The Consumer Price Index (CPI) is produced by National Statistical Offices across the world and is generally recognised as the principal measure of inflation experienced by households.
The CPI is routinely used to make comparisons of inflation in different countries. While using the CPI for this purpose is reasonable, there are some important differences in the way the CPI is measured in each country to be aware of when making these comparisons. Differences in approaches include how housing is measured, geographical coverage of the price collection and frequency of CPI basket updates, among other things.
This article discusses key differences in how Australia and selected countries, namely New Zealand (NZ), the United States (US), the United Kingdom (UK) and Canada, as well as the European Union (EU), measure CPI inflation. How the CPI is measured in each country differs based on geographical and population coverage, product (goods and services) coverage, methods, data sources, and importantly, the principal purpose of the CPI. Many countries produce the CPI for the dual purpose of a macro-economic measure of inflation to inform monetary policy where inflation targeting is used, and for indexation purposes, where pensions and other government payments are increased in line with CPI inflation.
This article provides a comparison of recent inflationary trends and discusses the different methods applied in each country. A focus of the article is whether owner-occupied housing costs are included in the CPI for each country, along with the reason behind these differences.