighting pattern is fixed for the life of each index series.

General government
The general government sector comprises institutional units which, in addition to fulfilling their political responsibilities and their role of economic regulation, produce principally non-market services (possibly goods) for individual or collective consumption and redistribute income or wealth.

Gross capital formation
A national accounts measure which equals the sum of gross fixed capital expenditure, increase in stocks and net acquisitions of valuables.

Gross fixed capital expenditure
A national accounts measure defined in the SNA93 as acquisitions, less disposals, of new or existing tangible fixed assets (e.g. buildings, equipment) and intangible fixed assets (e.g. mineral exploration, computer software); major improvements to tangible non-produced assets and costs associated with the transfer of ownership of non-produced assets.

Government final consumption expenditure
A national accounts measure which reflects current expenditure by general government bodies on services to the community.

Household Expenditure Survey (HES)
A sample survey conducted to determine the expenditure patterns of private households. Data from the HES is used as a primary source of information for the estimation of expenditure weights in the CPI.

All persons in the economy, with the institutional units in the household sector consisting of one individual or a group of individuals. The household of the owner of an unincorporated enterprise in general includes the enterprise.

Implicit price deflator
The relationship, expressed as an index number, between the current price values and constant price values of broad national accounting aggregates.

Index number series
A series of numbers measuring movement over time from a base period value. The base value is normally represented by an index number of 100.0.

Indirect taxes
Taxes assessed on producers, on the production, sale, purchase, or use of goods and services.

Institutional sectors
The sectors formed by classifying the institutional units primarily on the basis of differences in their financial role and behaviour.

Institutional units
Fundamental economic units which are capable of owning assets and incurring liabilities on their own behalf. They can engage in the full range of transactions.

Laspeyres price index
A price index in which the fixed weights used represent the relative importance of index items in the weighting base period.

The technique used to join a new index series which reflects a changed weighting pattern to the previous index series to form a continuous series. The technique ensures that the resultant linked index reflects only price variations (i.e. the introduction of the new items and weights does not of itself affect the level of the index). Also referred to as chaining.

Metropolitan households
Households located in the Statistical Divisions of the eight capital cities of Australia.

Net price index
A price index which represents an attempt to specifically remove the effects on prices of changes in indirect taxes and subsidies.

Non-profit institutions serving households (NPISH)
Institutions which are principally engaged in the production of non-market services for households and whose main resources are voluntary contributions by households.

Price index
An indicator used to measure the proportionate changes in the prices of a specified set of goods and services.

Private final consumption expenditure
A national accounts measure which reflects current expenditure by households, and producers of private non-profit services to households. It includes purchases of durable as well as non-durable goods. However, it excludes expenditure by persons on the purchase of dwellings and expenditure of a capital nature by unincorporated enterprises.

Project homes
Dwellings available for construction on a client’s block of land. Price changes therefore relate only to the price of the dwelling (excluding land).

Public corporations
Institutional units, subject to the control of government units, which aim to cover their operating expenses by selling their output or by engaging in financial transactions such as borrowing and lending.

Public sector
The public sector comprises general government and the public sub-sector of the corporate sector.

Purchasers’ prices
The value of a commodity at purchasers’ prices is equal to its basic price plus indirect taxes (less subsidies) and margins (e.g. wholesale, retail, freight).

Pure price change
The change in the price of an item after removing any variation in price attributable to a change in quality or quantity.

Quality change
Any change in the characteristics or attributes of a good or service. Quality adjustment isolates the pure price change by eliminating the effect of changes in quality on the price of the item.

Real estate transfer expenses
The various fees which are incurred by either the buyer or seller of real estate, namely legal fees on transfer, real estate sales commission, stamp duties on transfer and other government charges.

Scope (of a price index)
The conceptual boundaries of the price index in terms of goods and services represented, and of the population group and geographical areas to which it relates.

Seasonal adjustment
A statistical technique to remove the effects of seasonal and calendar influences operating on a series. Seasonal effects usually reflect the influence of the seasons themselves either directly or through production series related to them, or social conventions. Other types of calendar variation occur as a result of influences such as the number of days in the calendar period, the accounting or recording practices adopted or the incidence of moving holidays (such as Easter).

Smoothing techniques
The range of techniques which can be used to remove the irregular component from a seasonally adjusted time series. The standard ABS trending technique is one example.

Tornqvist price index
The Tornqvist index uses logarithmic change techniques to measure price change between any two periods. Items are weighted together in this formula by the arithmetic average of their relative expenditures in these periods.

Trend estimates
Trend estimates are derived from seasonally adjusted estimates via an averaging process which attempts to remove the irregular component of the time series. This allows the underlying direction of a time series to be identified.


  • ABS n.d., Australian National Accounts: National Income, Expenditure and Product, Cat. No. 5206.0, ABS, Canberra.
  • ABS, 1996, Australian National Accounts: Input-Output Tables, 1992–93, Cat. No. 5209.0, ABS, Canberra.
  • Central Statistical Office 1995, Joint ECE/ILO Meeting on Consumer Price Indices, November, Geneva.
  • Eurostat 1996, European System of Accounts, ESA 1995.
  • Haworth, Marta 1995, UK RPI. A Cost of Living Index or an Inflation Indicator, Central Statistical Office, UK Paper presented at the second meeting of the International Working group on Price Indices, November, Stockholm.
  • Hill, Peter 1996, ‘A General Index of Inflation’, Chapter 8 of Inflation Accounting: A Manual on National Accounting under Conditions of High Inflation, Organisation for Economic Co-operation and Development, Paris.
  • Reserve Bank of Australia Bulletin 1995, Reserve Bank of Australia Bulletin, July.
  • Statistics Canada 1987, Adjustment of the Consumer Price Index for Indirect Taxes (A Net Price Index), Prices Division, February.
  • System of National Accounts, 1993, Inter-Secretariat Working Group on National Accounts 1993, prepared under the auspices of the group, comprising representatives from five international organisations: Commission of the European Communities-Eurostat, International Monetary Fund, Organisation for Economic Co-operation and Development, United Nations and World Bank.
  • Turvey, Dr 1992, The Australian Consumer Price Index, 12th Series Review, Appendix 3, ABS Cat. No. 6450.0, ABS, Canberra.
  • US Senate Finance Committee 1996, Toward A More Accurate Measure Of The Cost Of Living, Final Report to the Senate Finance Committee from the Advisory Commission To Study The Consumer Price Index, Michael J. Boskin, Chairman, December.
  • Vernon, Cope & MacLeay 1993, A Monthly Price Index for the Whole Economy, Central Statistical Office, January, UK.
  • Zarb, J. 1991, ‘Is the Consumer Price Index Seasonal’, Australian Economic Indicators, ABS Cat. No. 1350.0, February, ABS, Canberra.

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