6427.0 - Producer Price Indexes, Australia, Sep 2012  
ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 02/11/2012   
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1. What is re-referencing?

Re-referencing is the process which sets a new index reference period for a price index. The index reference period is the period for which the price index is set to 100.0 and all index numbers are calculated on this basis. From the September quarter 2012, the new index reference period is 2011-12 = 100.0.

2. Which price indexes are being re-referenced?

From the September quarter 2012, the ABS is publishing the following price indexes on a new index reference period of 2011-12 = 100.0; International Trade Price Indexes, Australia (cat. no. 6457.0), Producer Price Indexes, Australia (cat. no. 6427.0), Consumer Price Index, Australia (cat. no. 6401.0) and Selected Living Cost Indexes, Australia (cat. no. 6467.0).

3. Why is the ABS re-referencing these price indexes?

Re-referencing is a crucial process undertaken by the ABS in order to maintain the accuracy and relevance of its price indexes and ensure a consistency of precision across all index series. The precision of an index series diminishes over time when index numbers fall to extremely low levels. Re-referencing also allows users to observe changes over time across index series on a consistent basis. The above mentioned price indexes currently have a range of index reference periods providing some difficulty for comparison. From the September quarter 2012, the ABS is presenting all index series in these publications on a consistent index reference period of 2011-12 = 100.0.

4. How often does the Australian Bureau of Statistics re-reference its price indexes?

International statistical agencies vary in the frequency at which they re-reference their price indexes. The ABS reviews its indexes on a regular basis and performs maintenance such as re-referencing and re-weighting to maintain the quality of its statistics.

5. What is the difference between re-referencing and re-weighting?

Re-referencing resets the index reference period of the basket to a period in which all index numbers have a value of 100.0. Re-referencing does not change the relative movements between periods. Re-weighting involves the introduction of an updated weight reference period (new weights) and recalculating the aggregate index for each period which, from then on, will affect the relative movements between periods. It is important to note that re-weighting does not impact on previous period calculations and does not result in revisions to the historical index series.

6. What effect does re-referencing have on published price indexes?

The ABS ensures that re-referencing its price indexes has no effect on the high quality data it publishes. A common consequence of re-referencing price indexes is that some 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.

7. Can I replicate the changes?

The ABS is reproducing historical index numbers on the new index reference period. Should users wish to duplicate the index numbers or convert future index numbers back to a previous index reference period; the ABS provides conversion factors for published price indexes in the September quarter 2012 publications.

Duplication of historical data or conversion of future data can be performed using these conversion factors and following the examples provided in Chapter 12 of Producer and International Trade Price Indexes: Concepts, Sources and Methods, 2006 (cat. no. 6429.0). Additional information is also provided in Appendix 2 of this publication.

8. Why do my calculations differ from the published data?

There may be some slight differences between user calculations and published numbers due to the greater level of precision of the values used in calculations performed by the ABS.

9. How will re-referencing affect my use of the price indexes in contract escalation?

Price indexes published by the ABS provide summary measures of the movements in various categories of prices over time. They are published primarily for use in Government economic analysis. Price indexes are also often used in contracts by businesses and government to adjust payments and/or charges to take account of changes in categories of prices (Indexation Clauses).

Although the ABS acknowledges that the various price indexes it publishes are used by businesses and government to adjust payments and/or charges, it neither endorses nor discourages such use.

The role of the ABS as the central statistical authority for the Australian government includes publishing price index data, and broadly explaining the underlying methodology and general limitations on such data. The ABS may provide information about the price indexes that are published by it, but will not recommend or comment on the use (or otherwise) of the price indexes.

The ABS has prepared information on the Use of Price Indexes in Contracts that sets out a range of issues that should be taken into account by parties considering an indexation clause in a contract using an ABS published price index. This paper is available on the ABS website and in each price index publication.

10. Where can I find more information about re-referencing?

Further information can be found in Chapter 12 of Producer and International Trade Price Indexes: Concepts, Sources and Methods, 2006 (cat. no. 6429.0) and Consumer Price Index: Concepts, Sources and Methods, 2011 (cat. no. 6461.0) which provide in-depth information on the methodology associated with the construction and compilation of the relevant price indexes.

If you require more detailed information, or would like to speak to someone about re-referencing, please contact the National Information and Referral Service on 1300 135 070 or email client.services@abs.gov.au.