Seasonally adjusted estimates are derived by estimating and removing systematic calendar related effects from the original series. In most economic data these calendar related effects are a combination of seasonal influences e.g. the weather, social traditions or administrative practices plus other kinds of calendar related variations, such as the number of trading days, Easter or the proximity of significant days (e.g. Christmas).
Institutional effects largely drive the seasonality of the WPI. Important factors are the timing of effect of Australian workplace agreements and certified agreements, the length of these agreements, and the timing of the implementation of significant wage determinations that impact on rates of pay. A significant institutional change in wage setting arrangements can affect the relative level (or trend) and seasonality of the index.
The ABS has implemented improved methods of producing seasonally adjusted estimates, focussed on the application of Autoregressive Integrated Moving Average (ARIMA) modelling. Adoption of ARIMA modelling reduces the extent of revisions to the seasonally adjusted and trend estimates. For more information on the details of ARIMA modelling see feature article: Use of ARIMA modelling to reduce revisions in the October 2004 issue of Australian Economic Indicators (cat. no. 1350.0).