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National Accounts and Balance of Payments – Derived Measures

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

The following is a list of derived statistical measures produced by the Australian National Accounts branch using the Producer and International Trade Price Indexes as inputs.

Chain Price Indexes and Implicit price deflators

Chain Price Indexes published quarterly in the Australian National Accounts are annually re-weighted. Chain Price Indexes are obtained by first weighting together elemental price indexes from the previous financial year to the current financial year to produce annual indexes, or to quarters in the current financial year to produce quarterly indexes, where the weights are calculated using expenditure shares of the previous financial year. Second, the resulting aggregate year-to-year or year-to-quarter price indexes are linked (compounded) together to form a time series. Third, the time series is referenced to 100.0 in the reference year. All quarterly indexes are benchmarked to annual indexes.
 

In addition to the Chain Price Indexes published for the major Australian National Accounts aggregates, the ABS publishes a range of Implicit Price Deflators.

An Implicit Price Deflators is obtained by dividing a current price value by its real counterpart (the Chain Price Indexes). When calculated from the major national accounting aggregates, such as Gross Domestic Product, Implicit Price Deflators relate to a broader range of goods and services in the economy than that represented by any of the individual price indexes published by the ABS. Movements in an Implicit Price Deflator both changes in price and changes in the composition of the aggregate for which the deflator is calculated.

Implicit Price Deflators do not compare the price of a constant basket of products (goods and services) between any two periods. Implicit Price Deflators calculated from quarterly aggregates are more likely to be affected by changes in the physical composition of those aggregates. As much of the period-to-period change in the physical composition is of a seasonal nature, Implicit Price Deflators derived from seasonally adjusted data are normally more reliable measures of price change than those calculated from unadjusted data.

However, seasonally adjusting the series may not completely eliminate the impact of seasonal changes on the derived Implicit Price Deflators.

Implicit Price Deflators are weighted using current period weights and are conceptually a Paasche price index.

Implicit Price Deflators and Chain Price Indexes are published for expenditure components of Gross Domestic Product.

Chain Price Indexes and Implicit Price Deflators are published quarterly as part of Australian National Accounts: National Income, Expenditure and Product, and Balance of Payments and International Investment Position, Australia .

Period-to-period movements in fixed-weight price indexes are generally consistent with those for Chain Price Indexes for indexes with similar coverage. The Chain Price Indexes are considered the most suitable indexes for measuring actual price change, as the effects of compositional change are excluded from these indexes whereas Implicit Price Deflators are affected by compositional change. Both Chain Price Indexes and Implicit Price Deflators s are subject to ongoing revisions, in line with revisions to underlying Gross Domestic Product weights.

Commercial indexation

charges to take account for changes in the prices of products. The use of ABS price indexes for commercial indexation is often taken due to the intendent nature of the ABS which allows business and government to view the Producer and International Trade Price Indexes as ‘independent indicators’. The use of price indexes for indexation is common in long-term contracts across industry and government.

While the ABS recognises that the price indexes it produces are used for commercial purposes, the ABS neither endorses nor discourages such use. The ABS does not advise, comment, or assist in preparing or writing contracts.  

For further information on the ABS policy concerning the use of price indexes for contract indexation purposes please refer to – Inflation and Price Indexes – Use of Price Indexes in Contracts

Economic Monitoring – Domestic

The Producer and International Trade Price Indexes are used by Australian Commonwealth, State and Territory governments, industry, and academics for economic monitoring, reporting and modelling purposes. As broad economy based and industry level price indicators, the Producer and International Trade Price Indexes are an important source of information for inflation monitoring for the Australian economy and are regularly used to inform government and industry policy and investment decisions. 

Economic Monitoring – International

The ABS provides the Australian Producer and International Trade Price Indexes to a range of international agencies, including the International Monetary Fund and the Organisation for Economic Co-operation and Development to enable economic monitoring and international comparisons.

The provision of the Producer and International Trade Price Indexes to the International Monetary Fund also fulfils Australia’s obligations as part of the International Monetary Fund’s Dissemination Standards Bulletin Board. The IMF Dissemination Standards Bulletin Board set out criteria concerning the statistics to be produced, their periodicity, release procedures etc. A brief overview of these standards can be found on the IMF Dissemination Standards Bulletin Board.

The International Monetary Fund - Special Data Dissemination Standard contains the main economic and financial statistics produced by the ABS and other agencies, such as the Reserve Bank of Australia.

The Organisation for Economic Co-operation and Development publishes an array of economic and financial statistics produced by the ABS in comparison to the member countries of the organisation, and also the Purchasing Power Parity statistics, which the Producer and International Trade Price Indexes are incorporated within.