APPENDIX 2 RE-REFERENCING THE WAGE PRICE INDEX


REFERENCE BASE

The reference base of an index series is that period for which the value of the index is set to 100.0. With the introduction of the 2006 edition of ANZSIC, all indexes are now presented on a reference base of 2008-09. Since the September quarter 2004, the LPI has used a reference base of 2003-04 = 100.0. Prior to this time the reference base for the wage price indexes was September quarter 1997. This was the first quarter for which data was available.


CONVERTING A SERIES TO THE NEW REFERENCE BASE

The conversion of series from the old base to the new base involves a rescaling of the index numbers. The conversion factor that should be applied to the index numbers is calculated by obtaining the ratio of the index numbers on the old and new bases for the new reference period.

The conversion factor is calculated using the unrounded index number for the 2008-09 financial year. The calculation of financial year indexes is outlined in paragraph 35 of the Explanatory Notes.

For example, for the total hourly rates of pay excluding bonuses index for Australia, an arithmetic conversion factor is obtained as follows:

Index number for financial year 2008-09 (on base 2003-04 = 100.0) is 121.775
Index number for financial year 2008-09 (on base 2008-09 = 100.0) is 100.0
Conversion factor = 100/121.775 = 0.8212

The factor may be multiplied by any total hourly rates of pay excluding bonuses index number for Australia on the old reference base to give the corresponding number on the new reference base. The procedure shown in the above example may be followed in respect of any specific index series for which index numbers have been published on the old reference base, with the exception of industry index series. It is not appropriate to convert the ANZSIC 1993 industry series on the 2003-04 reference base in previous issues to the 2008-09 reference base using this method.


ROUNDING

Index numbers and percentage changes are always published to one decimal place, with the percentage changes being calculated from the rounded index numbers. Index numbers for periods longer than a single quarter (e.g. for financial years) are calculated as the simple arithmetic average of the relevant rounded quarterly index numbers. The conversion factor described above is applied to the rounded index numbers.

A consequence of re-referencing price indexes can be that period to period percentage changes calculated using re-referenced index number series may differ slightly from those calculated using the original series. These differences do not constitute a revision of the index but simply reflect the effect of rounding.


CONVERTING THE RE-REFERENCED SERIES BACK TO THE PREVIOUS BASE

The conversion of series from the new base to the old base also involves a rescaling of the index numbers. The rescaling factor is obtained by taking the inverse of the previously described scaling factor.

For example, for the total hourly rates of pay excluding bonuses index for Australia, the rescaling factor is obtained as follows:

Index number for financial year 2008-09 (on base 2003-04 = 100.0) is 121.775
Index number for financial year 2008-09 (on base 2008-09 = 100.0) is 100.0
Conversion factor = 121.775/100 = 1.2178

The factor may be multiplied by any total hourly rates of pay excluding bonuses index number for Australia on the new reference base to give the corresponding number on the old reference base. As mentioned above, the industry price index series in previous issues should not be converted due to the use of two different industry classifications.

Conversion factors for most of the published total hourly rates of pay excluding bonuses indexes are provided in table A2. Additional factors can be obtained using the formulas above or by contacting Kathryn Parlor on Perth (08) 9360 5151.


CONVERSION FACTORS

A2 FACTORS USED TO CONVERT INDEX NUMBERS, from old reference base (2003-04 financial year = 100.0) - to new reference base (2008-09 financial year = 100.0)
		Private	Public	All sectors
Australia		0.8242	0.8122	0.8212
Sector by State/Territory
	New South Wales	0.8349	0.8119	0.8292
	Victoria	0.8294	0.8259	0.8285
	Queensland	0.8155	0.8055	0.8128
	South Australia	0.8294	0.8071	0.8234
	Western Australia	0.7842	0.8013	0.7880
	Tasmania	0.8236	0.8021	0.8165
	Northern Territory	0.8120	0.8300	0.8195
	Australian Capital Territory	0.8302	0.8105	0.8173
Sector by Industry(a)
	Mining	0.7720	. .	0.7720
	Manufacturing	0.8263	. .	0.8248
	Electricity, gas, water and waste services	0.8073	0.7940	0.7988
	Construction	0.7885	. .	0.7895
	Wholesale trade	0.8328	. .	0.8328
	Retail trade	0.8395	. .	0.8393
	Accommodation and food services	0.8660	. .	0.8660
	Transport, postal and warehousing	0.8270	. .	0.8255
	Information media and telecommunications	0.8493	. .	0.8455
	Financial and insurance services	0.8213	. .	0.8195
	Rental, hiring and real estate services	0.8393	. .	0.8358
	Professional, scientific and technical services	0.8058	0.8180	0.8068
	Administrative and support services	0.8395	. .	0.8395
	Public administration and safety	0.8303	0.8110	0.8118
	Education and training	0.8030	0.8043	0.8045
	Health care and social assistance	0.8208	0.8200	0.8203
	Arts and recreation services	0.8353	. .	0.8358
	Other services	0.8365	. .	0.8365
. . not applicable
(a) Classified according to the Australian and New Zealand Standard Industrial Classification (ANZSIC) 2006 (cat. no. 1292.0)