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CHAPTER 5 SCOPE, COVERAGE AND CLASSIFICATIONS
(ii) other taxes on production (for example, carbon tax)
(ii) other subsidies on production
(iii) retail and wholesale margins
(iv) insurance and transport charges separately invoiced.
5.15 The producers’ price is the amount receivable by the producer from the purchaser for a unit of a product produced as output, including any tax that is incorporated within the sales price and excluding any subsidy that reduces the sales price, on that unit as a consequence of its production or sale. It excludes any transport charges invoiced separately by the producer but includes delivery charges not separately invoiced.
(ii) retail and wholesale margins
(iii) insurance and transport charges separately invoiced.
5.16 The producers’ price and the basic price are two measures of output prices (that is, prices receivable). They differ in the way they treat non-deductible taxes on products, and producers’ subsidies on products.
Producers’ price = Basic Price
minus (Producers’) subsidies on products.
5.17 Neither the producers’ nor the basic price includes any amounts receivable in respect of GST, or similar deductible taxes. The difference between the two is that to obtain the basic price, any other tax payable per unit of output is deducted from the producers’ price while any subsidy receivable per unit of output is added.
5.18 In the context of the Australian PPIs, the output price indexes measure changes in basic prices. Output is recorded at basic prices; any tax on the product actually payable on the output is treated as if it were paid by the purchaser directly to the government instead of being an integral part of the price paid to the producer. Any subsidy on the product is treated as if it were received directly by the purchaser and not the producer. The basic price measures the amount retained by the producer and is, therefore, the price most relevant for a producer's decision-making.
5.19 The purchasers’ price is the amount paid by the purchaser in order to take delivery of products. Purchasers' prices include any taxes payable (less any subsidies receivable) on production and imports, and any transport charges paid separately by the purchaser to take delivery of goods. In the context of the Australian PPIs, which measure purchases by producers, the input price indexes exclude the GST, since the GST is generally deductible from the purchaser's own GST tax liability.
Free on board
5.20 Both the Import Price Index and the Export Price Index are valued using a free on board (f.o.b.) pricing basis. The value of products measured on an f.o.b. basis includes all production and other costs incurred up until the products are placed on board the international carrier for either export or import. Free on board values exclude international insurance and transport costs. They include the value of the outside packaging in which the product is wrapped, but do not include the value of the international freight containers used for transporting the products.
5.21 In concept, the SOP indexes are intended to incorporate all flows of products within the economy. While coverage of goods producing industries is relatively comprehensive, the coverage of services industries is being progressively improved. The expansion of Services industries price indexes coverage is a key objective for the ABS and consultation with users has helped to determine the priorities for the Australian Services Producer Price Indexes Development program which aims to progressively improve the coverage in these areas.
Export and import coverage within the PPI
5.22 On a conceptual basis, the inclusion of exports and exclusion of imports conforms to the measurement of output price change consistent with index use for the purpose of deriving chain volume estimates of Gross Domestic Product (GDP). In contrast, the inclusion of imports and exclusion of exports is consistent with demand-based index use. Both formulations are highly meaningful for a variety of important data users (see Chapter 2). Consequently, the ABS includes exports (on an f.o.b. basis) in output price indexes, and imports (on a cost insurance and freight (c.i.f.) basis) in input price indexes, since the key use of such indexes is in the production of the Australian National Accounts. On the other hand, the whole of economy inflationary measures provided by the Stage of Production PPIs exclude exports, but includes imports on an f.o.b. basis.
5.23 Classifications are a set of defined groupings or categories, based on common relationships, into which all members of statistical units can be divided or arranged. These groupings or categories can be ordered systematically, and must be mutually exclusive and exhaustive.
Importance of classifications in price statistics
5.24 The classification structure forms the index structure, and determines which products from which industries of the economy are needed to construct price indexes. Further, the classification serves as the basic language allowing sources of value data and price indexes to have a direct concordance.
5.25 Classifications enable an exact definition of which products are to be included in an index, and provide a meaningful and cohesive structure for reporting on price movements for different subsets of the price basket.
International and local classifications
5.26 The ABS uses many international and local classification systems. In the price index context, the availability of value data will dictate the lowest level of detail that might be possible. Although a classification may be conceived according to economic theory or user requirements using a top-down approach, in application the ABS collects data about individual products and then aggregates them according to the classification structure (i.e. a bottom-up approach).
5.27 In application, products used in the compilation of the PPIs and ITPIs can be classified according to more than one classification structure. See Appendix 2 for a list of classifications.
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