6461.0 - Consumer Price Index: Concepts, Sources and Methods, 2011  
ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 19/12/2011   
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Australian Bureau of Statistics.

Acquisitions approach

The acquisitions approach defines the basket of goods and services as consisting of all those consumer goods and services actually acquired by households during the base period. See also Cost of Use approach, Outlays approach.


The process of combining lower level price indexes to produce higher level indexes.

All groups

Highest level of the CPI, containing all the groups, subgroups and expenditure classes.


Arithmetic mean of price relatives - refer to Chapter 4 for the formula.


Australian Prudential Regulation Authority.

Chain linking

Joining together two indices that overlap in one period by rescaling one of them to make its value equal to that of the other in the same period, thus combining them into single time series. More complex methods may be used to link together indices that overlap by more than period. Also known as “chaining”. See chapter 12 for more information.


Classification of Individual Consumption by Purpose.


A category, grouping or an individual item under an index, for example, 'Bread' is a component at the expenditure class level, while 'Food' is also a component at the group level.

Cost of living index

A measure of the change in household income required to maintain a constant level of utility.

Cost of use approach

The cost of use approach defines the basket as consisting of all those consumer goods and services actually consumed (or used up) in the base period, regardless of when they were acquired or paid for. See also Acquisitions approach, Outlays approach.


Consumer Price Index - a general indicator of the rate of change in prices paid by households for consumer goods and services.

CPI basket

A commonly used term for the goods and services priced for the purpose of compiling the CPI.

CPI population group

The subset of the Australian population to which the CPI specifically relates. For the 16th series CPI this is all metropolitan private households.

Delphi method

A method used to assess the value and utility consumers place on the change to the quality of a good or service. In this approach a panel of experts are asked to provide an estimate of the average and likely range of quality (expressed in dollars) placed on an aspect of a good or service. A median of responses is taken to guide the quality adjustment used in pricing goods and services whose quality changes between periods. See also Quality adjustment and chapter 9.

Elementary aggregate

The lowest level of commodity classification in the CPI, and the only level for which index numbers are constructed by direct reference to price data.

Expenditure class

A group of similar goods or services. The level at which weights are fixed for the life of an index series, and the lowest level for which indexes are regularly published. There are eighty-seven expenditure classes in the 16th series CPI.

Expenditure aggregate

The current cost in dollars per year of purchasing the same quantity of goods and services that were purchased in the weighting base period by the CPI population group.


Geometric mean - refer to Chapter 4 for the formula.

Gross premiums

Total premiums payable by policy holders for general insurance.


The first level of disaggregation of the CPI. There are eleven groups in the 16th series CPI.

Goods and Services Tax (GST)

An ad valorem tax applied to supplies (goods and services produced or delivered) by registered suppliers engaged in taxable activity. The GST is effectively only paid by final consumers. The current legislated rate of GST is 10 per cent.


Household Final Consumption Expenditure.


Household Expenditure Classification. The classification used to analyse the results of the Household Expenditure Survey.


Higher Education Support Act.


Harmonised Indices of Consumer Prices - an index structure devised and used by the European Union.

Household Expenditure Survey (HES)

A sample survey conducted by the ABS to determine the expenditure patterns of private households. Data from the 2009-10 HES are the primary source of information for the expenditure weights for the 16th series CPI.


International Labour Organization.


The periodic adjustment of a money value according to changes in a price index.


A term commonly used to refer to changes in price levels. A rise in prices is called inflation, and a fall is called deflation.

Implicit Price Deflator (IPD)

This is a derived price measure outputted from the National Accounts. An implicit price deflator is obtained by dividing a current price value by its real counterpart (the chain volume measure). When calculated from the major national accounting aggregates such as GDP, IPDs relate to a broader range of goods and services in the economy than that represented by any or the individual price indexes (such as CPIs, PPIs).

Movements in an implicit price deflator reflect both changes in price and changes in the composition of the aggregate for which the deflator is calculated.


See Chain linking.

Link period

The link period is the quarter in which the index is calculated on both the old weights and structure and the new weights and structure. In the CPI, the link period usually follows the completion of the Household Expenditure Survey (HES), which currently runs once every 6 years. The weights in the CPI are updated during the link period to reflect the new expenditure data in the HES.

Link factor

A ratio used to join a new index series to an old index series to form a continuous series.

Matched sample

In a matched sample, items that are priced from period to period are identical in all respects.


For purposes of the CPI, metropolitan refers to the six State capital cities, as well as Darwin and Canberra.

National Standard

Refers to the type of specifications for which a product is being priced. These products are available in all capital cities, and at the vast majority of respondent outlets. They can be readily and clearly defined by characteristics such as make, model, and size as a specification for use nationally. ABS field officers have no latitude in choosing the product for pricing. Examples include motor vehicles, and the major brands of breakfast cereals. See also Respondent standard.

Non-tradables component

The component which is not classified as tradable. The tradables component comprises all items whose prices are largely determined on the world market. 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.

Outlays approach

The outlays (or payments) approach defines the basket in terms of the actual amounts paid out by households during the base period to gain access to consumer goods and services. See also Acquisitions approach, Cost of use approach.

Premium supplements

The value of premium supplements is equal to the total income earned by insurance companies through the investment of their technical reserves.

Price index

A composite measure of the prices of items expressed relative to a defined base period.

Price levels

Actual money values at a particular time.

Price movements

Changes in price levels between two or more periods. Movements can be expressed in money values, as price relatives, or as percentage changes.

Price relative

A measure of price movements: the ratio of the price level in one period to the price level in another.

Private households

Households living in private dwellings. Private dwellings exclude prisons, nursing homes for the aged, defence establishments, hospitals, and other communal dwellings.

Purchasers price

The amount paid by the purchaser inclusive of any non-deductible taxes on products, transport and trade margins.

Quality adjustment

The elimination of the effect that changes in the quality or composition of an item have on the price of that item in order to isolate the pure price change.


Relative of average prices - refer to Chapter 4 for the formula.

Reference base

The period in which the CPI is given a value of 100.0. The CPI is currently on a reference base of 1989-90. The reference base should not be confused with the weighting base period - see Weighting base period.


The selected goods and services priced for the purpose of compiling a price index.

Respondent standard

Refers to the type of specifications for which a product is being priced. These products can be readily defined by form and function, but a multitude of brands and models may exist making it impossible to guarantee that any one example of the product will be available Australia wide. A generic description is provided in sufficient detail to ensure that the field officers will be able to locate an example of the product. See also National standard.

Seasonal adjustment

A process by which the systematic and calendar related influences are estimated and then removed from a time series. Examples of such influences include holidays, weather patterns and administrative dates such as annual education fee increases.

Spatial index

A spatial index compares the relative differences in prices between geographic locations, at the same point in time.


A technique used to introduce new items or respondents into the index calculations so that the level of the index is not affected.


A collection of related expenditure classes. There are thirty three subgroups in the 16th series CPI.

Superlative index

A superlative index is one of a small group of indexes that makes equal use of prices and quantities, and treats them in a symmetrical manner in each pair of periods under observation. Examples are the Fisher Index and the Tornqvist Index. Superlative indexes require both price and expenditure values for all periods.

Temporal index

A temporal price index measures price change over time.

The New Tax System (TNTS)

A package of changes to the taxation and social-welfare system including the introduction of GST, and the changes to business taxation announced in response to the review of business taxation.

Technical reserves

The technical reserves held by general insurance companies include prepayments of premiums, and reserves against outstanding claims.

Tradables component

The tradables component comprises all items whose prices are largely determined on the world market. 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. The non-tradable component consists of the remaining commodities.

Transaction prices

The prices actually paid by consumers to acquire goods and services.


Often defined as the satisfaction derived from consumption of a good or service.


The measure of the importance of an item in the index regimen relative to the other items. Weights can be expressed in either quantity or value terms. Value weights are used in the CPI.

Weighting base period

The period to which the fixed quantity weights relate. The weighting base period for the 16th series CPI is June quarter 2011.