APPENDIX RE-REFERENCING HOUSE PRICE INDEXES
REFERENCE BASE
The reference base of an index series is that period for which the value of the index is set to 100.0. For the house price indexes, 1989-90 has previously been used as the reference base. With the introduction of the new methodology for its calculation, the established house price index will now be presented on a reference base of 2003-04. The price index for construction industry total hourly rates of pay is already presented on a reference base of 2003-04 so, for ease of comparison, it has been decided to re-reference the remaining indexes presented in this publication to the same reference base. Accordingly, the price indexes for project homes, materials used in house building and national accounts private housing investment will also now be presented on a reference base of 2003-04.
CONVERTING A SERIES TO THE NEW REFERENCE BASE
The conversion of series from the old base to the new base involves rescaling the index numbers. The conversion factor that should be applied to the index numbers is calculated by obtaining the ratio of the index numbers on the old and new bases for the new reference period.
The conversion factor is calculated using the unrounded index number for the 2003-04 financial year. The calculation of financial year indexes is outlined in paragraph 29 of the Explanatory Notes.
For example, for the project home price index for Australia, an arithmetic conversion factor is obtained as follows:
Index number for year 2003-04 (on base 1989-90 = 100.0) is 154.775
Index number for year 2003-04 (on base 2003-04 = 100.0) is 100.0
Conversion factor 100/154.775 = 0.64610
The factor 0.64610 may be multiplied by any project home price index number for Australia on the old reference base to give the corresponding number on the new reference base. The procedure shown in the above example may be followed in respect of any specific index series for which index numbers have been published on the old reference base.
ROUNDING
Index numbers and percentage changes are always published to one decimal place, with the percentage changes being calculated from the rounded index numbers. Index numbers for periods longer than a single quarter (e.g. for financial years) are calculated as the simple arithmetic average of the relevant rounded quarterly index numbers. The conversion factor described above is applied to the rounded index numbers.
A consequence of re-referencing price indexes can be that period-to-period percentage changes calculated using re-referenced index number series may differ slightly from those calculated using the original series. These differences do not constitute a revision of the index but simply reflect the effect of rounding.
CONVERTING THE RE-REFERENCED SERIES BACK TO THE PREVIOUS BASE
The conversion of series from the new base to the old base also involves rescaling the index numbers. The rescaling factor is obtained by taking the inverse of the previously described scaling factor.
For example, for the project home price index for Australia, the rescaling factor is obtained as follows:
Index number for year 2003-04 (on base 1989-90 = 100.0) is 154.775
Index number for year 2003-04 (on base 2003-04 = 100.0) is 100.0
Conversion factor 154.775/100 = 1.54775
The factor 1.54775 may be multiplied by any project home price index number for Australia on the new reference base to give the corresponding number on the old reference base.
Factors used to convert the published project homes, materials used in house building and national accounts private housing investment index numbers from the old reference base, 1989-90 = 100.0, to the new reference base, 2003-04 = 100.0, are as follows:
Project homes
Sydney 0.66159
Melbourne 0.65327
Brisbane 0.61833
Adelaide 0.60295
Perth 0.68799
Hobart 0.58148
Darwin 0.56689
Canberra 0.53476
Weighted average of eight capital cities 0.64610
Materials used in house building 0.74488
National accounts private housing investment 0.64010
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