APPENDIX 2 RE–REFERENCING THE PRODUCER PRICE INDEXES



1 From the September quarter 2012, the ABS harmonised the index reference periods for the Producer Price Indexes (PPIs). These series are now presented on an index reference period of 2011-12 = 100.0. Previously, PPIs used to be presented under three different index reference periods (1989-90 = 100.0, 1998-99 = 100.0 and 2001-02 = 100.0).

2 The ABS publishes conversion factors in 'Table 31: Producer Price Indexes conversion factors, from previous index reference periods to 2011-12' available as data cubes on the 'Downloads' tab of this product. This enables users to convert previously published time series to the new (2011-12 = 100.0) index reference period or to convert index numbers on the new index reference period to an old time series index reference period.

3 The following examples demonstrate the method used by the ABS to calculate the conversion factors to convert from the previous to the new (2011-12 = 100.0) index reference period (and vice versa).


CONVERTING AN OLD TIME SERIES TO THE NEW INDEX REFERENCE PERIOD

4 The conversion of time series from the previous index reference periods to the new involves a rescaling of the index numbers. The conversion factors that should be applied to the index numbers are calculated by obtaining the ratio of the index numbers on the previous to the new index reference period (2011-12 = 100.0).

5 Conversion factors are calculated using the four quarterly index numbers for the 2011-12 financial year.

Stage of Production, Final Demand; Total, index numbers
		Index reference period
Period		1998-99=100.0 (old)	2011-12=100.0 (new)
2010-11
	March quarter 2011	138.7	98.4
	June quarter 2011	139.8	99.2
2011-12
	September quarter 2011	140.7	99.8
	December quarter 2011	141.1	100.1
	March quarter 2012	140.7	99.8
	June quarter 2012	141.4	100.3
Financial year 2011-12		(a)141.0	(b)100.0
(a) Index number for financial year 2011-12 (index reference period 1998-99 = 100.0) = (140.7 + 141.1 + 140.7 + 141.4)/4 = 141.0
(b) Index number for financial year 2011-12 (index reference period 2011-12 = 100.0) = (99.8 + 100.1 + 99.8 + 100.3)/4 = 100.0

6 For example, for Final demand; Total, an arithmetic conversion factor is obtained as follows:

• Rounded conversion factor (index reference period 1998-99 = 100.0) = 100.0/((140.7 + 141.1 + 140.7 + 141.4)/4) = 0.7093
• Index number for June quarter 2012 = 141.4 (index reference period 1998-99 = 100.0)
• Index number for the June quarter 2012 (index reference period 2011-12 = 100.0) is 141.4 x 0.7093 = 100.3

7 The factor may be used to convert any historical Final demand; Total index numbers to the new index reference period. The formulae shown in the above example may be followed in respect of any specific time series for which index numbers have been published on the old index reference period.

NOTE: The above example is calculated using the published index numbers that have been rounded to one decimal place. The ABS has calculated the conversion factors from unrounded index numbers, to obtain a greater degree of precision. The preferred conversion factors which use this greater degree of precision are available electronically in 'Table 31: Producer Price Indexes conversion factors, from previous index reference periods to 2011-12', as data cubes, on the 'downloads' tab of this product.


CONVERTING THE RE-REFERENCED SERIES BACK TO PREVIOUS INDEX REFERENCE PERIOD

8 The conversion of the series from the new index reference period to the old involves a rescaling of the index numbers. The rescaling factors are obtained by taking the inverse of the previously described scaling factor. For example, for Final demand; Total, the rescaling factor is obtained as follows:

• Rounded conversion factor (index reference period 1998-99 = 100.0) = ((140.7 + 141.1 + 140.7 + 141.4)/4)/100.0 = 1.4098
• Index number for the June quarter 2012 (index reference period 2011-12 = 100.0) is 100.3
• Index number for the June quarter 2012 (index reference period 1998-99 = 100.0) is 100.3 x 1.4098 = 141.4

9 The factor may be used to convert any historical Final demand; Total index number on the new index reference period. The formulae shown in the above example may be followed in respect of any specific time series for which index numbers have been published on the new index reference period.


ROUNDING

10 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 factors described above are applied to the rounded index numbers. A consequence of re-referencing price indexes can be that period-to-period percentage changes may differ slightly to those previously published due to rounding and the re-referencing. These differences do not constitute a revision.

11 It should be noted that a different conversion factor will apply for each index series. For example the conversion factor for Final demand; Total will differ from the conversion factor for Intermediate demand; Imports. Conversion factors for converting to the new index reference period are provided in 'Table 31: Producer Price Indexes conversion factors, from previous index reference periods to 2011-12' available as a data cubes on the 'Downloads' tab of this product.

12 For further information, contact the National Information and Referral Service on 1300 135 070. The ABS provides further information on re-referencing in Producer and International Trade Price Indexes: Concepts, Sources and Methods, 2006 (cat. no. 6429.0) and Frequently Asked Questions available at <https://www.abs.gov.au>.