6470.0.55.002 - Information Paper: Introduction of the Consumer Price Index Weight Update, 2018  
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EXPENDITURE WEIGHTS UPDATE, 2018


3.1 The CPI and SLCI weights reflect the relative expenditures of the CPI population group and SLCI population subgroups as a whole. The weights reflect average expenditure of households and not the expenditure of an 'average household'. The CPI weights for the CPI groups are shown in Table 1.

TABLE 1: 2017 TO 2018 COMPARISON OF CPI WEIGHTS (a)

CPI group
2017

%

2018

%

Points Change

%


Food and non-alcoholic beverages
16.09
15.76
-0.33
Alcohol and tobacco
7.09
7.36
0.27
Clothing and footwear
3.55
3.32
-0.23
Housing
22.68
23.19
0.51
Furnishings, household equipment and services
9.39
8.89
-0.50
Health
5.43
5.69
0.26
Transport
10.32
10.48
0.16
Communication
2.68
2.57
-0.11
Recreation and culture
12.71
12.60
-0.11
Education
4.27
4.27
0.00
Insurance and financial services
5.80
5.86
0.06

(a) Any discrepancies between totals and sums of components in this table are due to rounding.

ANALYSIS OF CHANGES IN WEIGHTS


3.2 One thing to note when comparing the weights between 2017 and 2018 is the fact the weights are relative. The weight of a component of the CPI depends on how the change in expenditure on that component compares to the change in total expenditure (i.e. expenditure shares), rather than the absolute change in expenditure.

3.3 For example, if the increase in expenditure for a particular expenditure (EC) in the reference period is greater than the increase in total expenditure (in percentage terms), the weight for that EC will increase. Conversely, if the increase in expenditure for a particular EC in the reference period is less than the increase in total expenditure, the weight for that EC will decrease.

3.4 For the CPI, households continue to spend the most on Housing (23.19%), followed by Food and non-alcoholic beverages (15.76%) and Recreation and culture (12.60%).

3.5 Notable changes in the CPI weights are discussed in more detail below. All analysis refers to the weighted average of the eight capital cities.


Furnishings, household equipment and services

3.6 The weight for Furnishings, household equipment and services decreased by 0.50 percentage points (pp) to 8.89%. The main contributor was Child care, which fell 0.12pp. The fall in the weight for Child care reflects the New Child Care Subsidy introduced from 2 July 2018, replacing the Child Care Benefit and Child Care Rebate. For the 2018 update, expenditure values from 2016-17 have been revalued to prices from the September quarter 2018 to incorporate these changes. In addition to this, the weights for most household goods fell reflecting the subdued growth, or in some cases, decrease in prices as a result of strong retail competition.


Food and non-alcoholic beverages

3.7 The weight for Food and non-alcoholic beverages decreased by 0.33pp to 15.76%. This reflects the ongoing competition between supermarkets, which has kept growth in prices, and therefore growth in expenditure, subdued. Weights fell across most food items at the lower level, while the weight for Takeaway and fast foods increased slightly.


Alcohol and tobacco

3.8 The weight for Alcohol and tobacco increased by 0.27pp to 7.36%. The main contributor to the increase was Tobacco, which increased 0.22pp. Continued rises in the excise tax rate have resulted in higher prices, and subsequently higher expenditure on tobacco.


Housing


GRAPH 3.1: HOUSING GROUP CONTRIBUTION (%)


3.9 Housing remains the largest component of household spending, with a weight of 23.19%, increasing by 0.51pp.

3.10 New dwelling purchase by owner-occupiers remains the major component of Housing expenditure and is still the most heavily weighted EC in the CPI, increasing 0.27pp to 8.05%. 2016-17 saw strong residential construction activity and price growth, resulting in more dwellings being purchased for owner occupier purposes.

3.11 The weight for Utilities increased by 0.43pp to 4.49%. The increase in weight is predominantly driven by price increases, particularly in Electricity, which increased by 0.37pp to 2.54%.

3.12 The main offset to Housing's increase was for Rents, which decreased 0.12pp to 7.10%. This was driven by the slowdown of mining investment in WA and NT seeing less demand for rents and lower prices in Perth and Darwin.


Health

3.13 Health recorded an increase in weight of 0.26pp to 5.69%. The annual rise in health insurance premiums over this period was the major contributor to the increase in weight for Medical and hospital services, which rose 0.27pp to 4.00%.


Transport

3.14 The weights for Transport rose 0.16pp to 10.48%. The main driver was Automotive fuel, which recorded an increase in weight of 0.46pp to 3.24%. A weakening global oil supply driven by international tensions impacted domestic automotive fuel prices.

3.15 Motor vehicles recorded a fall in weight of -0.22pp to 2.56%. The fall in weight is due a combination of fewer sales of motor vehicles purchased for private use and lower prices due to the increase in competition between motor vehicle brands.


Recreation and culture

3.16 The weight for Recreation and culture fell by -0.11pp from 2017, driven by a fall across the majority of the ECs. While the weight for International holiday travel and accommodation fell 0.05pp to 3.10%, Domestic holiday travel and accommodation recorded an increase of 0.23pp to 2.91%. This reflects how subdued wages growth and a weaker Australian Dollar has resulted in a shift in holiday travel from international to domestic.