6401.0 - Consumer Price Index, Australia, June 2020 Quality Declaration 
Latest ISSUE Released at 11:30 AM (CANBERRA TIME) 29/07/2020   
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This document was added or updated on 07/08/2020.

CPI exclusion-based measures


The Australian Bureau of Statistics (ABS) produces a range of Consumer Price Index exclusion-based measures, which remove selected components from the CPI basket. Typically, the removed components have volatile price change and/or a pronounced seasonal pattern. These exclusion-based measures can help distinguish short term price fluctuations that impact the quarterly CPI movement providing additional insights into the general direction of medium-term inflation.

An example of a CPI exclusion-based measure is ‘CPI excluding alcohol and tobacco’, where annual increases in the federal excise tax has a significant effect on tobacco prices each year.

COVID-19 has brought about new challenges in measuring the CPI. For the June 2020 quarter CPI, additional CPI exclusion-based measures have been produced to those previously available in Table 8 of the CPI release. The additional exclusion-based measures, presented in table 1 of this article, help remove some of the temporary impacts of COVID-19 on the June quarter CPI.

Table 1: CPI exclusion-based measure, June 2020 quarter

Quarterly movement (%)
Annual movement (%)

Headline CPI
-1.9
-0.3
CPI excluding child care
-0.8
+0.7
CPI excluding automotive fuel
-1.3
+0.5
CPI excluding child care and automotive fuel
-0.1
+1.6
CPI excluding child care, automotive fuel and preschool & primary education
+0.1
+1.8


Table 1 shows both the quarterly and annual movements for selected exclusion-based measures and can be used to compare to the headline CPI. For example, when excluding child care and automotive fuel from the CPI, the quarterly movement is -0.1 per cent compared to -1.9 per cent for the headline CPI. This highlights the strong downward impact that free child care and price falls in automotive fuel has had on the June 2020 quarter CPI movement.


How to calculate exclusion-based series

Points contributions, available in table 12 of the CPI release, can be used to calculate exclusion-based measures. The sum of the points contributions of all lower level components equals the overall CPI index value. The points contribution of selected components can then be excluded and the CPI re-calculated.

Measuring the quarterly price change that would occur when excluding a CPI component is calculated by subtracting the points contribution of the CPI component from the CPI index number in each quarter and then calculating the percentage change between the resulting index. ‘CPI excluding automotive fuel’ series has been used as an example in table 2.

Table 2: Calculating exclusion-based measure example
Jun-20
Mar-20

All Groups index
114.4
116.6
Automotive fuel Points Contribution
3.26
4.05
All Groups minus Automotive fuel
111.14
112.55
Quarterly movement (111.14-112.55)/112.55 *100 (%)
-1.3


Table 2 shows that prices of all items other than automotive fuel decreased by 1.3 per cent on average between the March 2020 quarter and June 2020 quarter.

The June 2020 quarter saw COVID-19 have a significant impact on a range of CPI components. This article has demonstrated how excluding these components from the headline CPI provides new insights into the level of inflation in the Australian economy.