6422.0 - Information Paper: Producer Price Indexes Developments, 1999  
Latest ISSUE Released at 11:30 AM (CANBERRA TIME) 25/03/1999   
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5.1 While the presentation of the experimental indexes within the SOP framework is expected to increase the usefulness of the available price data, it represents a very incomplete picture of the inflation process because of limitations in both the scope and coverage of the data.

5.2 The conceptual scope of the producer price index SOP index model relates to the output of all domestic goods and services industries, whether used domestically or exported. The model also incorporates imports flowing into each stage of production.

5.3 However, data availability has restricted the initial coverage of domestic output in the experimental SOP indexes to goods producing industries, excluding the construction industry. Prices of service industry and construction industry commodity flows are therefore not included in the experimental series. The scope of the current import series is restricted to merchandise.

5.4 Further, the scope of a fully comprehensive data model would incorporate all the key aggregates contained in the Input-Output framework. Thus, in addition to the industry output, the scope of the complete model would include primary inputs (i.e. labour costs, Gross operating surplus (GOS) and Indirect taxes) as each of these elements can represent an important source of inflationary pressure.

5.5 Diagram 2 provides a summary of this comprehensive model and identifies some of the potential price transmission linkages.

5.6 This data model allows for the extension of analyses by including additional data as they become available. In the longer term, the analyses could incorporate data relating to service industry outputs from new producer price index collections that are being developed. Similarly, wage costs could be represented by data from the newly released indexes of wage costs (Wage Cost Index, Australia (Cat. no. 6345.0)). However, change in the rate of GOS is more problematic as it is not directly measurable.

5.7 In diagram 2, potential linkages between available experimental SOP index aggregates are represented by solid arrows. Other possible linkages are shown by broken arrows and provide for the future introduction of additional information that would form part of a more complete analysis.


(a) See paragraphs 5.10 and 5.23 for an explanation of the shaded boxes.

(b) Includes trade and transport services which are margins representing the difference between
   basic prices and purchasers' prices.

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