Selected Living Cost Indexes, Australia

In the June 2020 quarter, all five living cost indexes fell:

• Employee households recorded the strongest fall (-2.6%), followed by other government transfer recipients (-1.9%).
• The PBLCI fell -1.4%, age pensioners ( -0.8%) and the self-funded retirees (-0.4%) recorded the smallest fall.

Over the past 12 months:

• Employee households was the only population sub-group to record a fall (-2.1%).
• Other government transfer recipients (0.0%) recorded no movement.
• The PBLCI (+0.4%), age pensioners (+1.0%) and self-funded retirees (+1.1%) rose.
   

The following spotlight article is included in this release:

• Spotlight: Record fall in living costs for Employee households

An article was published on 8 July 2020 explaining the impact of COVID-19 on the June quarter CPI and Selected Living Cost Index series.

• Measuring the Consumer Price Index during a time of COVID-19
   

• Fell across all household types due to price falls for automotive fuel with weak global demand seeing lower world oil prices.
   

• Fell in three of the five household types due to free child care during the quarter. For more information on child care see Measuring the Consumer Price Index during a time of COVID-19.
• Partially offsetting the fall was non-durable household products, which rose due to a reduction in specials and general price increases for toilet paper and cleaning products.
   

• Falls driven by preschool and primary education due to free before and after school care and free preschool for term 2 in NSW, Victoria and Queensland.
   

• Fell across all household types mainly due to falls in rents and electricity. Weak rental market conditions as a result of rising vacancy rates saw rents fall this quarter. The fall in electricity was mainly driven by utility rebates in some capital cities to support households from the impacts of COVID-19.
   

• Rose across all household types due to increases in tobacco prices.
   

At the All groups level, differences across the population sub-groups quarterly movements are largely explained by the weight of child care, automotive fuel and mortgage interest charges for each sub-group, which all saw significant falls this quarter.

• The living cost index (LCI) for pensioner and beneficiary households (PBLCI) recorded a smaller fall than employee households this quarter due to PBLCI households having a lower expenditure weight for child care, which fell 95.0%.
• Over the past twelve months the PBLCI rose 0.4% due to rise in alcohol and tobacco (11.3%) and food and non-alcoholic beverages (4.7%).
   

• The LCI for employee households recorded the largest fall for all households this quarter due to mortgage interest charges, which fell 5.0%, and a higher expenditure weight for child care, which fell 95.0%.
• Over the past twelve months the LCI for employee households fell 2.1% due to falls in mortgage interest charges (-18.5%) and child care (-94.7%).
• The fall in employee households both quarterly and annually is the largest fall since the series commenced in June quarter 1998.
   

• The LCI for age pensioner households recorded a smaller fall this quarter compared to other households due to having no expenditure weight for child care, which fell 95.0%.
• Over the past twelve months the LCI for age pensioner households rose 1.0% due to rises in alcohol and tobacco (8.7%) and food and non-alcoholic beverages (4.8%), and having no weight for child care.
   

• The LCI for other government transfer recipient households recorded a larger fall than some households this quarter due to having a higher weight for child care, which fell 95.0%.
• Over the past twelve months the LCI for other government transfer recipient households was flat (0.0%) with rises in alcohol and tobacco (12.6%) and food and non-alcoholic beverages (4.7%), being offset by falls in child care and automotive fuel.
   

• The LCI for self–funded retiree households recorded a smaller fall compared to other households this quarter due to having no expenditure weight for child care, which fell 95.0%.
• Over the past twelve months the LCI for self–funded retiree households rose 1.1% due to rises in alcohol and tobacco (6.3%) and food and non-alcoholic beverages (4.4%), and having no weight for child.

Large price movements in response to the impacts of COVID-19 in the June 2020 quarter have resulted in the largest fall to date in the living cost index (LCI) for Employee households. The fall was driven by the provision of free child care for Australian families during the quarter, with Employee households having the highest weight for both child care and preschool and primary education (which contains a before and after-school care component) of all the LCIs, as shown in table 1.

Other government transfer recipient households also recorded their weakest ever movement, with the second highest weight for childcare and preschool and primary education. In comparison, Aged pensioners and Self-funded retirees have zero weight for child care and only a small weight for preschool and primary education.

Significant price falls for automotive fuel also contributed to the weak movements seen this quarter in all four LCIs.

The impacts of COVID-19 on the SLCIs join other significant economic events as shown in figure 1, including:

The introduction of the 10 per cent Goods and Services Tax (GST) on 1 July 2000 resulted in the largest positive movement in each of the LCIs' history. Each LCI was similarly affected since the GST was applied across a wide range of goods and services purchased by households.

A series of events across multiple oil producing regions led to a spike in automotive fuel prices. The RBA's cash rate was also set at a 12 year high, which was reflected in mortgage interest charges. These factors affected Employee households the most, resulting in the second-largest rise for that series due to higher weights for the relevant components.

The Global Financial Crisis saw interest rates plummet to (at the time) record lows and fuel prices crash, leading to Employee households experiencing what was then the only annual fall ever seen in a LCI. The remaining LCIs were less affected due to a lower weight for mortgage interest charges.

Wide scale shutdowns saw the introduction of a range of economic stimulus measures, the most significant being the provision of free child care, as well as discounts and refunds in the areas of education and utilities. Fuel prices also fell as demand shrunk due to global travel restrictions. Once again, the majority of these measures had the greatest impact on Employee households, resulting in the largest fall ever seen in any of the LCIs.

Price indexes published by the Australian Bureau of Statistics (ABS) provide summary measures of the movements in various categories of prices over time. They are published primarily for use in Government economic analysis. Price indexes are also often used in contracts by businesses and government to adjust payments and/or charges to take account of changes in categories of prices (Indexation Clauses).

Use of Price Indexes in Contracts that sets out a range of issues that should be taken into account by parties considering including an Indexation Clause in a contract using an ABS published price index.

The Frequently Asked Questions page that has answers to a number of common questions to do with price indexes and the Consumer Price Index, in particular.

This release previously used catalogue number 6467.0.