International Trade Price Index

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NAME OF ORGANISATION Australian Bureau of Statistics (ABS) OVERVIEW The Australian international trade price indexes (ITPIs) measure the changes in the prices paid for imports of merchandise that are landed in Australia each quarter and prices received for exports of merchandise that are shipped from Australia each quarter. International trade price indexes Import Price Index (IPI) - an input price index Export Price Index (EPI) - an output index PURPOSE Import and export prices are important extensions of domestic PPIs. They are used in the deflation of external trade values to provide indicators of the volume of international trade. Also, import prices feed into producer input indexes, since these are an important contribution to producer costs. Similarly, export prices feed into producer output indexes, since exports frequently represent a significant component of producer revenue. Price instability introduces uncertainty into economic analysis and decision making, so the main uses of the PPI and ITPI relate to efforts to minimise that uncertainty. They have the following main uses: as a national accounts deflator; as a short-term indicator of inflationary trends; for indexation in legal contracts in both the public and private sectors, particularly for more detailed PPI components; by international organisations such as Eurostat, the OECD and IMF for economic monitoring and comparison. SCOPE International Trade Price Indexes International trade price indexes measure changes in the price paid for imports of merchandise that are landed in Australia each quarter and prices received for exports of merchandise that are shipped from Australia each quarter. The import price index excludes the following items (representing approximately 5% of the value of merchandise imported during the weighting period) because of the inherent difficulties in pricing the items to constant quality: live animals (not for food) jewellery and other articles of precious metal n.e.s. military equipment commodities not classified according to kind works of art, collectors' pieces, antiques railway vehicles ships of various types. The export price index includes re-exports of merchandise (i.e. goods which are imported into Australia and exported at a later date without physical transformation). DATA DETAIL Conceptual framework International trade price indexes measure changes in the prices of imports of merchandise that are landed in Australia each quarter-the import price index, and exports of merchandise that are shipped from Australia each quarter-the export price index. The indexes are calculated on the index reference period 2011-12 = 100.0. Scope The import price index excludes the following items (representing approximately 5% of the value of merchandise imported during the weighting period) because of the inherent difficulties in pricing the items to constant quality: live animals (not for food) jewellery and other articles of precious metal n.e.s. military equipment commodities not classified according to kind works of art, collectors' pieces, antiques railway vehicles ships of various types. The export price index includes re-exports of merchandise (i.e. goods which are imported into Australia and exported at a later date without physical transformation). Price measurement In general, prices of individual shipments are obtained from major importers and exporters of the selected items and relate to the quarter in which the imported goods physically arrive in Australia and the exported goods physically leave Australia. Imports are priced on a 'free on board' (f.o.b.), country of origin basis. Therefore freight and insurance charges involved in shipping goods from foreign to Australian ports are excluded from the prices used in the index, as are Australian import duties and taxes. Similarly, exports are priced on a f.o.b. basis at the main Australian ports of export. Exports are exempt from taxes on products. As the prices used in the indexes are expressed in Australian currency, changes in the relative value of the Australian dollar and overseas currencies can have a direct impact on price movements for the many commodities that are bought and sold in currencies other than Australian dollars. Prices reported in a foreign currency are converted to Australian dollars using relevant exchange rates. Where imports or exports are transacted in prices expressed in terms of a foreign currency and forward exchange cover is used, the prices in the indexes exclude the forward exchange cover. The main pricing methodology used is specification pricing, under which a manageable sample of precisely specified products is selected, in consultation with each reporting business, for repeat pricing. In specifying the products, care is taken to ensure that they are fully defined in terms of all the characteristics which influence their transaction prices. As such, all the relevant technical characteristics need to be described (e.g. make, model, features) along with the unit of sale, type of packaging, conditions of sale (e.g. delivered, payment within 30 days), etc. The goods are also specified by country and market in order to lessen the impact of price variations attributable solely to changes over time in the mix of countries, or markets. When the quality or specifications of an item being priced change over time, adjustments are made to the reported prices so that the index captures only pure price change. That is, any element of price change attributable to a change in quality is removed. If there is an increase (decrease) in the quality of an item, then the price index is adjusted downwards (upwards) to reflect the 'worth' of the quality change. This technique is known as pricing to constant quality. Wherever possible, prices from volume selling products being traded with predominant countries, or markets, are obtained to ensure specifications have a good chance of being re-priced over time and index series are representative of overall price movements. Individual product weights and weights between markets and countries are regularly reviewed to keep the indexes up to date. Items and weights The import price index and export price index are annually reweighted chained Lowe indexes. This method of weighting was introduced in the September quarter 2000 and replaces the 'fixed-base' method of weighting in which the weighting patterns are updated infrequently (generally once every 5 or 10 years). The annual reweighting and chaining process involves a number of steps in order to provide new weights each year. Each September quarter the weights of the import price index are updated to reflect the average value of merchandise imports landed in Australia in the previous financial year. This differs slightly from the export price index where the weights are updated in the September quarter of each year and are derived from the average value of export items during the two previous financial years, due to the greater volatility associated with the value of export items. The weights are revalued to reflect link period (June quarter of the latest year) price levels; this means, for example, that in the September quarter 2005, the weights for the import price index are effectively determined using quantities from 2004-05 and prices from June quarter 2005. Indexes derived by using the new weights for the September quarter 2005 are then linked to the already published June quarter 2005 (link period) levels which were derived using the previous series weights. Using this methodology, long-term chain linked series can be constructed over time on a consistent reference base for continuity and user convenience, but using annually refreshed weights. The reference base for each index series continues to be 2011-12=100 even though the weights are being updated each year. The commodities directly represented in each index (the index items) are selected on the basis of the significance of their import and export values in relevant weighting period. All significant commodities were selected for pricing. The weights for minor commodities which are not directly priced are included with those of comparable directly priced items whose prices are likely to move in a similar way. Main outputs Publications International Trade Price Indexes, Australia (6457.0) - Contains indexes measuring changes in the prices of imports of merchandise that are landed in Australia each quarter (the Import Price Index), and exports of merchandise that are shipped from Australia each quarter (the Export Price Index). ABS web site The current quarter key figures, time series spreadsheets, notes, analyses and comments and Explanatory Notes are available from the 'Summary' tab of the 6457.0 pages on the ABS Website. Classifications The main classification used for both the import and export price indexes is the Standard International Trade Classification (SITC), Revision 4. The import price index is also presented by Balance of Payments Broad Economic Categories which have been disaggregated into balance of payments groupings of consumption goods, capital goods and intermediate and other merchandise goods and ANZSIC division and subdivision. The export price index is also presented by Balance of Payments classification of export groupings and ANZSIC division and subdivision. Other concepts (summary) GEOGRAPHIC DETAIL Australia Comments and/or Other Regions COLLECTION FREQUENCY Quarterly Frequency comments COLLECTION HISTORY International Trade Price Indexes Export Price Index An index of export prices has been published since 1901. The first index was compiled annually from 1901 to 1916-17 as a current weighted unit value index. The method of calculation was changed in 1918 to incorporate fixed weights. An index on this basis was published for the years 1897 to 1929-30. An index of export prices was not published again until 1937 when two series were introduced. One index used fixed weights and the other changing weights. These indexes used actual export prices in place of unit values. These indexes were compiled until 1962. The next index was introduced in August 1962. This index was a fixed weights index with a reference base of 1959-60 = 100.0. This index was compiled until July 1969 when a new interim index, using weights based on 1969-70, was linked to this series. This index was published until June 1979 when it was replaced by the first series of the current Export Price Index. This first series was compiled on a monthly basis with a reference base of 1974-75 =100.0 and a weighting pattern based on the value of exports for the three years to June 1997. The index was reviewed in 1990 and a new series, on a reference base of 1989-90 = 100.0 and weights based on 1988-89, was introduced in September 1990 and published in Export Price Index, Australia (cat. no. 6405.0). The indexes have been compiled and released on a quarterly basis since September quarter 1997. The Export Price Index, Australia, was reviewed in 1999, with a new series introduced from September quarter 2000. As a result of this review, the 'fixed-base' method of weighting was changed to an annually re-weighted and chained method. The weights are revised in the September quarter of each year and are derived from the average value of export items during the two previous financial years. In June quarter 2001 Export Price Index, Australia (cat. no. 6405.0) was combined with Import Price Index, Australia (cat. no. 6414.0) into a single publication, International Trade Price Indexes, Australia (cat. no. 6457.0). In the September quarter 2012 the ITPIs were re-referenced to 2011-12 = 100 Import Price Index Import price measures in Australia have a considerable history, with an import price index published by the Reserve Bank of Australia (RBA) from 1928 until September 1982. The first index of import prices produced by the ABS was introduced in May 1983, through the publication Import Price Index, Australia (cat. no. 6414.0). This index was compiled quarterly from September quarter 1981 until June quarter 1991 (on a reference base of 1981-82 = 100.0). A re-weighted index of import prices was introduced in September 1991 with index numbers compiled monthly from April 1991 until June 1997. This series had a reference base of 1989-90 = 100.0. The weights were based on the average value of merchandise imports landed in Australia during 1988-89 and 1989-90. The indexes have been compiled and released on a quarterly basis since September quarter 1997. In 1999, a review of the index was undertaken with the findings published in Information Paper: Review of the Import Price Index and Export Price Index (cat. no. 6424.0). One of the results of the review was a move to an annually re-weighted chained index, whereby each September quarter the weights of the index are updated to reflect the average value of merchandise imports landed in Australia in the previous financial year. In June quarter 2001 both Import Price Index, Australia (cat. no. 6414.0) and Export Price Index, Australia (cat. no. 6405.0) were replaced by a single publication International Trade Price Indexes, Australia (cat. no. 6457.0) which covers both the import price index and the export price index. In the September quarter 2012 the ITPIs were re-referenced to 2011-12 = 100 DATA AVAILABILITY Yes Data availability comments DATE OF LAST UPDATE FOR THIS DOCUMENT 30/05/2018 12:13 PM Document Selection These documents will be presented in a new window.