Methods changes during the COVID-19 period

A series of notes which describe key changes in the methods used to produce and disseminate ABS economic statistics during the COVID-19 period

Released
17/06/2020

Main features

Methods changes during the COVID-19 period

COVID-19 provides us with unprecedented times, which means that the Australian Bureau of Statistics (ABS), like other National Statistical Organisations, is reviewing a number of methodological areas to ensure we maintain the quality of our statistics during this period.

This page will be updated with key changes in the methods used to produce and disseminate ABS economic statistics during the COVID-19 period.

ABS trend and seasonal adjustment during COVID-19

Suspension of trend estimates during the COVID-19 period

The rationale for suspending trend estimates during the COVID-19 period is that the trend estimate includes the medium to long direction of a time series, in contrast to the seasonal component (systematic and calendar related movements) and the irregular component (unsystematic and short term fluctuations).

To estimate the trend, significant events are assigned to either the trend, seasonal or irregular components of a time series. If the impact is assigned to the trend then it will be visible in the trend, if not, then it will be not. Currently it is not known whether the impacts of COVID-19 will be short or medium to long-term and therefore we cannot confidently assign it to the trend or not. This means that the interpretation of trend estimate during the period affected by COVID-19 could be misleading. Therefore during the COVID-19 period the ABS will be suspending the publication of trend estimates until the medium to long-term nature of the impact is understood.

During the global financial crisis in 2009, the ABS suspended trend estimation for retail trade estimates. On that occasion it was based upon the disturbance to spending created by aspects of the policy response, most notably cash payments to households. The impacts of COVID-19 are more extensive. so the ABS has suspended the release of trend estimates across its statistics.

For short term growth rates, the seasonally adjusted series still provides utility for understanding underlying movements and so will continue to be published where appropriate.

Seasonal adjustment during the COVID-19 period

The ABS has considered 'how to seasonally adjust during an extended period of large (or potentially large) unusual impacts to a time series'? The key being to maintain data quality and minimise revisions.

Three options were considered:

  1. Move to forward factors for all seasonally adjusted estimates.
  2. Move to forward factors for series that show, or are anticipated to show, a significant and prolonged impact during the COVID-19 period in the context of the usual volatility of the series.
  3. Retention of concurrent seasonal adjustment with interventions where necessary for all seasonally adjusted estimates.
     

Forward factor seasonal adjustment uses data up to a fixed point in time to estimate seasonal factors. These factors are then used as the seasonal factors for the next twelve months or four quarters. This process is repeated annually to calculate seasonal factors for the coming year. Seasonal factors for previous years are also revised at this point. Large unusual impacts to the times series, such as COVID-19, do not require real-time interventions to the seasonal factors but will require intervention at the end of the twelve month period.

This method was used by the ABS prior to the early 2000s.

Concurrent seasonal adjustment uses data from a defined period in the time series to calculate the seasonal factors. Each time a new data point is added to the time series, the seasonal factors are recalculated through the series. Where time series are not impacted by large unusual events, this allows seasonal factors to account for changing seasonality in a more timely way.

Seasonal factors are revised with each new data point. The concurrent seasonal factors are more dynamic to changes, resulting in more frequent but generally lower revisions than if using forward factors.

When there are large unusual impacts to the time series, such as COVID-19, interventions are required (e.g. outliering) to prevent distortion of the seasonal factors.

This method is currently used by ABS.

This information paper provides further information on forward factors and concurrent seasonal adjustment.

There is no perfect answer to 'how to seasonally adjust during a period of large (or potentially large) unusual impacts to a time series'? The ABS has therefore decided that:

  • Where a time series will be exposed (or anticipated to be exposed) to a significant and prolonged impact from COVID, fixed forward factors will be adopted. This is to avoid the need for a number of successive interventions.
  • If a time series is not severely impacted (or anticipated to be impacted) by COVID for a significant and prolonged period, concurrent seasonal adjustment should continue, with interventions as necessary.
  • Time series will be assessed on a case-by-case basis, using analytical tools in X-ARIMA.
     

Post the COVID-19 period, for time series that have moved to forward factors, careful consideration will be needed to determine when and how to return to concurrent seasonal adjustment. All time series that have been affected by COVID-19, whether using the concurrent or forward factors, will also need to be assessed to determine whether the series has returned to the pre-COVID-19 seasonal pattern, or whether a new seasonal pattern has emerged.

The table below lists the ABS series that have moved to forward factors for seasonal adjustment.

Show all

OutputSeries moved to Forward FactorsReference period that the series moved to forward factors
5368.0 International Trade in Goods and ServicesTransport services, Passenger - Exports (credits)
Travel services, Exports (credits)
Transport services, Passenger - Imports (debits)
Travel services - Imports (debits).
March 2020
5601.0 Lending IndicatorsAll published seriesApril 2020
Consumer Price IndexChild care
Medical and hospital services
Preschool and primary education
June quarter 2020
Labour ForceAllApril 2020
Job Vacancies2 (Australia and Public sector, with Private sector remaining concurrent)May 2020
Average Weekly Earnings78 (21 will remain as concurrent)May 2020
Labour Accounttbc - likely to be allJune quarter 2020
5206.0 National AccountsGFCE
· Sales of goods and services: National, NSW, ACT, VIC, QLD, NT, SA, WA, TAS
· Use of goods and services: National, NSW, ACT, VIC, QLD, NT, SA, WA, TAS
· Employee Expenses: NSW, ACT, VIC, QLD, NT, SA, WA, TAS
· Commonwealth non defence - Use of goods and services: National, NSW, ACT, VIC, QLD, NT, SA, WA, TAS
· Use of goods and services + employee expenses - sales of goods and services: National, NSW, ACT, VIC, QLD, NT, SA, WA, TAS

HFCE
· Purchase of Vehicles: ACT
· Hotels, Cafes and Restaurants
· Clothing and Footwear
· Food
· NEO
· NEO Credits
· NEO Debits
· Transport Services
· Operation of Vehicles

TRADE
· Travel Services Imports
· Travel Services Exports
· Transport Services Imports
· Transport Services Export

INCOME
· Arts and Recreation COE
· Accommodation and food services COE
· Accommodation and food services GOSM

PRODUCTION
QBIS Sales
· Mining - Exploration and Mining Support Services
· Manufacturing - Food Product
· Beverage and Tobacco Products
· Wood Product Manufacturing
· Pulp, Paper and Converted Paper Product
· Printing & Recorded Media
· Basic Chemical & Chemical Product
· Polymer Product and Rubber Product
· Primary Metal & Metal Products
· Fabricated Metal Product Manufacturing
· Transport Equipment Manufacturing
· Machinery & Equipment
· Electricity, Gas, Water and Waste Services - Gas
· Waste Collect, Treatment & Disposal
· Wholesale trade - Basic Material Wholesaling
· Machinery & Equipment Wholesaling
· Motor Vehicle & Motor Vehicle Parts Wholesaling
· Grocery, Liquor & Tobacco Product Wholesaling
· Other Goods Wholesaling
· Commission-Based Wholesaling
Retail Trade Survey
· Supermarket and Grocery Stores
· Specialised Food Retailing
· Liquor Retailing
· Furniture, Floor Coverings, Houseware and Textile Goods Retailing
· Electrical and Electronic Goods Retailing
· Hardware, Building and Garden Supplies Retailing
· Newspaper and Book Retailing
· Recreational Goods Retailing
· Clothing Retailing
· Clothing, Footwear and Personal Accessory Retailing
· Department Stores
· Pharmaceutical, Cosmetic and Toiletry Goods Retailing
· Other Retailing Retail Trade Survey
QBIS Sales
· Accommodation and Food Services - Accommodation
· Food & Beverage Services
· Transport, Postal and Warehousing - Road Transport
· Rail Transport
· Water Transport
· Other Transport
· Postal, Courier & Other Services
· Transport Support Services
· Warehousing & Storage Services
· Information Media and Telecommunications - Publishing (ex Internet & Music Publishing)
· Motion Picture & Sound Recording Activities
· Broadcasting (Except Internet)
· Internet Publishing & Broadcasting & ISP
· Telecommunication Services
· ISPs, Web Search Portals & Data Process Services
· Library & Other Information Services
· Financial and Insurance Services - Auxiliary Finance and Insurance Services
· Rental, Hiring and Real Estate Services - Rental and Hiring Services
· Property Operators and Real Estate Services
· Professional, Scientific and Technical Services - Other Professional, Scientific and Technical Services
· Administrative and Support Services - Administrative Services
· Building Cleaning, Pest Control and Other Support Services
· Arts and Recreation Services - Heritage Activities
· Creative & Performing Arts Activities
· Sports and Recreation Activities
· Gambling Activities
· Other Services - Repair & Maintenance
· Personal & Other Services
QBIS Inventories
· DIV H, SD44 - Accommodation
· DIV H, SD45 - Food and Beverage Services
· Cafes, Restaurants and Takeaway Food Services
· Cafes and Restaurants
· Takeaway Food Services
· Catering Services
· Pubs, Taverns and Bars
· Clubs (Hospitality)
· Mining
· DIV B, SD 06 - Coal Mining
· DIV B, SD 07 - Oil and Gas Extraction
· DIV B, SD 08 - Metal Ore Mining
· DIV B, SD 09 -Non-Metallic Mineral Mining and Quarrying
· DIV B, SD10 Exploration and Other Mining Support Services
· DIV D, SD 26 -Electricity Supply
· DIV D, SD 27 - Gas Supply
March quarter 2020
8501.0 Retail Trade AustraliaAll series were moved to forward factors consistent with initial advice from MD.March 2020
5625.0 - Private New Capital Expenditure and Expected Expenditure, Australia, Mar 2020

8412.0 - Mineral and Petroleum Exploration, Australia
In consultation with BAC/ECS and National Accts Capital Teams, all series are on concurrent seasonal adjustment to maintain consistency across related series.

Expectation that most series will move across to forward factors for June quarter but will be in consultation with BAC/ECS and National Accts Capital Team.
June quarter 2020
5676.0 - Business Indicators, Australia (QBIS)Most series moved to forward factors in line with advice from MD then in consultation with National Accounts Production/Income team select series were reverted back to concurrent to maintain consistency between QBIS and the Accounts for key series.

Around 360 series are on forward factors.

Expectation that further series will move across to forward factors for June quarter but will be in consultation with National Accounts.
March/June quarter 2020
8731 - Building Approvals AustraliaAll monthly series moved to forward factors from the May month in line with advice from MD and notification of NAB (trend also suspended).

Quarterly CVM series remain as trend/concurrent adjustment to March quarter. Will suppress for June quarter release in the coming month.
May 2020

Treatment of JobKeeper in Labour and Wage related ABS statistics

The table below summarises the conceptual treatment of JobKeeper in ABS labour and wages related statistics and any changes to the questionnaire or series published.

CollectionConceptual treatment of JobKeeperQuestionnaire changes necessitated by JobKeeperAdditional analysis or series that will be published
Labour Force (and annual surveys collected with the Labour Force Survey)JobKeeper-supported jobs and earnings are included in employment and earnings series.No changes. 
Weekly Payroll Jobs and WagesJobKeeper-supported jobs and earnings are included in jobs and earnings series.n/aAnalysis of revisions to jobs and wages series related to JobKeeper back payments was included in the 16 June 2020 release.
Labour AccountJobKeeper-supported jobs and earnings are included in jobs, employment and earnings series.n/a 
Average Weekly EarningsJobKeeper-supported earnings are included in earnings series.

Jobs that are entirely supported by JobKeeper (i.e. 100% of the amount) will be included in the total earnings series, but will be excluded from the full-time series (and categorised as ‘other’, given the reduced hours and earnings for many of these jobs).
Additional instructions around includes and excludes were added to the questionnaire.The release of data for May 2020 will include analysis of the influence of COVID-19 and JobKeeper on average weekly earnings.
Wage Price IndexHeadline WPI will remove any affect of JobKeeper supported payments in wage and salaries.

Additional analytical series will be published to both include the JobKeeper payment (hourly income growth) and exclude the payment (cost of labour to an employer)
Question wording unchanged but modified includes on the questionnaire to aid in reportingAdditional analytical series are being developed for release - Labour Price Index (excluding JobKeeper from the cost of labour and accounting for payroll tax reductions) Hourly Income index (no name as yet) which will include JobKeeper payments where wages increase

Australian conceptual framework for measures of employee remuneration

Framework for measures of employee remuneration

Australian conceptual framework for measures of employee remuneration

This image contains the Australian Conceptual Framework for measures of employee remuneration.

Labour costs flow down to Compensation of employees(a) and Other labour-related costs (other costs incurred by employers in relation to employees). Other labour-related costs include payroll tax, training costs, recruitment costs, and wage subsidies from government (negative costs).

Compensation of employees(a) flow down to Wages and salaries and Employer’ social contributions (contributions by employers to secure social benefits for their employees). Employers’ social contributions include employer superannuation contributions (other than through salary sacrifice), workers’ compensation premiums, and provisions for severance, termination and redundancy payments.

Wages and salaries flow to Wages and salaries in cash and Wages and salaries in kind(b). Wage and salaries in kind(b) include benefits such as free or subsidised accommodation, travel, food or motor vehicle (other than through salary sacrifice) and fringe benefits tax on goods and services provided by employer (other than through salary sacrifice).

Wages and salaries in cash flows down to Regular(b) and Irregular. Regular(b) includes regular and recurring payments such as: ordinary time and overtime payments, payment by result, taxable allowances, commissions, gratuities and tips, income tax, regular bonuses, regular payments under profit-sharing schemes, and all salary sacrificed (including associated taxes e.g. fringe benefits tax and superannuation contributions tax). Irregular includes irregular payments such as: irregular bonuses and incentive payments, and irregular payments under profit-sharing schemes.
  1. The concept 'employee income' is broadly comparable with compensation of employees.
  2. Conceptually, earnings comprise regular wages and salaries in cash and regular wages and salaries in kind. 
     

Source: https://www.abs.gov.au/AUSSTATS/abs@.nsf/DetailsPage/6313.02006?OpenDocument)

Measuring the Consumer Price Index during a time of COVID-19

Introduction

Following the March 2020 quarter Note on the impact of COVID-19 on the CPI, this article explains the changes that will be made to the June quarter CPI as a result of the actions taken by governments, businesses and individuals in response to the COVID-19 pandemic (scheduled for release on 29 July). The following measurement approaches have been adopted:

  1. The implementation of free childcare and the changes in rental agreements that reduced the prices paid by tenants, have flowed through to measured CPI.
  2. For unavailable goods and services, the quarterly price movements will be imputed from the headline CPI quarterly movement. This applies to: urban transport fares; domestic holiday travel and accommodation; international holiday travel and accommodation; sports participation; and other recreational, sporting and cultural services.
  3. Seasonal forward factors will be used for three CPI series: child care; medical and hospital services; and pre-school and primary education, while the remaining seasonally adjusted series will maintain their (usual) concurrent seasonal adjustment approach.
  4. CPI expenditure weights have not been updated for changes in household expenditure patterns as a result of COVID-19. Expenditure weights will be updated in the December 2020 quarter, consistent with current practice.
     

For further information, please email prices.statistics@abs.gov.au​​​​​

Price collection

The ABS has a range of data sources for the CPI including: direct collection, administrative data, web scraping and transactions 'scanner' data. Direct collection, which contributes slightly more than half the weight of the CPI, is largely collected via on line or over the phone. Less than two per cent of the weight of the CPI is collected by ABS officers in-store.

In late March, the ABS suspended in-store collection to ensure the health and safety of our collectors. This decision remained in place for the June quarter. The ABS continued to directly collect prices online and over the phone, and moved the majority of in-store collections to these modes.

Impact of free child care

On 2 April, the Australian Government announced that child care services would be free for families from 6 April to 28 June. Following the 2 April announcement, free child care was extended until 12 July.

Child care contributes 1.2 per cent of household expenditure in the CPI and is measured through changes in the out-of-pocket expenses for families. Figure 1 summarises changes to various child care support schemes over the years, and the impact these had on the child care price series.

Figure 1 - Child care index in the CPI (2011-12 = 100.0)

Graph of the child care index in the CPI

Figure 1 - Child care index in the CPI (2011-12 = 100.0)

The graph shows the Child care index in the CPI.
The annotations included in the graph are:
September 2007: The Child Care Rebate (CCR) was introduced to the existing Child Care Benefit (CCB).
September 2008: Increase in the Child Care Rebate from 30% to 50%.
September 2018: Child Care Subsidy replaced with the Child Care Benefit and Child Care Rebate.
June 2020: Fee free Child care introduced on 6 April 2020 leading to a 95% price fall.

Graph and data: Child care index in the CPI

Download


The latest changes reduced child care out-of-pocket expenses for households to zero for most of the June quarter. Free child care will be taken into account by using the number of days it was in effect (62 out of 65 business days). This results in a 95 per cent price fall in the CPI child care expenditure class for the June quarter, subtracting approximately 1.1 percentage points from the headline CPI.

The scheduled ending of free child care on 12 July will result in a significant rise in the September 2020 quarter childcare price series.

Free child care will also impact these series in the June 2020 quarter:

  • Preschool and primary education, with before and after school care services also being free.
  • Selected Living Cost Indexes, which measure changes in living costs for different household types. Free child care will have a higher impact on employee households, for which the child care series has a weight of 1.5 per cent, compared to a weight of 1.2 per cent in the CPI.
     

Measuring price change in rents

COVID-19 resulted in significant changes in the rental property market with State and Territory Governments announcing a range of rental support packages.

Rents contribute 6.8 per cent of household expenditure in the CPI, with privately owned dwelling rents contributing 92 per cent of total rents expenditure. Figure 2 provides a summary of the different scenarios by jurisdiction, and how they will be captured in the CPI.

Figure 2 - June quarter scenarios in the CPI rent series.

CPI rent series scenarios

Figure 2 - June quarter scenarios in the CPI rent series.

This image provides a summary of the different scenarios by jurisdiction, and how they will be captured in the CPI.

The support packages of rent negotiation, one-off rent reduction or rent-free period, rent relief due to land tax rebate, and Government rent relief grants will all result in a price fall in the CPI. This is consistent with the principle that prices collected in the CPI should reflect the out-of-pocket expenditure by the consumer, including any adjustments for Government subsidies or assistance. All State and Territory governments announced rent negotiation and one-off rent reduction or rent-free period support packages. New South Wales, Victoria, Queensland, South Australia and the Australian Capital Territory announced rent relief due to land tax rebate. While Victoria, Queensland and Western Australia announced Government rent relief grants.

The rental support of rent deferral, eviction moratorium, and rent freeze will all result in no price change in CPI. Any deferrals in rental payments will not impact the CPI as rents will be measured as the price including the deferred amount. All States and Territory governments announced rent deferral support packages. All States and Territory governments bar the Northern Territory announced eviction moratorium and all States and Territory governments bar New South Wales and the Northern Territory announced rent freeze support packages.

Permanent or temporary re-negotiations of rent between landlords and tenants will be treated as a price fall in the CPI. Rent reductions due to support packages, such as land tax or rental relief grants, will also result in a price fall in the CPI. This is consistent with the principle that prices collected in the CPI should reflect the out-of-pocket expenditure by the consumer, including any adjustments for Government subsidies or assistance.

The CPI measures price change in the period when the good or service is actually received, regardless of the period in which payment or use occurs. This is known as the 'Acquisitions approach'. Therefore, any deferrals in rental payments will not impact the CPI as rents will be measured as the price including the deferred amount. Eviction moratoriums and rent freezes will also have no impact on prices.

Use of imputation for missing prices

It is common for there to be some missing prices from the CPI each quarter due to goods or services being temporarily unavailable, or businesses being temporarily closed. Missing prices typically represent around 5-6 per cent of the CPI sample each quarter.

For the June 2020 quarter, the proportion of missing prices was 13 per cent, reflecting unavailable goods and services due to COVID-19 restrictions. However, when allowance is made for the goods and services that were unavailable, such as airfares, the proportion of missing prices was closer to 7 per cent. This is only slightly higher than the June 2019 quarter proportion of 5.5 per cent.

The increase in the proportion of missing prices will not have an adverse impact on the quality of the CPI due to the use of imputation methods. Appendix 1 contains a review of the responses from other National Statistical Organisation on this topic.

When discussing imputation in the CPI, a distinction needs to be made between:

  1. Available goods and services to purchase, but with some prices temporarily missing.
  2. Unavailable goods and services, meaning there are no prices to collect for the entire quarter.
     

Available goods and services

The ABS has well established imputation methods for this scenario, which are supported internationally in the Consumer Price Index Manual: Theory and Practice and used widely by other National Statistical Organisations.

In most cases of temporarily missing prices, a movement is imputed off similar goods or services. This is known as class (or sample) mean imputation. This uses the assumption that the movement of the missing price is the average price change of similar goods and services. The class mean approach is commonly applied to items within the clothing, furniture and household appliance expenditure groups.

In some cases, the carry forward imputation approach is used, with available prices from the previous period and a movement of zero recorded. The carry forward approach is used where prices do not change very frequently, such as for renting a dwelling.

Unavailable goods and services (footnote 1)

International guidelines and methods are less well established for imputation where no prices are available or no consumption has taken place (even when prices are available). Examples of this during the June 2020 quarter include domestic and international travel, and attending sporting events.

The ABS developed a CPI imputation framework to decide the imputation method to be used for different scenarios (figure 3).

The first decision is to determine whether the good or service is available or unavailable to purchase, regardless of whether prices can be collected. The next decisions to follow are:

  • in the case of an available good or service where expenditure has declined significantly, it will be treated as unavailable. Urban transport fares are an example where expenditure has declined by over 80 per cent from normal levels.
  • in the case of an unavailable good or service where a significant amount of its typical expenditure has been substituted to another good or service, donor imputation will be used. An example of this is consumers substituting alcohol consumed on premises to takeaway alcohol.
     

Figure 3 - CPI imputation decision framework

CPI imputation decision framework

Figure 3 - CPI imputation decision framework

This image outlines the CPI imputation decision framework. It is a flow chart made up of yes or no questions.

The first question asks “Is the good or service still available to purchase?” If the answer is Yes, this flows on to the next question of “Has the expenditure declined significantly?”. If the answer is No, this flows on to the next question of “Has the expenditure been substituted to a similar good or service?”

Following the Yes answer line, if the answer is No to the question “Has the expenditure declined significantly?”, standard imputation is used. If the answer is Yes (e.g. urban transport), this flows to the next question of “Has the expenditure been substituted to a similar good or service?”, joining the No flow line from the first question.

From the question of “Has the expenditure been substituted to a similar good or service?”, if the answer is Yes (e.g. alcohol consumed on premises) then donor imputation is used. If the answer is No (e.g. international travel), the decision is to impute off headline CPI quarterly movement.

Imputation approach

  • Standard imputation - used as described above in the case of goods and services that are available to purchase but for which prices are temporarily missing. This may be due to the item being out of stock or the business being closed. There is a small increase in the number of temporarily missing prices in the June quarter where this approach will be used.
  • Donor imputation - used for an unavailable good or service where a significant amount of its typical expenditure has been substituted to another good or service. This approach imputes off a 'donor' series located elsewhere in the CPI. For example, takeaway alcohol will be used as the donor for alcohol consumed on premises, which is classified separately within the Alcohol and tobacco group.
  • Imputation off the headline CPI - used for an unavailable good or service where consumption is not being substituted elsewhere. This has the effect of the movement of the imputed series not contributing to the CPI quarterly movement. This reflects the fact that there are no prices being transacted, and no (or very little) consumption of the particular good or service has occurred during the quarter.
     

Table 1 provides a summary of the imputation methods that will be used for the goods and services particularly affected by COVID-19 actions in the June 2020 quarter.

Table 1 - CPI imputation approach for the June 2020 quarter.

SeriesGoods and services includedWeight (%)Imputation approach
Restaurant mealsEntree, main and dessert meals from restaurants, cafes and clubs3.3If available, takeaway prices used or standard imputation if not available
Alcohol consumed on premisesBeer, wine and spirits from restaurants, cafes and clubs1.5Donor imputation off takeaway alcohol
Urban transport faresTrain, bus, tram, ferry0.7Impute off headline CPI
Domestic holiday travel and accommodationAirfares, train, bus, ferry, hotels, motels, holiday houses, caravan parks, shared accommodation.3.0Impute off headline CPI
International holiday travel and accommodationAirfares, tours, overseas accommodation3.4Impute off headline CPI
Sports participationGym and sports club membership fees, sports lesson fees0.9Impute off headline CPI
Other recreational, sporting and cultural servicesAttending sports events, cinema, theatre, lessons1.1Impute off headline CPI

Seasonal adjustment in the CPI

Of the 87 CPI expenditure class series published by the ABS, 55 are seasonally adjusted. With COVID-19 related events affecting prices for a range of goods and services purchased by households, the ABS has assessed each of the 55 seasonally adjusted series to determine the appropriate treatment.

Consistent with other economic statistics, for the calculation of seasonally adjusted movements, the ABS has decided to move to forward factors (published in Table 14 of the CPI) for any CPI series significantly affected for a potentially prolonged period. In these cases, the use of forward factors will replace the standard concurrent adjustment.

The use of forward factors retains the pre-COVID-19 seasonal factors and allows time for an assessment of the full impact. Forward factors will be used in the June 2020 quarter for these CPI series:

  • Child care
  • Medical and hospital services
  • Preschool and primary education
     

All other CPI seasonally adjusted series will remain concurrently adjusted.

For the CPI imputed series discussed in this article, a consistent approach will be used for the All groups CPI seasonally adjusted series. This means that for those series shown in table 1 above as being imputed off headline CPI in original terms, these series will be re-imputed off the aggregate seasonally adjusted level.

Footnotes

  1. The ABS conducted extensive consultation on this topic with a number of National Statistical Organisations and Professor Kevin Fox, UNSW, and would like to thank them for their contributions.

Appendix 1 - review of literature and response by other National Statistical Organisations

Show all

Country/authorAgencyImputation approachReference
EuropeEurostatHeadline CPI for non-seasonal products, and typical seasonal movement for seasonal products.Guidance on the compilation of the CPI in the context of COVID-19 crisis
New ZealandStats NZHeadline CPIImpacts of the COVID-19 lockdown on methodology for food price index April 2020
CanadaStatistics CanadaHeadline CPITechnical Supplement for the April 2020 CPI
USBLSStandard imputationEffects of COVID-19 Pandemic and Response on CPI
BelgiumStatistics BelgiumCarry forward for non-seasonal products and typical seasonal movement for seasonal productsImpact of the COVID-19 on the measurement of inflation
FranceINSEESame as EurostatHow to compute a CPI in the context of the Covid-19 crisis?
ItalyIStatHeadline CPIThe Covid-19 crisis and the compilation of CPIs
NetherlandsCBSSame as EurostatImpact of imputation methods on the CPI
NorwayStatistics NorwaySame as EurostatCorona consequences for CPI
United KingdomONSHeadline CPICoronavirus and the effects on UK prices
Erwin Diewert and Kevin FoxNBER working paperHeadline CPIMeasuring Real Consumption and CPI Bias Under Lockdown Conditions

Measuring the Wage Price Index during the COVID-19 pandemic

Summary

This article explains the changes being made to the measurement of the Wage Price Index (WPI) following the response of Commonwealth and state/territory governments to the COVID-19 pandemic. These changes will be made in the June quarter 2020 WPI, scheduled for release on 12 August. In summary:

  1. Wage subsidies (JobKeeper) and payroll tax changes will have no direct impact on the WPI as they fall outside of the conceptual framework defining wages and salaries.
  2. New analytical indexes will be released alongside the WPI providing insights around the combined impacts of government measures on the Australian labour market.
     

Australian conceptual framework for measures of employee remuneration

The principle purpose of the WPI is to measure changes in the price of wages and salaries (in hourly terms) for employers in the Australian labour market.

Figure 1 shows the conceptual framework for Labour Costs. Here you can see that wage subsidies and payroll tax are outside the conceptual boundary for WPI.

Figure 1 - Labour costs conceptual framework

Figure 1: Labour costs conceptual framework

Figure 1 - Labour costs conceptual framework

This image shows the conceptual framework for Labour Costs. There are two large bubbles: one for Compensation of employees and one for Other labour-related costs. Inside the Other labour-related costs bubble are Payroll tax, Recruitment costs, Training costs, and Wage subsidies from government (reduction in costs). These have no direct impact on the Wage Price Index as they fall outside of the conceptual framework defining wages and salaries.

The Compensation of employees’ bubble contains two smaller bubbles inside: Employers’ social contributions and Wage and salaries. Inside the Employers’ social contributions bubble are Employer superannuation contributions, Workers compensation premiums, and Provisions for severance, termination & redundancy payments.

Inside the Wages and salaries bubble are two smaller bubbles: Wage and salaries in cash (Regular payments including ordinary time earnings, overtime, allowances, bonuses and incentives, etc) and Wage and salaries in kind (benefits such as free or subsidised accommodation, travel, food and motor vehicles (not salary sacrificed), FBT on goods and services provided by the employer).

New analytical indexes

To assist businesses responding to the WPI survey, respondents have been asked to include JobKeeper payments in their wage and salary data. This is consistent with the survey of Average Weekly Earnings (AWE) approach. JobKeeper payments will then be identified in the WPI data and their effect removed during validation.

The WPI is often used as a proxy measure of price changes of the total labour cost for employers, as well a measure of an employees’ hourly income growth. In this exceptional COVID-19 period, the ABS will therefore provide two alternative analytical indexes alongside the WPI:

  1. A Labour Price Index (LPI), including the JobKeeper wage subsidy and payroll tax changes.
  2. An index of hourly income growth including the JobKeeper subsidy where applicable.


The additional analytical indexes will be created using collected WPI data, including JobKeeper payment information, supplemented with administrative data and other ABS labour survey data.

The analytical LPI will, where possible, be created using the same methods as the previously published Labour Price Index, which was last released in 2011.

Coherence with Average Weekly Earnings

As a measure of average income, the Average Weekly Earnings survey (AWE) will include JobKeeper payments. The WPI will remove the effect of the JobKeeper payments from the headline WPI.

Ensuring consistency across the ABS economic accounts

Governments across Australia have announced a series of economic stimulus and support packages in response to the COVID-19 pandemic. To ensure consistency in ABS surveys, the ABS is reviewing and where necessary updating survey questions and guidance to ensure consistent business and household reporting with the ABS classification of the announced packages (see 5261.0 - Economic measurement during COVID-19: Selected issues in the Economic Accounts, May 2020 for more information on selected packages).

Once the ABS has made a classification decision, potentially impacted survey questions are identified and reviewed across the suite of ABS surveys. If needed, new questions will be developed or modifications made to existing questions and/or guidance. Below is an example for the classification of boosting cash flow for employers (Classifying boosting cash flow for employers in Australia’s economic accounts).

Areas impactedABS surveys and statistical collections impactedSurvey changes
Australian GovernmentGovernment Finance Statistics collectionGovernment providers informed to Include 'Boosting cash flow for employers' payments as a subsidy
Eligible businessesAustralian Industry Survey'Boosting cash flow for employers' is specifically collected as a response in the 'Funding from federal, state and/or local government' question Guidance material is provided for survey respondents
Business Indicators Survey'Boosting cash flow for employers' is reported in the 'Other income' question which includes 'Funding from federal, state and/or local government' Processes have been modified to ensure respondents were directed to include the value of Boosting Cash Flow entitlement in other income.

Measuring residential property prices during COVID-19

The Residential property price indexes (RPPIs) measure price change of the stock of residential dwellings over time. Residential property sales data are used to produce the RPPIs and related statistics. For each capital city, RPPIs are produced by stratifying dwelling transactions by: dwelling type; long term median price; and socio-economic index for areas.

The effects of COVID-19 saw residential property transactions fall substantially in the eight capital cities during the June 2020 quarter. This reduced the number of transactions in most strata. Stratification methods require a sufficient number of transactions to compile the indexes each quarter. To overcome this, the ABS introduced imputation methods.

Further information will be available in Residential Property Price Indexes, Eight Capital Cities: June quarter 2020, to be released on Tuesday 15 September 2020.

Measuring the Consumer Price Index: September quarter update

Introduction

The impact of COVID-19 continues to be reflected in the statistics produced by the ABS, including many economic statistics. In response to the pandemic, decisions and actions taken by governments, businesses and households resulted in a record quarterly fall of 1.9 per cent in the Consumer Price Index (CPI) in the June 2020 quarter.

For the release of the June quarter CPI, the ABS had to address several new measurement challenges, in particular: the suspension of the CPI in-store collection; free child care; and the unavailability of certain goods and services, for example, international holiday travel. These topics were discussed in Measuring the CPI during a time of COVID-19

This article provides an update to the ongoing CPI measurement challenges for the September 2020 quarter, scheduled for release on 28 October. 

The September quarter release of the CPI will again contain additional analysis provided in two spotlight articles: CPI exclusion-based measures and Underlying inflation measures. The aim of these articles are to assist users understand the COVID-19 related impacts on the CPI, including temporary impacts such as free child care and the subsequent re-application of fees.

For further information, please email prices.statistics@abs.gov.au.

Data collection

The suspension of CPI in-store collection remained in place for the September 2020 quarter. As in the June quarter, the small amount of collection previously undertaken in-store continued to be conducted by ABS office-based staff either online or over the phone.

Missing prices, due to goods or services being temporarily unavailable or businesses being temporarily closed, typically represent around 5-6 per cent of the CPI sample each quarter. In the June quarter this was slightly higher, at around 7 per cent. With many businesses remaining closed during the September quarter, the proportion of missing prices was again higher than usual at around 7 per cent of the CPI sample, while in Melbourne it was around 10 per cent. As discussed in the June quarter article, standard imputation methods will be used in these cases of missing prices.

Stage 4 restrictions in Melbourne meant prices were unable to be collected from some retailers, in particular for hairdressing services and motor vehicles. In these cases a price movement has been imputed from Melbourne's CPI quarterly movement - see Unavailable goods and services below for further details.

Child care

On 6 April the Australian Government introduced the 'Early Childhood Education and Care Relief Package'. Free child care was provided for families from 6 April to 12 July, which resulted in a 95 per cent fall in the child care series in the June quarter. With the removal of free child care on 13 July, families were again required to pay fees similar to pre-6 April.

Applying a similar treatment as the June quarter, the number of business days where child care was not free was used to derive a movement for the child care series. In the September quarter, families paid child care fees for 58 out of 66 business days. With the Australian Government's announcement of further support for child care centres in Victoria, Melbourne's movement for the child care series differs from the other seven capital cities. Nationally, Melbourne contributes 24 per cent to the child care series.

The September quarter index for the CPI child care series will increase from 7.6 to around 112.6. The rise in child care will add approximately 0.9 percentage points to the headline CPI movement in the September quarter.

Figure 1 shows that the child care series is still 26 per cent below the pre-COVID-19 March quarter index level of 152.8. This is due to Stage 4 restrictions in Melbourne impacting child care attendance and free child care being in place across Australia for eight days in July.

Figure 1 - Child care index in the CPI (2011-12 = 100.0)

Figure 1 shows that the child care series is still 26 per cent below the pre-COVID-19 March quarter index level of 152.8. This is due to Stage 4 restrictions in Melbourne impacting child care attendance and free child care being in place across Australia for eight days in July.

Figure 1 - Child care index in the CPI (2011-12 = 100.0)

The graph shows the Child care index in the CPI.
The annotations included in the graph are:
September 2007: The Child Care Rebate (CCR) was introduced to the existing Child Care Benefit (CCB).
September 2008: Increase in the Child Care Rebate from 30% to 50%.
September 2018: Child Care Subsidy replaced with the Child Care Benefit and Child Care Rebate.
June 2020: Fee free Child care introduced on 6 April 2020 leading to a 95% price fall.
September 2020: Free child care ended on 12 July, leading to a large increase in the September quarter.

Graph and data: Child care index in the CPI

Download

As with the June quarter, the ending of free child care will impact the following series in the September quarter:

Preschool and primary education in the CPI, with before and after school care services no longer being free.
Selected Living Cost Indexes, which measure changes in living costs for different household types.

Unavailable goods and services

During the first wave of the COVID-19 pandemic, States and Territories introduced social distancing requirements and travel restrictions. This saw a number of services being completely unavailable or significantly restricted for the majority of the June quarter. In response to this, the ABS developed an imputation framework which included the treatment for unavailable or significantly restricted services (see Figure 2 in the appendix). 

In the June quarter scenario, a movement was imputed off the headline CPI quarterly movement. This reflected the fact that there were no prices available and that no (or very little) consumption of the particular service during the quarter. This approach was used for five series in the June quarter: urban transport fares; domestic holiday travel and accommodation; international holiday travel and accommodation; sports participation; and other recreational, sporting and cultural services. These five series contribute around 9 per cent of the weight of the CPI.

With a number of the social distancing requirements and restrictions easing in recent months, it is again possible to measure price change for some of these CPI series in the September quarter. Exceptions to this are:

  • Domestic holiday travel and accommodation - State and Territory border closures were in place for all or part of the quarter, restricting interstate holiday travel.
  • International holiday travel and accommodation - international travel restrictions remained in place.
  • Melbourne - many retailers were closed due to Stage 3 and 4 restrictions that were in place in Melbourne for the majority of the September quarter.

Table 1 lists the changes between the June and September quarters. For Melbourne, seven series will be imputed from the Melbourne All groups CPI movement for the September quarter. Melbourne contributes around 30 per cent to the national figure for each of these CPI series.

Table 1 - CPI imputation approach for the September 2020 quarter
  June quarter imputation approachSeptember quarter imputation approach
CPI seriesCPI Weight (%) Seven capital citiesMelbourne
Restaurant meals3.3If available, takeaway prices used or standard imputation if not availableMeasure normally using collected pricesIf available, takeaway prices used or standard imputation if not available
Alcohol consumed on premises1.5Donor imputation off takeaway alcoholMeasure normally using collected pricesDonor imputation off takeaway alcohol
Urban transport fares0.7Imputed off each city's All groups CPIMeasure normally using collected pricesImpute off Melbourne's All groups CPI
Domestic holiday travel and accommodation3Imputed off each city's All groups CPIImpute off each city's All groups CPIImpute off Melbourne's All groups CPI
International holiday travel and accommodation3.4Imputed off each city's All groups CPIImpute off each city's All groups CPIImpute off Melbourne's All groups CPI
Sports participation0.9Imputed off each city's All groups CPIMeasure normally using collected pricesImpute off Melbourne's All groups CPI
Other recreational, sporting and cultural services1.1Imputed off each city's All groups CPIMeasure normally using collected pricesImpute off Melbourne's All groups CPI
Hairdressing and personal grooming services0.9Measured normally using collected pricesMeasure normally using collected pricesImpute off Melbourne's All groups CPI
Motor vehicles2.5Measured normally using collected pricesMeasure normally using collected pricesImpute off Melbourne's All groups CPI

Re-weighting the CPI

Each December quarter the ABS updates the CPI expenditure weights. This provides an annual update to the CPI spending patterns of Australian households, which is important for an accurate measure of inflation.

With COVID-19 seeing social distancing and restrictions in place, there has been a significant shift in the pattern of goods and services purchased by Australian households. Consistent with the June quarter, the CPI weights will not be updated in the September quarter in response to temporary changes in spending patterns.

The CPI will be re-weighted again in the December 2020 quarter. This will capture the longer-lasting changes in expenditure, such as for international holiday travel. Work is currently underway to make use of a wide range of timely data sources to supplement the use of National Accounts data to update the CPI expenditure weights.

An information paper on the CPI weight update will be published in December 2020, ahead of the December quarter CPI release on 27 January 2021.

For more information on re-weighting the CPI see Introduction of the Consumer Price Index Weight Update, 2019.

Appendix

Figure 2 - imputation framework September quarter application

Figure 2 - CPI imputation framework to decide the imputation method to be used for different scenarios

Figure 2 - imputation framework September quarter application

This image outlines the CPI imputation decision framework. It is a flow chart made up of yes or no questions.
The first question asks “Is the good or service still available to purchase?” If the answer is Yes, this flows on to the next question of “Has the expenditure declined significantly?”. If the answer is No, this flows on to the next question of “Has the expenditure been substituted to a similar good or service?”
Following the Yes answer line, if the answer is No to the question “Has the expenditure declined significantly?”, standard imputation is used. If the answer is Yes (e.g. urban transport), this flows to the next question of “Has the expenditure been substituted to a similar good or service?”, joining the No flow line from the first question.
From the question of “Has the expenditure been substituted to a similar good or service?”, if the answer is Yes (e.g. alcohol consumed on premises) then donor imputation is used. If the answer is No (e.g. international travel), the decision is to impute off headline CPI quarterly movement.

History of changes

Show all

07/09/2020 - Addition of the Measuring residential property prices during COVID-19 article.

23/07/2020 - Addition of the Measuring the Wage Price Index during a time of COVID-19 article.
Addition of the Coherence across the economic accounts article.
ABS trend and seasonal adjustment during COVID-19 updated with a summary of the treatment of JobKeeper.

08/07/2020 - Addition of the Measuring the Consumer Price Index during a time of COVID-19 article.
ABS trend and seasonal adjustment during COVID-19 updated to include list of ABS series that have moved to forward factors for seasonal adjustment.

07/10/2020 - Addition of the Measuring the Consumer Price Index: September quarter update

Previous catalogue number

This release previously used catalogue number 1359.0.