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Comparing basic and producers' prices

Producer and International Trade Price Indexes: Concepts, Sources and Methods
Reference period
2022
Released
29/04/2022
Next release Unknown
First release

The Australian System of National Accounts (ASNA) uses two kinds of output prices, basic price and producers' price.

The basic price is the amount receivable by the producer from the purchaser for a unit of a product produced as output, minus any tax payable, plus any per unit subsidy receivable on that unit as a consequence of its production or sale. It excludes any transport charges invoiced separately by the producer. However, delivery charges that are not separately invoiced are included in the basic price.

Example of a basic price:

Basic price = the amount received by the producer from the purchaser plus any subsidies received on a product.

Includes:

  • subsidies on products
  • other taxes on production (for example, carbon tax)

Excludes:

  • taxes on products (for example, GST, excise)
  • other subsidies on production
  • retail and wholesale margins
  • insurance and transport charges separately invoiced.

The producers’ price is the amount receivable by the producer from the purchaser for a unit of a product produced as output, including any tax that is incorporated within the sales price and excluding any subsidy that reduces the sales price, on that unit as a consequence of its production or sale. It excludes any transport charges invoiced separately by the producer but includes delivery charges not separately invoiced.

Example of a producers’ price:

Producers’ price = the amount received by the producer from the purchaser

Excludes:

  • deductible taxes on products (for example, GST) invoiced to the purchaser and subsidies on products¹
  • retail and wholesale margins
  • insurance and transport charges separately invoiced.

The producers’ price and the basic price are two measures of output prices (that is, prices receivable). They differ in the way they treat non-deductible taxes on products, and producers’ subsidies on products.

Example of comparison between producers’ price and the basic price:

Producers’ price = Basic Price

  • plus (Producers’) non-deductible taxes on products
  • minus (Producers’) subsidies on products.

Neither the producers’ nor the basic price includes any amounts receivable in respect of consumption taxes, such as the Goods and Services Tax, or similar deductible taxes. The difference between the two is that to obtain the basic price, any other tax payable per unit of output is deducted from the producers’ price while any subsidy receivable per unit of output is added.

In the context of the Australian PPIs, the output price indexes measure changes in basic prices. Output is recorded at basic prices; any tax on the product actually payable on the output is treated as if it were paid by the purchaser directly to the government instead of being an integral part of the price paid to the producer. Any subsidy on the product is treated as if it were received directly by the purchaser and not the producer. The basic price measures the amount retained by the producer and is, therefore, the price most relevant for a producer's decision-making.

Footnotes

  1. The Goods and Services Tax (GST) is excluded from all the prices recorded in the PPI because it is deductible on business to business transactions.