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History of retail/consumer prices indexes in Australia
C Series Index
By far the most important of these former retail price indexes was the C Series Index, which was the principal retail price index in Australia for close to 40 years. In 1920 the Royal Commission on the Basic Wage recommended the introduction of a new series which would cover a wider range of goods. This led to the to the introduction of the C Series Index, which was first compiled in 1921, with index numbers being compiled retrospectively to 1914. The C Series Index was subject to a general review in 1936 and a slightly revised regimen was introduced following that review. The C Series Index remained on this basis until its last issue in December quarter 1960, although it was continued on a special basis for certain transitional purposes until September quarter 1961.
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, on a continuous basis, of post-war consumption than was 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 reweighting of the C Series Index in the following terms:
Interim Retail Price Index
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). It retained the same weighting pattern throughout the period of its compilation and 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, including television, became widely used in households. During the same period, widely disparate movements occurred in the prices of different items of household consumer expenditure. It was considered that the combined impact of these factors made it impracticable to successfully introduce a comprehensive new retail price index during the period to 1960.
Consumer Price Index
In 1960 a new approach was implemented. Instead of the former emphasis on long-term fixed-weight indexes, the aim was to compile a series of shorter-term indexes that would be chain-linked together to form a long-term series. The Consumer Price Index, commonly referred to as ‘the CPI’, was the first price index of this kind constructed in Australia.
The CPI was first compiled in 1960, with index numbers being compiled retrospectively to mid-1948. Like its predecessor indexes, the CPI was designed to measure quarterly changes in retail prices of goods and services purchased by metropolitan wage earner households.
The CPI has been reviewed and reweighted thirteen times. At its inception in 1960, the CPI consisted of three original linked series, 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 and 2000. The method of linking the sequence of short-term price indexes to form one continuous series is described in Chapter 9 of Australian Consumer Price Index: Concepts, Sources and Methods (6461.0).
Historically, the CPI and its predecessors were developed with the principal purpose of providing input to the highly centralised wage and salary determination process that existed in Australia. As recently as 1998 the principal purpose remained as an input to wage adjustment, although the range of uses for the CPI had been growing steadily, including its use as a general measure of inflation and for adjustment of age and superannuation pensions, other government benefit payments, and public and private sector contracts and charges. However, with the emerging trend towards decentralised, enterprise-level wage and salary setting arrangements in the later half of the 1990s, the historical purpose of the CPI was greatly diminished.
This culminated with the introduction of the 13th Series CPI in September quarter 1998. Several major changes were made to the index at that time, most notably the decision that the CPI would change from a measure of living costs of wage and salary earning households to its current form, as a general measure of price inflation for the household sector as a whole (see Price impacts on the living costs of selected Australian household types).
Long-term linked series
To provide an approximate long-term measure of retail/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 (table 28.4), by linking together selected retail/consumer price index series from among those described above. The index numbers are expressed on a reference base 1945 = 100.0, which was the end of a period of relative price stability during World War II.
Graph 28.6 shows the annual percentage changes derived from this retail/consumer price index series for the 100-year period.
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