6461.0 - Consumer Price Index: Concepts, Sources and Methods, 2018  
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HISTORICAL BACKGROUND


INTRODUCTION

3.1 Before the introduction of the Consumer Price Index (CPI) in 1960, there were five series of retail-price indexes compiled by the then Commonwealth Bureau of Census and Statistics. Those indexes were as follows:

(i) The A Series Index, covering only food, groceries and housing rents (for all houses), which was first compiled in 1912 with index numbers going back to 1901, was discontinued in 1938. Its main use was for adjusting wages between 1913 and 1933.
(ii) The B Series Index, covering only food, groceries and housing rents (for four and five-roomed houses), which was first compiled in 1925, was discontinued in 1953. It was introduced to replace the A Series Index for general statistical purposes, but was never used for adjusting wages.
(iii) The C Series Index, covering food and groceries, housing rents (for four and five-roomed houses), clothing, household drapery, household utensils, fuel, lighting, urban-transport fares, smoking and some miscellaneous items, which was introduced in 1921, was discontinued in 1961. The food and rent component of the C Series Index was the same as that for the B Series Index. The C Series Index was used to adjust wages from 1934 until it was discontinued.
(iv) The D Series Index, which was derived by combining the A Series and C Series Indexes, and was compiled especially for wage adjustment purposes for a short period in 1933-34.
(v) The Interim Retail Price Index, covering food and groceries, housing rents (for four and five-roomed houses), clothing, household drapery, household utensils, fuel, lighting, urban-transport fares, smoking, and some services and miscellaneous items which was first compiled in 1954 and was discontinued in 1960. As the name implies, the Interim Index was intended to serve as a transitional index, but to some extent it replaced the C Series Index for general statistical purposes for a few years before 1960. It was never used for wage adjustment purposes.


C SERIES INDEX

3.2 By far the most important of these old price indexes was the C Series Index which was the principal retail price index in Australia for almost forty years. It was first compiled in 1921 with index numbers compiled back to 1914. C Series Index numbers were compiled for:

(i) the capital city in each of the six states;
(ii) four of the larger towns in each of the six states;
(iii) weighted average of five towns (including the capital city) in each of the six states;
(iv) weighted average of the six state capital cities;
(v) weighted average of thirty towns (including the capital cities); and
(vi) three additional towns - Whyalla, Port Augusta, and Canberra.

    3.3 The C Series Index was reviewed in 1936 and a slightly revised selection of goods and services was introduced, which then remained unchanged until the C Series Index was discontinued.

    3.4 The main reason for the long interval without any review or change in composition of the C Series Index after 1936 was the recurrent changes in consumption patterns which occurred during and after World War II. It was considered impossible at the time to devise a revised weighting pattern which would be any more representative of post-war consumption than the existing weighting pattern of the C Series Index. The Commonwealth Statistician of the time, in successive editions of the Labour Report during the 1950s and 1960s, explained the absence of any re-weighting of the C Series Index in the following words.

    "From the outbreak of war in 1939 to late in 1948, periodic policy changes in various wartime controls (including rationing) caused recurrent changes in consumption and in the pattern of expenditure. This rendered changes desirable but made it impracticable either to produce a new index, or to revise the old one, on any basis that would render the index more representative than it already was of the changing pattern of household expenditure in those years. When commodity rationing had virtually ceased in the latter part of 1948 action was taken by the Statistician to collect price data of about 100 additional items and to gather information as to current consumption and expenditure patterns. This was done to facilitate review of the component items and weighting system of the C Series Retail Price Index in the light of the new pattern of wage earner expenditure and consumption that appeared to be then emerging. But there supervened, in the next few years, conditions which caused wide price dispersion, coupled with a very rapid rise in prices and a new sequence of changes in consumption and in the pattern of wage earner expenditure. Under these conditions it was not possible to devise any new weighting pattern likely to be more continuously representative of conditions then current, than was the existing C Series Index on the 1936 revision."

    3.5 In 1953, the decision was made to continue compiling the C Series Index on its pre-war basis, but also to compile an interim retail price index based as nearly as possible on the post-war pattern of consumer usage and expenditure. Nevertheless, the C Series Index continued to be regarded by the majority of users as the principal official index, and was the one used in most indexation and escalation arrangements throughout the 1950s.


    INTERIM RETAIL PRICE INDEX

    3.6 The Interim Retail Price Index was based on post-war consumption weights. Compared with the C Series Index, the Interim Index covered an expanded range of items, including additional foods (such as packaged breakfast foods, soft drinks, ice cream, and confectionery) and services (such as dry-cleaning and shoe repairs). Throughout the period of its compilation, no attempt was made to revise its weights to take account of major changes in expenditure patterns and lifestyles that were occurring during the 1950s. During that decade, house renting was substantially replaced by home ownership, the use of motor cars partially replaced the use of public transport, and a variety of electrical appliances, and subsequently television, became widely used by households. During the same period, widely disparate movements occurred in the prices of different items routinely purchased by households. It was considered that the combined effect of these factors made it impracticable to introduce a comprehensive new retail price index during the period to 1960.


    CONSUMER PRICE INDEX

    3.7 In 1960, a new approach was tried. Instead of the former emphasis on long-term fixed-weighted indexes, the aim was to compile a series of shorter term indexes that would be chain linked to form long-term series. The Consumer Price Index, commonly referred to as the CPI, was the first price index of this kind constructed in Australia.

    3.8 The CPI was first compiled in 1960 with index numbers compiled back to mid-1948. Like the old indexes, the CPI was designed to measure quarterly changes in the retail prices of goods and services purchased by metropolitan wage-earning households.

    3.9 At its inception in 1960, the CPI consisted of three original series linked together with changes in weights in 1952 and 1956. Weights were changed in 1960 and subsequently in 1963, 1968, 1973, 1974, 1976, 1982, 1987, 1992, 1998, 2000, 2005, 2011 and 2017. From 2017, the CPI is re-weighted annually each December quarter. The Household Expenditure Survey (HES) is used to update the weights in the years that it is available. For the inter-HES years, Household Final Consumption Expenditure (HFCE) data from the National Accounts is used as the principal data source for re-weighting the CPI.

    LONG-TERM LINKED SERIES

    3.10 To provide an approximate long-term aggregate measure of consumer price change for the period since the first Australian retail price index was compiled, the ABS has constructed a single series of index numbers by linking together selected retail and consumer price index series from amongst those described above (see Table 3.1). The index numbers are expressed with an index reference base of 1945 equals 100.0 which was the end of a period of price stability during World War II. The successive series linked together to produce this long-term series of index numbers are:
    • from 1901 to 1914, the A Series Retail Price Index;
    • from 1914 to 1946-47, the C Series Retail Price Index;
    • from 1946-47 to 1948-49, a combination of the C Series Index, excluding the housing group of the CPI; and
    • from 1948-49 onwards, the CPI.

    3.11 This long-term series of index numbers is updated each year. A graph of the series taken from Table 3.1 is presented in Figure 3.1.

    3.1 RETAIL/CONSUMER PRICE INDEX NUMBERS(a)(b)(c)

    Year
    Index
    Year
    Index
    Year
    Index
    Year
    Index

    1901
    47
    1931
    78
    1961
    252
    1991
    1,898
    1902
    50
    1932
    74
    1962
    251
    1992
    1,917
    1903
    49
    1933
    71
    1963
    252
    1993
    1,952
    1904
    46
    1934
    73
    1964
    258
    1994
    1,989
    1905
    48
    1935
    74
    1965
    268
    1995
    2,082
    1906
    48
    1936
    75
    1966
    276
    1996
    2,136
    1907
    48
    1937
    78
    1967
    286
    1997
    2,141
    1908
    51
    1938
    80
    1968
    293
    1998
    2,159
    1909
    51
    1939
    82
    1969
    302
    1999
    2,191
    1910
    52
    1940
    85
    1970
    313
    2000
    2,289
    1911
    53
    1941
    89
    1971
    332
    2001
    2,389
    1912
    59
    1942
    97
    1972
    352
    2002
    2,462
    1913
    59
    1943
    101
    1973
    385
    2003
    2,530
    1914
    61
    1944
    100
    1974
    443
    2004
    2,588
    1915
    70
    1945
    100
    1975
    510
    2005
    2,658
    1916
    71
    1946
    102
    1976
    579
    2006
    2,753
    1917
    75
    1947
    106
    1977
    650
    2007
    2,817
    1918
    80
    1948
    117
    1978
    702
    2008
    2,940
    1919
    91
    1949
    128
    1979
    766
    2009
    2,994
    1920
    103
    1950
    140
    1980
    844
    2010
    3,079
    1921
    90
    1951
    167
    1981
    926
    2011
    3,181
    1922
    87
    1952
    196
    1982
    1,028
    2012
    3,237
    1923
    89
    1953
    205
    1983
    1,132
    2013
    3,316
    1924
    88
    1954
    206
    1984
    1,177
    2014
    3,399
    1925
    88
    1955
    211
    1985
    1,257
    2015
    3,450
    1926
    90
    1956
    224
    1986
    1,370
    2016
    3,494
    1927
    89
    1957
    229
    1987
    1,487
    2017
    3,562
    1928
    89
    1958
    233
    1988
    1,594
    2018
    3,630
    1929
    91
    1959
    237
    1989
    1,714
    1930
    87
    1960
    245
    1990
    1,839

    (a) Base: Calendar Year 1945 = 100.0.
    (b) The index numbers relate to the weighted average of six state capital cities from 1901 to 1980 and to the weighted average of eight capital cities from 1981. Index numbers are for calendar years.
    (c) Any discrepancies with movements published in ABS cat. no. 6401.0 are due to different index reference periods and rounding.

    FIGURE 3.1 LONG TERM RETAIL AND CONSUMER PRICE INDEX, 1901-2018
    Figure 3.1 Graph of long term retail and Consumer Price Index, 1901-2018