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APPENDIX 2 ANALYTICAL SERIES
2 These analytical series are published in table 8 of Consumer Price Index, Australia (cat. no. 6401.0) and are compiled by taking subsets of the CPI basket. Each series and their composition are outlined below.
SEASONALLY ADJUSTED SERIES
3 Seasonal adjustment helps the analysis of price movements as it estimates and then removes influences that are systematic and calendar related from a time series. The seasonal adjustment methodology used to produce analytical measures of underlying inflation from the 15th series CPI has been replaced with standard ABS seasonal adjustment methodology. This will ensure that seasonally adjusted CPI data is consistent with other ABS data and results in more transparent and robust analytical series.
4 The following analytical series are published using the ABS seasonal adjustment methodology:
(i) All Groups CPI, seasonally adjusted: where seasonality has been identified at the weighted average of eight capital cities level. Seasonal adjustment factors are calculated using the history of price changes up to the current quarter CPI and are revised each quarter. The time series began with the December quarter 1986, with an index reference period of 1989-90 = 100.0.
(ii) Expenditure class level price indexes (seasonally adjusted): comprises the subset of seasonally adjusted expenditure classes at the weighted average of eight capital cities level. The time series began with the September quarter 1972, with an index reference period of 1989-90 = 100.0.
(iii) Trimmed mean and Weighted median: two measures of underlying inflation. In the 15th series, these measures were calculated using a seasonal adjustment methodology developed by the Reserve Bank of Australia (RBA)(footnote 1) . The 16th series replaced this methodology with standard ABS seasonal adjustment methodology. These time series began with the June quarter 2002, with an index reference period of the June quarter 2002 = 100.0.
5 More information on the seasonal adjustment methodology is available in Information paper: Seasonal adjustment of Consumer Price Indexes, 2011 (cat. no. 6401.0.55.003).
INTERNATIONAL TRADE EXPOSURE
6 The compilation of price indexes that separates the CPI into tradable and non-tradable components is useful in analysing domestically sourced versus internationally sourced price pressures. In an open economy it is generally accepted that while the prices of some commodities are determined by domestic considerations, prices of other items are largely determined by prices on the world market.
7 A commodity is defined as tradable if a significant proportion of its domestic output is exported or if a significant proportion of its demand for domestic consumption is imported. For an expenditure class to be classified as tradable, the proportion of imports or exports has to be equal to or greater than 10% of the total supply for that particular expenditure class.(footnote 2) All expenditure classes which are classified as importable and/or exportable form part of the tradable component. The non-tradable component consists of the remaining expenditure classes. The classifications are then assessed against expectations with any anomalies subjected to further sensitivity analysis. For more information, see Appendix 1, September quarter 1999, Consumer Price Index, Australia (cat. no. 6401.0).
8 The ABS released the tradables and non-tradables price indexes from the June quarter 1998 based on 1993-1994 and 1994-1995 Input-Output tables and related product correspondences. For the 15th series CPI, the tradable and non-tradable classification was based on the 2001-02 Input-Output data and related product correspondences. For the 16th series CPI, the 2006-07 Input-Output tables and related product correspondences were used and an optimal threshold of 10% was applied to determine whether an industry is exportable or importable. The series is now known as International Trade Exposure.
9 More information is available in Australian National Accounts: Input-Output Tables - Electronic Publication, 2007-08 Final (cat. no. 5209.0.55.001).
10 Assessment of tradable and non-tradable classifications under the 16th series review resulted in two adjustments to classifications under the current methodology.
(i) Tourist expenditure was excluded from exports as their expenditure on items such as urban transport fares was deemed not to affect price change.
(ii) Gas and other household fuels was set as non-tradable as prices were considered to be domestically driven despite the high export content of this commodity.
11 Table A2.1 shows, for each CPI group, which expenditure classes are classified as tradable and which are classified as non-tradable. In aggregate, 51 expenditure classes, which account for approximately 42% of the CPI by weight, are classified as tradable. The remaining 36 expenditure classes, accounting for approximately 58% of the CPI by weight, are classified as non-tradable.
HOUSING, FINANCIAL AND INSURANCE SERVICES
12 The All groups CPI excluding Insurance and financial services series reflects the changing composition of the CPI. From the September quarter 1989 to the June quarter 1998, the series excluded house insurance, house contents insurance, vehicle insurance and mortgage interest charges and consumer credit charges; from the September quarter 1998 to the June quarter 2000 the series excluded house insurance, house contents insurance and vehicle insurance; from the September quarter 2000 to the June quarter 2005 insurance services was excluded; from the September quarter 2005 to the June quarter 2011 Financial and insurance services were excluded; and from the September quarter 2011 the series comprises the All groups CPI excluding Insurance and financial services.
13 The All groups CPI excluding Housing and Insurance and financial services series also reflects the changing composition of the CPI. From the September quarter 1989 to the June quarter 1998, the series excluded housing, house contents insurance, vehicle insurance and consumer credit charges; from the September quarter 1998 to the June quarter 2000 the series excluded housing, house insurance, house contents insurance and vehicle insurance; from the September quarter 2000 to the June quarter 2005 housing and insurance services were excluded; from the September quarter 2005 to the June quarter 2011 housing and financial and insurance services were excluded; and from the September quarter 2011 the series comprises the All groups CPI excluding housing and insurance and financial services.
14 One of the outcomes of the 16th series review was to remove the indirectly measured component of the Deposit and loan facilities index from the headline CPI until such time that the methods and data sources are sufficiently robust for its reintroduction to the CPI. A new analytical series, All groups CPI including Deposit and loan charges (indirect charges) includes the All groups CPI plus the indirectly measured component of the Deposit and loan facilities index.
GOODS AND SERVICES
15 The All groups CPI , goods component comprises the Food and non-alcoholic beverages group (except Restaurant meals); Alcohol and tobacco group; Clothing and footwear group (except Cleaning, repair and hire of clothing and footwear); Furnishings, household equipment and services group (except Domestic and household services sub-group); Utilities, Audio, visual and computing equipment and services, Newspapers, books and stationery and New dwelling purchase by owner-occupiers sub-groups; Pharmaceutical products, Motor vehicles, Automotive fuel, Spare parts and accessories for motor vehicles, Equipment for sports, camping and open-air recreation, Games, toys and hobbies and Pets and related products expenditure classes.
16 The All groups CPI , services component comprises all items not included in the All groups CPI , goods component.
17 The All groups CPI , excluding 'volatile items' series comprises the All groups CPI excluding Fruit, Vegetables and Automotive fuel expenditure class.
18 The series Market goods and services, excluding 'volatile items' is broken down into both goods and services components and excludes the following expenditure classes:
1 Roberts, I (2005), Underlying Inflation: Concepts, Measurement and Performance, RBA Research Discussion Paper No 2005–05. <back
2 Dwyer, J., (1992), “The Tradeable Non–Tradeable Dichotomy: A Practical Approach”. Knight, G. and Johnson, L., (1997), “Tradables: Developing output and price measures for Australia’s tradable and non–tradable sectors,” Working Papers in Econometrics and Applied Statistics, No. 97/1, ABS cat. no. 1351.0. <back
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