Annual weight update of the CPI and Living Cost Indexes

This article presents an overview of the 2025 annual update to the weights for the Consumer Price Index (CPI). The new weights have been implemented in the January monthly CPI indicator (released 26 February 2025) and will apply from the March 2025 quarter for the quarterly CPI to be released on 30 April 2025.

The weights for the Selected Living Cost Indexes (SLCIs) will also be updated for the March 2025 quarter, to be released on 7 May 2025.

The ABS has annually updated the weights for the CPI and SLCIs since 2018, predominantly using Household Final Consumption Expenditure (HFCE) data. Annually re-weighting the CPI ensures that the CPI basket continues to be representative of contemporary spending by Australian households. Further details on annually re-weighting the CPI can be found in the information paper An Implementation Plan to Annually Re-weight the Australian CPI, 2017. 

For further information contact prices.statistics@abs.gov.au. 

The main data source used to update the 2025 CPI and SLCI weights was HFCE data from the 2023-24 financial year. Other data sources such as supermarket scanner data provide a more detailed breakdown and were used to supplement the HFCE data. The scanner data was used to split the aggregate HFCE total value in order to update the lower level weights in the CPI. For example, the scanner data was used to split the HFCE value for Food into categories such as meat products and dairy products.

As with previous years, updated weights for some of the components of the CPI and SLCIs were derived from alternative data sources. These components were:
 

• New dwelling purchase by owner-occupiers;
• Other financial services; and
• Mortgage interest charges (only included in the SLCIs).

For more information on the data sources used see the information papers: Introduction of the 17th Series Australian Consumer Price Index and An Update on the Annual Re-weighting of the Australian CPI and Living Cost Indexes.

The use of HFCE data for CPI weights provides more up-to-date weights than under previous methods, enhancing the CPI in its principal purpose as a macro-economic indicator of household inflation. However, there are challenges with using HFCE data for CPI weighting purposes. These challenges were investigated by the ABS and detailed in the information paper Increasing the Frequency of CPI Expenditure Class Weight Updates.

 For the 2025 update, 12-month movements in the HFCE data from the financial year 2022-23 to 2023-24 were used. The approach for the 2025 update to re-weight the CPI and SLCIs can be summarised as follows: 
 

1. Align the HFCE data with the scope and classifications of the CPI and SLCIs at a detailed product level. This requires the removal of some components of HFCE (e.g. expenditure by Non-Profit Institutions Serving Households (NPISH)).
2. Produce a concordance of the HFCE data to the Consumer Price Index Commodity Classification (CPICC). This provides HFCE data for each CPI expenditure class (EC) for the CPI and SLCIs. These first two steps result in HFCE data aligned to the same concepts and scope of the CPI and SLCIs.
3. Calculate 12-month movements from 2022-23 to 2023-24 for the HFCE data from step 2, and apply these movements to each CPI EC to update the expenditure values.
4. Price update the 2023-24 expenditure values for each CPI EC to the December 2024 quarter.
5. Re-scale the price updated expenditure values across all CPI ECs so they sum to 100 (i.e. expenditure shares).

The CPI weights reflect the relative amount spent on goods and services as a proportion of total expenditure by all households.  The weights do not represent the expenditure of an 'average household'. The weights for each of the CPI groups are shown in the following table.

One thing to note when comparing the weights between 2024 and 2025 is that the weights are relative. The weight of a component of the CPI depends on how expenditure on that component compares to total expenditure (i.e. expenditure shares), rather than the absolute change in expenditure. 

For example, if the increase in expenditure for a particular expenditure class (EC) is greater than the increase in total expenditure (in percentage terms), the weight for that EC will increase, reflecting that the EC now represents a greater proportion of total expenditure than it did previously. Conversely, if the increase in expenditure for a particular EC is less than the increase in total expenditure, the weight for that EC will decrease.

For the 2025 CPI weight update, the largest weight remains for the Housing group (21.39%), followed by Food and non-alcoholic beverages (17.44%), Recreation and culture (12.74%) and Transport (11.45%).

Changes in the CPI weights are discussed in more detail below. All analysis refers to the weighted average of the eight capital cities. A more detailed breakdown of the CPI weights is available in appendix 1.

The weight for the Alcohol and tobacco group fell 0.40pp (percentage points). The fall is largely due to a decrease in the weight for Tobacco (-0.31pp). Sales of legal tobacco have fallen again due to the continued decline in smoking rates, reflecting lower spending on tobacco products (excluding the purchase of vapes and illicit tobacco).

The weight for the Housing group fell 0.35pp due to a decrease in the weight for New dwellings purchase by owner-occupiers (-0.48pp) and Electricity (-0.52pp). 

Dwelling commencements in 2023-24 were the lowest in over ten years reflecting reduced spending on new dwelling construction and purchases of new dwellings. 

The weight for Electricity fell due to lower electricity costs from the introduction of the Commonwealth Energy Bill Relief Fund rebates. These rebates were first introduced in July 2023 and were extended and expanded in July 2024. This combined with various state and territory government rebates, meant households spent less on electricity.

The weight for Rents increased 0.58pp. With vacancy rates remaining at historic lows, rental prices increased by 6.4% in the 12 months to the December 2024 quarter.

Changes in Housing group weights differed across the capital cities. Appendix 2 provides a comparison of the Housing group weights for each capital city.

The weight for the Furnishings, household equipment and services group fell 0.41pp as weak demand led to lower expenditure over the past 12 months for discretionary goods such as Furniture (-0.08pp) and services such as hairdressing (-0.14pp). 

The weight for the Health group rose 0.30pp. An increase in the number and cost of medical services saw the weight for Medical and hospital services increase 0.32pp. 

The weight for the Transport group increased slightly by 0.03pp due to an increase in the weight for Motor vehicles (+0.26pp) with a record number of vehicles purchased in 2023-24. This was largely offset by a fall in the weight for Automotive fuel (-0.38pp) with petrol prices 7.9% lower in the 12 months to the December 2024 quarter.

The weight for the Recreation and culture group increased 0.19pp. More Australians continued to holiday overseas and international airfare prices remained elevated, which resulted in an increase in the weight for International holiday travel and accommodation of 0.33pp. Overseas Arrivals and Departures data show that the number of people travelling has returned to pre-COVID (2019) levels.

The weight for the Education group increased 0.35pp. Education fees rose 5.9 per cent in the March 2024 quarter, combined with higher school enrolment numbers at non-government schools.

Consumer Price Index, Australia methodology, December Quarter 2024