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Expenditure weights update, 2019
TABLE 1: 2018 TO 2019 COMPARISON OF CPI WEIGHTS (a)
Analysis of changes in weights
One thing to note when comparing the weights between 2018 and 2019 is the fact the weights are relative. The weight of a component of the CPI depends on how expenditure on that component compares to total expenditure (i.e. expenditure shares), rather than the absolute change in expenditure.
For example, if the increase in expenditure for a particular EC in the reference period is greater than the increase in total expenditure (in percentage terms), the weight for that EC will increase. Conversely, if the increase in expenditure for a particular EC in the reference period is less than the increase in total expenditure, the weight for that EC will decrease.
For the CPI, households continue to spend the most on Housing (22.93%), followed by Food and non-alcoholic beverages (15.75%) and Recreation and culture (12.81%).
Notable changes in the CPI weights are discussed in more detail below. All analysis refers to the weighted average of the eight capital cities.
Food and non-alcoholic beverages
The weight for Food and non-alcoholic beverages had a minimal weight change, decreasing by 0.01 percentage points (pp) to 15.75%. Fruit and vegetables recovered from flooding in 2017 in some growing regions which caused prices to ease back to normal levels resulting in a lower expenditure share. The weight for packaged products fell reflecting ongoing competition between supermarkets which saw price falls, and therefore a lower expenditure share. Wheat-based products, such as bread and cereals, and meat products rose in weight reflecting adverse weather conditions as well as international demand, resulting in a higher expenditure share for these products.
Alcohol and tobacco
The weight for Alcohol and tobacco increased by 0.35pp in 2019 to 7.71%. The main contributor to the increase was Tobacco, which increased 0.35pp. The continued rise in the tobacco excise tax rate has resulted in higher prices and subsequently a higher expenditure share.
Chart 1: Change in Weight (percentage points)
Housing remains the largest component of household spending, with a weight of 22.93%, decreasing by 0.26pp.
The weight for Rents decreased by 0.26pp to 6.84%. This reflected subdued price growth due to increased supply of rental properties and higher vacancy rates in some capital cities.
New dwelling purchase by owner-occupiers remains a major component of housing expenditure and is still the most heavily weighted EC in the CPI. The weight decreased by 0.21pp to 7.84% due to weak price growth and slowing residential construction activity during 2017-18.
The main offset to the Housing group’s decrease was Utilities, which increased by 0.14pp to 4.63%. This was driven by both Electricity and Gas and other household fuels which saw price rises in some capital cities, leading to an increase in household expenditure.
Furnishings, household equipment and services
The weight for Furnishings, household equipment and services decreased by 0.33pp to 8.56%. The main contributor was Child care which fell 0.06pp. The fall in the weight for Child care reflects the price fall from the New Child Care Subsidy which was introduced in July 2018. A range of household goods also fell in weight reflecting the continued strong retail competition.
Health recorded an increase in weight of 0.19pp to 5.88%. The annual rise in private health insurance premiums was the major contributor to the increase in weight for Medical and hospital services, which rose 0.16pp to 4.16%.
The weight for Transport rose 0.20pp to 10.68%. The main driver was Automotive fuel, which recorded an increase in weight of 0.33pp to 3.57%. A lower Australian dollar and higher world oil prices impacted domestic automotive fuel prices.
Motor vehicles recorded a fall in weight of 0.10pp to 2.46% due to weakness in motor vehicle sales over this period.
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