SYSTEM OF PRICE STATISTICS

INTRODUCTION

12.1 This section provides a broad overview of the price statistics published by the ABS.

Principle Price Indexes

12.2 The Residential Property Price Indexes are part of a broader system of price statistics published by the ABS. Other price indexes available are:

• Consumer Price Index (CPI);
  • Selected Living Cost Indexes (SLCIs);
  • Pensioner and Beneficiary Living Cost Index (PBLCI);
• Producer Price Indexes (PPI);
• International Trade Price Indexes (ITPI);
  • Export Price Index (EPI);
  • Import Price Index (IPI);
• Wage Price Index (WPI).

12.3 These price indexes are used for deflation purposes in providing summary measures of the volume of products (goods and services) produced and consumed. Price indexes are not only important tools in the design and conduct of the monetary and fiscal policy of the government, but also of great utility in economic decisions throughout the private sector. The indexes provide an integrated and consistent view of price developments pertaining to production, consumption, and international transactions of products.

Direct measures of price change

12.4 The principal price indexes described above are direct measures of price change, in that they are derived through collecting and directly using price data. The CPI, PPI, ITPI and WPI are detailed in the following paragraphs.

Consumer Price Index (CPI)

12.5 The CPI is an input index and measures changes in the price of a “basket” of goods and services which account for a high proportion of expenditure by Australian metropolitan households. Indexes are produced for each of the eight capital cities, for eleven broad groups of products made up of 87 expenditure classes. The CPI is published quarterly in Consumer Price Index, Australia (cat. no. 6401.0).

12.6 The valuation basis of the CPI is purchasers’ prices and the prices are obtained by direct collection from retail outlets and other businesses, authorities, etc. from which the CPI population group buys.

12.7 The CPI has fixed weights that are updated approximately every five years following the release of the ABS Household Expenditure Survey (HES).

12.8 The Selected Living Cost Indexes, Australia (cat. no. 6467.0) (SLCIs) provides indexes for four individual population subgroups: employee households; age pensioner households; other government transfer recipient households; and self-funded retiree households. Also included is the Pensioner and Beneficiary Living Cost Index (PBLCI) which provides an index for age pensioner and other government transfer recipient households whose principal source of income is government benefits.

12.9 The SLCIs inform users of the extent to which the impact of price change varies across these different subgroups of the Australian population.

Producer Price Index (PPI)

12.10 Several Producer Price Indexes (PPIs) are produced and published. Economy wide indexes are presented within a stage of production framework together with a set of indexes relating to specific industries (selected manufacturing, construction, mining and service industries). The PPI is published quarterly in Producer Price Index, Australia (cat. no. 6427.0).

12.11 PPIs can be constructed as either output measures or input measures. Output indexes measure changes in the prices of goods and/or services sold by defined industry groupings while; input indexes measure changes in the prices of goods and/or services purchased by a particular industry grouping.

International Trade Price Indexes (ITPI)

12.12 Import and export prices are important extensions of domestic PPIs. The Australian International Trade Price Indexes (ITPIs) measure the average change in the prices paid for imports of products that are landed in Australia and the average change in the prices received for exports of products that are shipped from Australia. Both the import price index (IPI) and the export price index (EPI) are valued using a free on board pricing basis.

12.13 The principal purpose of the ITPIs is for deflating external trade values to provide indicators of the volume of international trade. Import prices feed into producer input indexes as these are an important contribution to producer costs. Similarly, export prices feed indirectly into producer output indexes as exports frequently represent a significant component of producer revenue.

12.14 The ITPIs are published quarterly in International Trade Price Indexes, Australia (cat. no, 6457.0)

Wage Price Index (WPI)

12.15 The WPI measures changes in the wages and salaries paid by employers for a unit (i.e. hour) of labour where the quality and quantity of labour are held constant. It has the dual purpose of monitoring wages and salaries inflation in the economy and supporting the compilation of the Australian System of National Accounts. To achieve this, the WPI uses a Laspeyres index methodology (where the price in a particular period is compared to that in a previous fixed period) designed to produce a measure of pure price change in wages and salaries independent of compositional factors (i.e. the quantity and quality of labour are held constant). ‘Quantity’ refers to compositional factors such as the effect of changing hours paid for and number of employees. ‘Quality’ refers to changes in job specifications or job holder characteristics such as employee performance or relative level of experience. These factors are held constant by ensuring that jobs are matched between quarters with no change in job specifications and by holding weekly hours constant between quarters. Adjustments to remove changes in quality and quantity are made during the statistical production phase of the WPI survey.

12.16 The WPI is published quarterly in Wage Price Index, Australia (cat. no. 6345.0).


DERIVED MEASURES OF PRICE CHANGE

National accounts chain price indexes

12.17 Chain price indexes published in the National Accounts are annually reweighted chain Laspeyres price indexes. The chain price indexes are calculated by weighting together elemental price indexes using annual quantity weights derived from chain volume estimates.

12.18 Chain price indexes are published in Australian National Accounts: National Income, Expenditure and Product (cat. no. 5206.0).

Implicit price deflators

12.19 In addition to the chain price indexes published for the major National Accounts aggregates, the ABS publishes a range of implicit price deflators (IPDs). IPDs are derived measures, obtained by dividing a current–price value by the chain volume measure expressed in dollar terms. They reflect both changes in the prices between two periods and changes in the composition of the aggregate between those periods.

12.20 IPDs and chain price indexes are published for all expenditure components of GDP(E).

12.21 Implicit price deflators are published quarterly as part of Australian National Accounts: National Income, Expenditure and Product (cat. no. 5206.0), and Balance of Payments and International Investment Position, Australia (cat. no. 5302.0).


WHICH PRICE SERIES SHOULD I USE?

12.22 There are a wide range of price indexes produced by the ABS which are used for indexation, research and analysis. Although the ABS acknowledges that the various price indexes it publishes are used in indexation clauses, it neither endorses nor discourages such use. The ABS has prepared information for users that set 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 Use of Price Indexes in Contracts is available on the ABS website and in Appendix 1 of this publication.

12.23 The index or indexes selected will affect the price change recorded and should be chosen carefully to best represent the set of items. A description of what each price index measures is available on the ABS website which will assist in the decision of which index to use. For more information about what data is available, please contact the ABS National Information and Referral Service on 1300 135 070.