6421.0 - Information Paper: An Analytical Framework for Price Indexes in Australia, 1997  
ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 24/02/1997  Ceased
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Contents >> Summary

The ABS currently publishes a range of separate consumer, producer and international trade price indexes, each relating to a particular segment of economic activity, as well as price measures derived from the national accounts. These measures are used for a wide variety of purposes including policy and commercial applications.

In order to help improve users’ knowledge and understanding of the range of price statistics available, and help facilitate the selection of the most appropriate measure(s) for any particular application, an outline of each of the different price measures is provided and their interrelationships illustrated by reference to the Input Output framework.

Given the differing principal objectives of the various individual price measures, there is scope to enhance the analytical value of the information through the ABS drawing the series together and presenting them as a system or family of price indexes. This system would be designed around a cohesive statistical framework developed specifically to support the study of inflation. The framework would also accommodate future developments in the field of price statistics such as extensions in coverage and presentation under alternative classifications.

Recognising a number of ideal properties, an analytical framework based on a ‘market transactions’ approach is developed. Then, a Domestic Final Purchases (DFP) whole-economy price index model is presented. The DFP model embraces both an aggregate measure and component indexes. It forms part of the broader, market transactions statistical framework which provides for complementary views of the economy as measured by Stage of Production producer price indexes, the Labour Cost Index and the Export Price Index.

The ABS has recently commenced work on the periodic review and reweighting of the CPI and an ABS information paper seeking user input to the review will be published in April 1997. In parallel with that work, the ABS will be consulting with users on proposals to commence work on developing a price index corresponding to the Household Consumption Purchases (HCP) component of the DFP model, designed specifically to assist in the analysis of inflation. It would be based on existing CPI price collections but exclude interest rates and non-market determined prices. Its scope would include all households and it would use national accounts data for weights, probably with annual reweighting (using chain index methods). The frequency of this component could be monthly or quarterly, although a monthly index would require some additional data collection.

In recognition of the increased attention being given to measures of underlying inflation, alternative methods of abstracting from the effects of changes in indirect taxes and subsidies, seasonality and volatility are considered. A ‘specific adjustment method’, involving the development of net price indexes (at constant tax rates) and the application of seasonal adjustment and smoothing techniques, is assessed as being conceptually superior. Therefore, the ABS proposes to pursue investigations into the measurement of underlying household inflation through the development of an experimental underlying price index of HCP, applying the specific adjustment method.

Further, the ABS proposes to undertake a comprehensive review of its strategy for the publication of price statistics, with the aim of ensuring key information is communicated effectively to users. The strategy will need to provide for the release of the results from new initiatives as they become available.

Consultation with users

As noted in the Preface, the ABS had prepared this information paper as a basis for user consultation on a strategy for enhancing our statistical service in the field of price indexes. The reference period for consultation concluded in mid 1997. Nevertheless, interested parties may still forward correspondance on the proposals contained in the paper to:

      The Director
      Producer Price Indexes Section
      Australian Bureau of Statistics
      PO Box 10
      BELCONNEN ACT 2616

      Facsimile: Canberra (06) 252 7060.

In addition, seminars to discuss the proposals were held in each capital city during the period March to April 1997.

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