|Page tools: Print Page Print All RSS Search this Product|
This document was added or updated on 08/07/2020.
Measuring the Consumer Price Index during a time of COVID-19
For further information, please email email@example.com
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)
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:
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.
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:
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:
Figure 3 - CPI imputation decision framework
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.
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:
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.
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
These documents will be presented in a new window.