6401.0.60.002 - Information Paper: Increasing the Frequency of CPI Expenditure Class Weight Updates, July 2016  
Latest ISSUE Released at 11:30 AM (CANBERRA TIME) 11/07/2016  First Issue
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PREFACE

The Australian Bureau of Statistics (ABS) maintains a program of periodic reviews of the Consumer Price Index (CPI) to ensure it continues to meet community needs. The 16th Series CPI Review (ABS 2010) was the last comprehensive review which examined CPI concepts, methodologies and data sources. A number of topics and strategies were considered to maintain the relevance of the CPI in a dynamic environment, particularly given recent developments in methods and approaches. These developments present new opportunities to enhance the CPI. As outlined in the recent information paper (ABS 2015), the ABS is currently conducting a research program aimed at re-examining the current approaches to compiling the CPI. This paper focuses on the frequency of expenditure class (EC) weight updates.

The ABS has primarily used the Household Expenditure Survey (HES) to derive CPI weights at the published level (EC level and above) and have updated these weights every six years. The International Labour Organization (ILO) Resolution on CPIs recommends published level CPI weights are updated at least every five years. Conducting a more frequent HES would deliver benefits to the measurement of household inflation and to other users. However a more frequent HES requires additional funding. Alternative data sources of household expenditure are available to update CPI expenditure weights more frequently, irrespective of the frequency of the HES. This paper discusses the feasibility of using Household Final Consumption Expenditure (HFCE) data to more frequently update Australia's CPI EC weights; identifies and addresses challenges of the proposal; and presents empirical results.