6470.0.55.001 - Information Paper: Introduction of the 17th Series Australian Consumer Price Index, 2017  
Latest ISSUE Released at 11:30 AM (CANBERRA TIME) 06/11/2017  First Issue
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1.1 The ABS first compiled the CPI in 1960 with a time series extending back to the September quarter 1948. Prior to introducing the CPI, the ABS and its predecessor agency, the Commonwealth Bureau of Census and Statistics, produced a number of discrete retail price indexes, each constructed with fixed quantity weights and spanning different lengths of time from 1901 to 1960 – see Chapter 3: Historical Background of Consumer Price Index: Concepts, Sources and Methods (cat. no. 6461.0) for more detail. The introduction of the CPI heralded a different approach to constructing price indexes. Rather than compiling a set of discrete fixed–weighted indexes, the objective became to produce a series of short–term fixed–weighted indexes that were to be regularly linked together to provide a single continuous measure of price change. This strategy was adopted to ensure that, at any point in time, the weighting patterns and item coverage of the CPI were relevant to user requirements and reflected contemporary economic conditions. As a result, the ABS has maintained a program of periodic reviews of the CPI to ensure that it continues to meet community needs.

1.2 The ABS also publishes the Analytical Living Cost Indexes (ALCIs) and the Pensioner and Beneficiary Living Cost Index (PBLCI), collectively known as the Selected Living Cost Indexes (SLCIs, cat. no. 6467.0). The ALCIs have been compiled and published since June 2000 and were developed in recognition of the widespread interest in the extent to which the impact of price change varies across different groups of households in the Australian population. The PBLCI was introduced in the June quarter 2009 and is a measure of the effect of changes in prices experienced by Age pensioner and Other government transfer recipient households. These indexes are also evaluated as part of the periodic review program.

1.3 The most important objective of these reviews is to update the CPI and SLCI weighting patterns, which represent the average expenditure of Australian households on goods and services. When analysing a new set of weights compared with the previous set, it is important to note that the weights are relative to each other rather than being absolute. As a result, the weight of a product could fall, for example, even though the expenditure per household on the product has increased over time. This occurs when the increase is less than the average increase for all products. Products in the CPI and SLCIs include both goods and services purchased by households.

1.4 The ABS classifies these reviews as either 'major' or 'minor' depending on the issues being considered during a particular review. In general, a minor review is restricted mainly to updating the weighting patterns. As well as updating the weights, a major review involves examining the structure and purpose of the CPI and SLCIs, their underlying classification and commodity coverage. The 17th series review is a minor review.

1.5 This information paper details the new weighting patterns, as well as discussing the key enhancements in the 17th series and providing an overview of data sources and methodologies used in deriving the weights. The paper also provides an updated estimate of the amount of upper level substitution bias in the Australian CPI. There will be no changes to the classification structure or publications in respect of the 17th series.

1.6 Associated with this information paper are two data cubes available on the ABS website: Consumer Price Index: 17th Series Weighting Pattern (cat. no. 6473.0), which contains the 17th series CPI weights, points contributions and average weekly expenditures; and Selected Living Cost Indexes: 17th Series Weighting Pattern (cat. no. 6474.0), which contains the 17th series weights and average weekly expenditures for the four household types: Employee, Age pensioner, Other government transfer recipient, and Self–funded retiree. It also contains the 17th series weights and average weekly expenditures for the Pensioner and Beneficiary Living Cost Index, which combines the Age pensioner and Other government transfer recipient households.

1.7 The 17th series CPI and SLCI weights will be implemented in the December quarter 2017, due to be released on 31 January 2018 and 7 February 2018 respectively.