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6470.0 - Information Paper: Introduction of the 16th Series Australian Consumer Price Index, 2011  
Latest ISSUE Released at 11:30 AM (CANBERRA TIME) 22/09/2011  First Issue
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CHAPTER 3: 16TH SERIES EXPENDITURE WEIGHTS


3.1 The CPI weights reflect the relative expenditures of the CPI population group as a whole and not those of any particular type or size of household. The weights reflect average expenditure of households and not the expenditure of an 'average household'. The household average weekly expenditure and corresponding 16th series CPI relative weights for the CPI groups are shown in Table 1.

Table 1: 16th series CPI, average weekly expenditure and weights, June quarter 2011, weighted average of eight capital cities.

CPI group
Average weekly expenditure (2009–10 quantities, June quarter 2011 prices) (a)
CPI weight
$
%
All groups CPI
1371.30
100.0
Food and non–alcoholic beverages
230.87
16.8
Alcohol and tobacco
96.87
7.1
Clothing and footwear
54.58
4.0
Housing
305.75
22.3
Furnishings, household equipment and services
124.79
9.1
Health
72.56
5.3
Transport
158.39
11.6
Communication
41.81
3.0
Recreation and culture
172.30
12.6
Education
43.67
3.2
Insurance and financial services
69.71
5.1
(a) Derived from 2009–10 ABS Household Expenditure Survey and other sources.
Note: Any discrepancies between totals and sums of components in this table are due to rounding.


3.2 The 16th series weights and household average weekly expenditure by group, sub–group and expenditure class as at June quarter 2011 are shown in Appendix 2 and in the data cube: Consumer Price Index: 16th Series Weighting Pattern, 2011 (cat. no. 6471.0)

3.3 Total household expenditure in the CPI basket increased 29.6% from $1058.12 in 2003–04 (at June quarter 2005 prices) to $1371.30 in 2009–10 (at June quarter 2011 prices). The CPI increased 20.1% over the same period. Table 2 below summarises the changes in expenditure by group.


Table 2: Average Weekly Expenditure, between 15th and 16th series CPI.


CPI group
15th series Average weekly expenditure (2003–04 quantities, June quarter 2005 prices)(a)
16th series Average weekly expenditure(2009–10 quantities, June quarter 2011 prices)(a)
Percentage change
$
$
%
All groups CPI
1058.12
1371.30
29.6
Food and non–alcoholic beverages
163.36
230.87
41.3
Alcohol and tobacco
71.86
96.87
34.8
Clothing and footwear
41.42
54.58
31.8
Housing
206.66
305.75
47.9
Furnishings, household equipment and services
101.67
124.79
22.7
Health
49.74
72.56
45.9
Transport (b)
138.70
158.39
14.2
Communication
35.06
41.81
19.3
Recreation and culture
122.25
172.30
40.9
Education
28.93
43.67
51.0
Insurance and financial services (c)
98.47
69.71
–29.2
(a) Derived from ABS Household Expenditure Survey and other sources
(b) 16th series includes new cars, transfer from non–household sector and dealer service fee. The 15th series only included new cars.
(c) Deposit and loan facilities (indirect charges) has been removed in the 16th series.
Note: Any discrepancies between totals and sums of components in this table are due to rounding.



Changes in weighting patterns

3.4 Appendix 3 contains a comparison between the weights for the 15th series CPI (at June quarter 2005) as published and the 16th series CPI (at June quarter 2011). Before analysing the changes to the CPI weighting pattern over time, a number of points should be noted. These include the changes in the commodity classification shown in Appendix 1 and the additional issues discussed below.

Quantities underlying the weights are fixed
3.5 Although the weights are expressed in terms of expenditure shares, it is not the expenditure shares (where expenditure is given by the product of quantity and price) that are held constant (or fixed) from period to period. What are held constant are the quantities of products underpinning these expenditures. Weights are presented in expenditure terms because it is not possible to present quantity weights in a comparable way. The relative expenditure shares of items will change over time in response to changes in relative prices. The weights in the 16th series CPI generally relate to expenditures in 2009–10, revalued using price movements in the CPI, to June quarter 2011 (the 'link' quarter) prices to maintain fixed '2009–10 quantities'. See Chapter 4: Price Index Theory in Concepts, Sources and Methods, Australia, 2009 (cat. no. 6461.0) for more information.

Weights are relative
3.6 The weight of an expenditure class in any particular CPI series depends on how expenditure on that class compares to total expenditure (i.e. expenditure shares), rather than the absolute expenditure. If the increase in expenditure on a particular expenditure class in the reference period is greater than the increase in total expenditure between two series, the weight of that expenditure class will increase. For example, between the 15th and 16th series, the expenditure share on ‘Restaurant meals’ increased from 2.00% to 2.81%. Conversely, if the increase in expenditure on a particular expenditure class in the reference period is less than the increase in total expenditure between two series, the weight of that expenditure class will decrease. For example, in the 16th series the expenditure share on ‘Furniture’ increased by less than the increase in overall expenditures. As a result, the weight of Furniture fell from 1.96% in the 15th series to 1.63% in the 16th series.

Changes to coverage
3.7 Changes in the coverage of the CPI basket will also affect weighting patterns. The weight of the ‘Insurance and financial services’ group has decreased, primarily as a result of the removal of the ‘Deposit and loan facilities (indirect charges)’ from the CPI basket.

3.8 There has also been a small coverage change for ‘Motor vehicles’. In the 16th series CPI the weight for ‘Motor vehicles’ will incorporate new cars, transfer of used cars to the household sector (from business or government) and the service fee for the transfer of second hand cars. This is a change from the 15th series CPI which only included the purchase of new cars. As a consequence, the data source for ‘Motor vehicles’ in the 16th series will be the National Accounts household final consumption expenditure (HFCE) data. In the 15th series, HES data was used to derive the weight for ‘Motor vehicles’.

Changes in weights between the 15th and 16th series
3.9 The changes in CPI weights between the 15th and 16th series can be broken down into price and volume effects. The volume change captures both quality and quantity changes between the reference years 2003–04 and 2009–10. The volume changes were calculated by removing the price change (corresponding price index measure) between the two periods. Expenditures in 2009–10, price updated to June 2011 prices were compared to 2003–04 expenditures price updated to June 2011 prices. The corresponding CPI price movements were mostly used as the measure of price change. An analysis of expenditure classes with relatively large changes to their weights between the 15th and 16th series is provided below.

Examples of expenditure classes with large increases in weight
3.10 ‘Rents’ weight increased from 5.22% to 6.71%. Average weekly expenditure on Rents increased 67% from $55.18 in 2003–04 (at June quarter 2005 prices) to $92.01 in 2009–10 (at June quarter 2011 prices). The increase was due to both a price and volume increase. The volume increase was driven by increases in the size and quality of dwellings as well as a small increase in the proportion of people renting.

3.11 ‘New dwelling purchase by owner–occupiers’ weight increased from 7.87% to 8.67%. Average weekly expenditure on New dwelling purchase by owner–occupiers increased 43% from $83.33 in 2003–04 (at June quarter 2005 prices) to $118.86 in 2009–10 (at June quarter 2011 prices). The increase was due to both a price and volume increase. The volume increase was driven by additional new residential construction driven by population growth in the capital cities and an increase in the average size and quality of new dwellings.

3.12 ‘Restaurant meals’ weight increased from 2.00% to 2.81%. Average weekly expenditure on Restaurant meals increased 82% from $21.20 in 2003–04 (at June quarter 2005 prices) to $38.55 in 2009–10 (at June quarter 2011 prices).

3.13 ‘Fruit’ weight increased from 0.95% to 1.60%. Average weekly expenditure on Fruit increased 117% from $10.10 in 2003–04 (at June quarter 2005 prices) to $21.97 in 2009–10 (at June quarter 2011 prices). The increase was primarily due to price rises for bananas in the March quarter 2011 and the June quarter 2011 following crop damage caused by cyclone Yasi. The relative weight of the fruit component will fall when the price of bananas returns to levels prior to cyclone Yasi.

Examples of expenditure classes with large decreases in weight
3.14 ‘Deposit and loan facilities’ weight decreased from 4.47% to 0.76%. This is mostly due to a coverage change. The indirect charges component was removed and now only the direct charges are measured in the 16th series CPI. A more detailed explanation of the changes to Financial services in the CPI can be found in Appendix 4.

3.15 ‘Motor vehicles’ weight decreased from 4.90% to 3.25%. Average weekly expenditure on Motor vehicles decreased from $51.87 in 2003–04 (at June quarter 2005 prices) to $44.56 in 2009–10 (at June quarter 2011 prices).

3.16 ‘Carpets and other floor coverings’ weight decreased from 0.78% to 0.28%. This is partly due to a coverage change. In the 15th series CPI ‘Floor and window coverings’ were in the same expenditure class but in the 16th series CPI, window coverings has been moved to ‘Household textiles’.

3.17 ‘Audio, visual and computing media and services’ weight decreased from 1.38% to 0.98%. This is partly due to a coverage change. In the 15th series CPI, stationery was included in this expenditure class but in the 16th series CPI, stationery has been moved to ‘Newspapers, books and stationery’.

3.18 ‘Furniture’ weight decreased from 1.96% to 1.63%. Average weekly expenditure on Furniture increased from $20.72 in 2003–04 (at June quarter 2005 prices) to $22.42 in 2009–10 (at June quarter 2011 prices). However, the increase in expenditure (8.2%) was less than the increase in the All groups CPI (20.1%) and therefore its relative importance diminished.


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