A Guide to the Consumer Price Index: 17th Series methodology

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 and Outlays approach.

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

This is commonly known as the 'headline' CPI and is the highest level of the CPI, containing all the groups, sub-groups and expenditure classes.

Arithmetic mean of price relatives, also known as the Carli index formula - refer to 4.18 for the formula.

A specified set of quantities of goods and services consumed by an average household. The CPI basket of goods and services refers to the goods and services in the basket; how much of each good or service is in the basket; and a specified level of quality of each good or service

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

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.

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

The subset of the Australian population to which the CPI specifically relates. For the 17th series CPI this is all metropolitan private households.

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. The range of goods and services covered by an elementary aggregate should be as homogeneous as possible.

The current cost in dollars per year of purchasing the same quantity of goods or services as was purchased in the weighting base period by the CPI population group.

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 87 expenditure classes in the 17th series CPI.

Geometric mean, also known as the Jevons index formula - refer to 4.19-4.21 for the formula.

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.

The first level of disaggregation of the CPI. There are 11 groups in the 17th series CPI.

A sample survey conducted by the ABS to determine the expenditure patterns of private households. Data from the 2015-16 HES was the primary source of information for the expenditure weights for the 17th series CPI.

Household Final Consumption Expenditure measures expenditure by resident households on goods and services, whether the expenditure is made within the domestic territory or by Australian residents abroad, and expenditure by Non-Profit Institutions Serving Households (NPISH). Conceptually, the measurement of HFCE aligns closely with the HES. Both HFCE and HES data cover expenditure by Australian households only and exclude expenditure by non-residents in Australia.

The period in which the CPI is given a value of 100.0. The CPI is currently on an index reference period of 2011-12.

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, while a fall is called deflation.

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

A living cost index reflects changes over time in the purchasing power of the after-tax incomes of households. It measures the impact of changes in prices on the out-of-pocket expenses incurred by households to gain access to a fixed basket of consumer goods and services.

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 the Territory capitals of Darwin and Canberra.

Multilateral index numbers are often used for spatial price and output comparisons across economic entities (e.g. countries). In a temporal context, multilateral index numbers make price comparisons across more than two time periods.

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.

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

Actual money values at a particular period of time.

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

The period that provides the prices to which the prices in other periods are compared. The price reference period for the 17th series CPI is the September quarter 2017.

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

Households living in private dwellings. Private dwellings exclude prisons, non self-care units for the aged, defence establishments, hospitals and other communal dwellings.

The change in the price of a good or service of which the characteristics are unchanged; or the change in the price after adjusting for any change in quality.

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 arithmetic mean of prices, also known as the Dutot index formula - refer to 4.17 for the formula.

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 33 sub-groups in the 17th series CPI.

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

Also known as scanner data. An economic flow that is an interaction between institutional units by mutual agreement. In the case of the CPI, transactions data are the prices actually paid by consumers to acquire goods and services

Calculated by dividing a product's revenue by the quantity sold. A product's unit value represents the average price paid by consumers over a certain period of time, e.g. one month

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

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

The period of which the expenditures serve as weights for the index. The weight reference period for the 17th series CPI is 2015-16.