TOWARDS AN AUSTRALIAN MONTHLY CPI

By Leigh Merrington, Economic Research Section

SUMMARY

The Consumer Price Index (CPI) provides a general measure of change in the prices of goods and services acquired by Australian households. It is a key indicator for informing monetary policy, with the Reserve Bank of Australia (RBA) having an explicit inflation target to "keep consumer price inflation in the economy to 2-3 per cent, on average, over the medium term". The CPI is also used extensively by government, academics and economists for macro-economic analysis, as well as by businesses and the general community in setting wages and the prices of goods and services.

Over the past few years the Australian Bureau of Statistics (ABS) has undertaken a range of activities to enhance the Australian CPI. These activities include: (a) the annual re-weighting of the CPI; and (b) the use of new data sources to compile the CPI, namely transactions data and web-scraped data. These strategic enhancements to the CPI have addressed most of the significant topics raised by stakeholders during the 2010 review of the CPI and has positioned the ABS to produce a monthly CPI.

While these activities have enhanced the quality of the CPI, they have also lowered the costs, in particular the data collections costs, required to produce the quarterly CPI. As part of the 2010 review of the CPI, the ABS estimated it would cost an additional $15 million per annum to produce a monthly CPI. The cost to produce a monthly CPI has significantly reduced as a result of the investment made by the ABS to lower the CPI data collection costs over the past three or four years.

The ABS has begun development work on the feasibility of a monthly CPI. This paper outlines the challenges being investigated in the development phase of the project and proposes an implementation plan. User and stakeholder input is being sought to determine the requirements for a monthly CPI and as a basis for broad community consultation.

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Monthly CPI - Frequently Asked Questions