6427.0.55.008 - Information Paper: Developments in Producer Price Indexes for Natural Gas, Dec 2015  
ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 16/12/2015  First Issue
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The Consumer Price Index (CPI) measures changes in the price of a 'basket' of goods and services representative of expenditure by households in the eight capital cities. The 'basket' includes 87 groupings of similar items, referred to as expenditure classes, each with an index published by the ABS in Consumer Prices Indexes, Australia (cat. no. 6401.0).

The CPI expenditure class Gas and Other Household Fuels includes natural gas consumption, but also comprises of bottled gas, as well as less common fuel sources for household heating such as firewood and oil. This index is published quarterly for each capital city and for the weighted average of the capital cities. This index series can be found in ABS cat. no. 6401.0 Tables 7 and 9.

For more information on the CPI refer to Consumer Price Index: Concepts, Sources and Methods, 2011 (ABS cat. no. 6461.0).


The International Trade Price Indexes (ITPIs) measure changes in the prices of goods imported into Australia (the Import Price Index) and goods exported from Australia (the Export Price Index).

The ABS currently publish a quarterly export price index for Gas, natural and manufactured (ABS cat. no. 6457.0 Tables 7 and 9, Series ID A2295603T ).

This index is calculated from price observations for both LNG and liquefied petroleum gas (LPG), however LNG is the main constituent. Although this index is published quarterly, prices are collected on a monthly basis: a combination of prices directly collected from gas producers supplemented with average unit values derived from detailed merchandise trade data.

In general, when prices are directly collected, prices of individual shipments are obtained from major exporters of the selected items and relate to the period in which the exported goods physically leave Australia. Exports are priced on a 'free on board' (f.o.b.) basis at the main Australian ports of export. Therefore freight and insurance charges involved in shipping goods from Australian to foreign ports are excluded from the prices used in the index. Exports are exempt from taxes on products.

As the prices used in the ITPIs are expressed in Australian currency, changes in the relative value of the Australian dollar and overseas currencies can have a direct impact on price movements for the many commodities that are bought and sold in currencies other than Australian dollars. Prices reported in a foreign currency are converted to Australian dollars using relevant exchange rates.

For more information on the ITPIs refer to Producer and International Trade Price Indexes: Concepts, Sources and Methods, 2014 (ABS cat. no. 6429.0).


Output Price Indexes and Input Price Indexes

Most Producer Price Indexes (PPIs) are compiled using a framework based on the Australian and New Zealand Standard Industrial Classification (ANZSIC 2006) and the product and industry relationships articulated in Australian National Accounts Input Output tables. There are two basic types of PPIs: output price indexes and input price indexes.

Output price indexes measure the average change in the price of products produced by industries. The preferred valuation basis for the transactions covered by an output price index is at basic prices, which is a measurement of price that excludes transport and trade margins. Basic prices are prices before taxes on products are added and subsidies on products are subtracted. The point at which prices are measured is ex-factory, ex-farm, ex-service provider, etc.. ABS output price indexes measure the prices received by producers irrespective of whether their products are sold on the domestic market or as exports.

Input price indexes measure the average change in the prices of products used in the production process. These are products produced elsewhere in the domestic economy, or are imported. Primary inputs such as land, labour and capital are excluded from input PPIs. The valuation basis for the transactions covered by an input price index is purchasers’ prices. Purchasers’ prices are inclusive of non-deductible taxes on products, and transport and trade margins (that is, the prices recorded in the index should be the actual price paid by the user which relates to the price of products delivered into store, delivered on site, etc.).

PPIs are published quarterly in Producer Price Indexes, Australia (ABS cat. no. 6427.0). For more information on PPIs refer to Producer and International Trade Price Indexes: Concepts, Sources and Methods, 2014 (ABS cat. no. 6429.0).

Output Price Indexes Published by the ABS

The ABS publish output PPIs for selected manufacturing, construction and services industries.

The industry most of relevance to natural gas production (both in the gaseous state and the liquified state) is ANZSIC class 0700 Oil and Gas Extraction. No output price index is currently published by the ABS for this industry.

The ABS does publish PPIs for the following related industries:

    • ANZSIC Class 1811 Industrial gas manufacturing (ABS cat. no. 6427.0, Table 12, Series ID A2305661K). This industry consists of businesses mainly engaged in manufacturing industrial organic and inorganic gas in compressed, liquid or solid forms. It should be noted that the ABS classifies businesses engaged in LNG production (liquefication of natural gas) to ANZSIC 06 Class 0700 Oil and Gas Extraction regardless of whether the businesses are engaged in the entire natural gas production process (including extraction, separation and liquefication) or engaged in liquefying natural gas only.
    • ANZSIC Class 5021 - Pipeline Transport (ABS cat. no. 6427.0, Table 21, Series ID A2314103K). This industry consists of businesses mainly engaged in the transportation of natural gas, oil or other materials via pipelines.

Input Price Indexes Published by the ABS

The ABS publish input producer price indexes for the manufacturing industry, the mining industry and the house building industry.

The input to manufacturing price indexes measure changes in the prices of goods and services used by the manufacturing industry as a whole, and by the fifteen ANZSIC 2006 subdivisions within the manufacturing division. Published indexes describe industry of use and products classified by industry of origin.

The ABS currently publish a PPI for natural gas inputs to manufacturing (Table 13 6427.0 Natural gas to manufacturing, Series ID A2309195K). This quarterly price index is compiled for Australia and its time series commences in 1970. This index is produced by weighting component level indexes for inputs of natural gas to eight manufacturing subdivisions: 11 Food product manufacturing; 12 Beverage and tobacco product manufacturing; 13 Textile, leather, clothing and footwear manufacturing; 15 Pulp, paper and converted paper product manufacturing; 17 Petroleum and coal product manufacturing; 18 Basic chemical and chemical product manufacturing; 20 Non-metalic mineral product manufacturing; and 21 Primary metal and metal product manufacturing. The component level indexes are weighted together using the value of the intermediate use of gas by each industry from Input Output tables.

When compiling input to manufacturing price indexes, as far as possible, actual prices are collected from manufacturers, with some exceptions when it is more efficient to collect from suppliers. Natural gas is one of these exceptions. The prices for natural gas inputs to manufacturing are collected from a sample which includes gas producers, retailers and wholesalers. As prices are collected from suppliers, it is not practical to include transport as this service is usually contracted by the purchaser directly with a pipeline operator, rather than with the supplier. The natural gas input to manufacturing price index reflects carbon pricing (a non-deductible tax) during the period when that scheme was operating.

Price information used in the compilation of the natural gas inputs to manufacturing price index is predominantly supplied as either average revenue per gigajoule over a three month period for agreements meeting specified parameters (for example ranges of contracted quantities), or as an average price per gigajoule over a three month period for a specified contract. It is often not practical for providers to provide prices according to identical specifications, and the reporting arrangements for each provider are usually determined during a personal interview.

As with all PPIs, the natural gas inputs to manufacturing index is compiled as a Lowe index (a variation of a Laspeyres index which is employed due the price reference period and the weight reference period being at different times). At the lowest level of index compilation, movements for each price observation are weighted together using weights are based on the value of gas sales.

Margin Price Indexes

Some industries produce margin services, for example the retail and wholesale trade industries. The output of these industries is not regarded as the product which is sold, but rather the margin service provided in the selling of the goods. Gas supply has an element of a margin service and the measurement of this service would focus on the wholesale and retail margins rather than the gas itself. The industry of relevance for measuring the margin on gas supply is ANZSIC Class 2700 - Gas Supply. The ABS does not currently produce a PPI for this industry.