APPENDIX 1 PRICE INDEX OF MATERIALS USED IN BUILDING OTHER THAN HOUSE BUILDING, PERTH
BACKGROUND
In July 2004 the ABS announced that it would be discontinuing the price index of materials used in building, other than house building (OTHB) and that the June quarter 2004 data would be the last set of OTHB indexes released. Following the discontinuation of the OTHB indexes, the ABS was approached by a WA government agency to continue to produce, on a funded basis, a particular subset of the OTHB for Perth (OTHB All groups excluding electrical materials and mechanical services) because of the large size of two WA government contracts that were being indexed by the Perth OTHB. The ABS has agreed to produce this series for Perth, until the end of 2007, and further to make the resulting series available on the ABS Website to all interested parties.
METHODOLOGY
The underlying basis for the index is that relevant components from the price index of materials used in house building (HB), which is still being produced, have been used to the extent possible. They have been supplemented by some specially collected prices for product groups of the OTHB index that could not be sourced from ongoing HB series. Nine product groups were involved in the special collection: pre-mixed concrete, precast concrete pipes, other precast concrete products, reinforcing steel bar, aluminium windows, structural steel, reinforcing steel fabric and mesh, aluminium screens and doors, and glass products. The ABS has collected prices in Perth for these groups and combined them with prices for the other product groups that could be sourced from the HB series to produce the Perth OTHB index as set out below.
Developing the new price index by utilising data already collected for other price indexes has allowed a replacement price index to be developed within a short time frame, for relatively low cost and with minimal burden on respondents. In this investigation, the ABS determined that twenty nine of the forty three Perth OTHB price samples historically moved in a manner consistent with samples from the Perth HB price index. Additionally, five of the price samples historically moved in a manner consistent with price samples from the Six Capital City HB price index.
The remaining nine price samples (listed above) were judged to have been historically sufficiently different from both Perth and national price samples to warrant developing new samples. These samples were set up in time for price collection in the September quarter 2005. The development of these price samples required enrolling new respondents and collecting prices for a range of products from them. Some respondents to this new collection had previously participated in the OTHB price index in Perth. In enrolling these respondents it was not only necessary to collect pricing data for September quarter 2005 but also to collect pricing data for the periods September quarter 2004 through June quarter 2005.
The index that results from this combination of price samples was released with the publication of Producer Price Indexes, Australia, September quarter 2005 (cat. no. 6427.0). This price index is available to all interested users via the ABS website as Table 48 'Price Index of Materials Used in Building Other than House Building, Special Series, Perth'. It will be updated each quarter with each future release of Producer Price Indexes, Australia (cat. no. 6427.0). The ABS will continue to publish this price index until the December 2007 issue of Producer Price Indexes, Australia (cat. no. 6427.0), to be released in late January 2008.
WEIGHTING PATTERN
The weighting pattern adopted for this price index was identical to that observed for the discontinued price index, that is, June quarter 2004 of the OTHB price index.
These weights are included in a table below.
Materials used in building other than house building, excl.
electrical materials & mechanical services, Perth(a) |
|  |
| Component | Weight (percentage) | |
| |
| Wood and wood products | 7.5 | |
| Ceramics | 4.9 | |
| Cement, plaster and concrete producers | 22.7 | |
| Iron and steel products | 4.3 | |
| Structural metal products | 36.5 | |
| Sheet metal products | 0.8 | |
| Fabricated metal products | 2.6 | |
| Other materials | 20.7 | |
| All materials | 100.0 | |
| |
| (a) June quarter 2004. |
HISTORICAL ANALYSIS
This index is based on combining existing price samples with some new price samples to recreate as accurately as possible the OTHB price index series previously produced for Perth. Adopting such a method allows analysis of how such an index would have behaved historically. The ABS applied the new method to historical price samples over the period March 2000 - June 2004 and compared the results with the previously published index from Table 42 of Producer Price Indexes, Australia (cat. no. 6427.0).
It should be noted that the historical data compiled using the new method for June quarter 2004 and earlier periods is not a revision to the previously published Perth OTHB series. Rather the purpose of recompiling the historical data is to provide an indication of the impact caused by the change in methodology. For publication purposes, the series compiled on the new basis will be 'spliced' onto the previously published series at June quarter 2004.
Comparison of methods, Base: 1989-90=100.0
Comparison of methods, Quarterly % change
Comparison of methods, Annual % change
As can be seen from the graphs, the index developed using the new methodology behaves similarly to the index previously published as part of Table 42. In this analysis both series began in March quarter 2000 with an index number of 115.8. At June quarter 2004 (the link period for the new index) the original OTHB (excluding mechanical materials and mechanical services) has an index number of 134.9, whilst the new method has an index number of 135.8. The two series differed by no more than one index point in any quarter over the entire period investigated.
Both quarterly and annual movements of the new index are similar to those of the index previously published in Table 42, although the new method would have delivered a price index that is marginally higher than the published series over the period from March quarter 2000.
The reasons why the two indexes behave so similarly are that many of the materials used in building are common to both 'house building' and 'other than house building' and, in cases where the products do differ to some extent, they are often manufactured using similar materials and processes, so that their prices follow similar behaviour. For those cases where materials and/or price behaviour were substantially different a replacement sample was developed, as described above.
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