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OUTCOMES OF THE 13th SERIES AUSTRALIAN CONSUMER PRICE INDEX REVIEW
In November 1997 the decisions taken in the review were published in the Information Paper Outcome of the 13th Series Australian Consumer Price Index Review (6453.0). The majority of the changes made as a result of the review were incorporated into the September quarter 1998 CPI.
A summary of the main outcomes is outlined below.
Principal purpose and population coverage
The most important finding of the 13th Series CPI Review was that the context in which the CPI is used has changed:
Taking these changes into consideration it was decided that the Australian community would now be better served by a CPI designed specifically to provide a general measure of price inflation for the household sector as a whole. The CPI reference population has been extended to cover all private households in capital cities.
Item coverage and commodity classification
The most noticeable changes to the item coverage resulting from the review were the exclusion of mortgage interest and consumer credit charges from the index and the inclusion of expenditure on new dwellings (excluding land).
The sample of items covered by the CPI was also updated to better reflect the current expenditure of the target population. Additions to the sample included Computing equipment, Tertiary education fees and Domestic services.
A number of classification changes were made to update some of the expenditure class titles. For example, Telephone services was changed to Communication services, enabling the inclusion of faxes, and other forms of communication, such as e-mail, as they become significant. Some expenditure classes were amalgamated or removed where expenditure had become insignificant since the last review. For example, Butter no longer has its own expenditure class, but is included in the Fats and oils expenditure class.
A new subgroup, Utilities, comprising items previously grouped under separate headings, was added to the Housing group. The Selected State and Local Government Charges Index has been dropped as it has become less relevant following the corporatisation and privatisation of many previously State-run enterprises.
A Financial Services group is expected to be introduced to the CPI in the year 2000. This group will measure the changes in the prices paid by households for a range of services including those incurred in respect of borrowings, savings, maintenance of accounts with financial institutions, accessing investment advice and the purchase of shares etc. These measures will cover both direct fees and charges and indirect costs incorporated in the interest rate margins of financial intermediaries.
For more detail on the changes made to the item coverage and commodity classification for the 13th Series CPI see the Appendix to Consumer Price Index Australia (6401.0) for the June or September quarter 1998.
A new 'Tradeables vs Non-Tradeables' index will be developed which will differentiate between items according to whether or not their prices are influenced predominantly by world market prices. This index will replace the price index of imported items used mainly by the Reserve Bank of Australia as a measure of the impact of world markets on Australian inflation.
User input to the review did not indicate that monthly calculation and publication of the CPI was a high priority given the high additional costs that would be incurred. It was therefore decided that the CPI would continue to be calculated and published quarterly.
An assessment of costs and benefits concluded that, while there was some support for an extension of the CPI coverage beyond capital cities, this was not sufficient to justify the additional expense.
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