Re-referencing and linking price indexes

12.1 The following reference periods are discussed in Re-referencing and linking price indexes: 

• Weight reference period is the period covered by the expenditure statistics used to calculate the weights. The weight reference period for the 2025 update of the Consumer Price Index (CPI) is 2023-24 Financial Year.
• Price reference period is the period for which prices are used as denominators in the index calculation. The price reference period for the 2025 update of the Consumer Price Index (CPI) is September 2025, for both the monthly and quarterly series.
• Index reference period is the period for which the index is set to 100.00. The current index reference period for the monthly and quarterly CPI is September 2025.

12.2 The ABS changes the index reference period (a process known as re-referencing) of the CPI from time to time, but not frequently. This is because frequently changing the index reference period is inconvenient for users, particularly those who use the CPI for contract escalation. Re-referencing may also result in the loss of some detailed historical data, especially for long series. The current CPI index reference period was updated in October 2025 to the month of September 2025. Prior to this, the index reference period was 2011-12.

12.3 By convention, the ABS publishes price index numbers rounded to two decimal places. Re-referencing is necessary where price index numbers fall to levels which would result in a loss of precision of period-to-period index movements. An example of a series in the CPI where this could occur is the Audio, visual and computing equipment expenditure class. This series experiences a downward trend due to the technological improvements seen in these goods, resulting in pure price falls over time. Therefore, re-referencing is required in these cases so that price indexes accurately capture period-to-period movements.

12.4 The conversion of an index series from one index reference period to another involves calculating a conversion factor using the ratio between the two series of index numbers. As the complete Monthly CPI is a new series, there is no existing monthly data to re-reference; rather, the existing quarterly data is re-referenced to reflect the new single-month reference period.

For example, consider converting the Clothing and footwear group index for Australia from an index reference period of 2011-12 = 100.0 to September 2025 = 100.00 (see Table 12.1). The index number for September quarter 2025 using an index reference period of 2011-12=100.0 is 101.5. The index number for September quarter 2025 using an index reference period of September 2025 = 100.00 can be calculated using the monthly data (99.25+100.64+100)/3=99.96. This gives a conversion factor of 0.98483 (approximately 99.96/101.5). This can be applied to existing values from the 2011-12=100.0 index series to obtain the index value under the September 2025 = 100.00 index reference period; for example the December 2022 index number, on an index reference period of September 2025 = 100.00, is 97.50 (99.0 x 0.98483). 

12.5 A similar procedure can be used to convert the September 2025 index reference period to a 2011-12 index reference period. For example, a quarterly index value from some point after September 2025, with the index reference period of September 2025 = 100.00, can be multiplied by the conversion factor of 1.01541 (101.5/99.96) to obtain the index value under the index reference period of 2011-12 = 100.00. It should be noted that a different conversion factor will apply for each index and city - that is, the factor for the Clothing and footwear group for Australia will differ from the factor for the Transport group for Australia, and for the Clothing and footwear group for Sydney.

12.6 Re-referencing does not change the relative movements between periods. Period-to-period percentage changes may differ slightly to those previously published due to rounding under the re-referencing. However, these differences do not constitute a revision.

12.7 A full list of the conversion factors used in the most recent CPI re-reference will be published in the December 2025 CPI publication.

12.8 The use of fixed weights (as in a Laspeyres formula) over a long period of time is not considered sound practice. For example, weights in a consumer price index have to be changed to reflect changing consumption patterns. Consumption patterns change in response to longer term price movements, changes in preferences, and the introduction or displacement of goods or services.

12.9 There are two options in these situations if a fixed weight index is used. Option one is to hold the weights constant over as long a period as seems reasonable, starting a new index each time the weights are changed. This means that a longer time series is not available. Option two is to update the weights more frequently and chain link the series together to form a longer time series. The latter option is the more common practice and is what is used in the Australian CPI.

12.10 The behaviour under chain linking of the Laspeyres, Paasche and Fisher index formulas is explored in Table 12.2. In period 3, prices and quantities are returned to their index reference period values and in period 4 the index reference period prices and quantities are shuffled between items. Period 3 is sometimes described as time reversal and period 4 as price bouncing.

12.11 Under the three formulas, the index number under direct estimation returns to 100.0 when prices and quantities of each item return to their index reference period levels, however, the chained index numbers do not. Note that the chained Fisher Ideal index might generally be expected to perform better than the chained Laspeyres or Paasche. More information on linking indexes is contained in Chapter 9 in the international CPI Manual (ILO, 2020).

12.12 This situation creates a challenge for prices statisticians when using a fixed weight index. There are obvious attractions in frequent chaining, however, chaining in a fixed weight index may lead to biased estimates. This can occur if there is seasonality or cycles in the price, and chaining coincides with the top or bottom of each cycle. For this reason, it is generally accepted that indexes should not be chained at intervals less than annual. The conceptual underpinning of chaining is that the traditionally expected inverse relationship between prices and quantities applies in practice (i.e. growth in quantities is higher for those items whose prices increase less than those of other items). The System of National Accounts, 2008 describes the practical situations in which chaining works best.