1301.0 - Year Book Australia, 2012
ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 24/05/2012
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Statistics contained in the Year Book are the most recent available at the time of preparation. In many cases, the ABS website and the websites of other organisations provide access to more recent data. Each Year Book table or graph and the bibliography at the end of each chapter provides hyperlinks to the most up to date data release where available.
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CONSUMER PRICE INDEX (CPI)
The CPI has been designed as a general measure of price inflation faced by households. While several conceptual bases are possible, the ABS has adopted the concept of the CPI as a measure of changes, over time, in the prices of a basket of goods and services acquired by households in the eight capital cities in Australia.
The simplest way of thinking about the CPI is to imagine a basket of goods and services of the kind typically acquired by Australian households. As prices vary, the total cost of this basket will also vary. The CPI is a measure of the changes in the cost of this basket as the prices of items in it change.
From the September quarter 2011 onwards, the total basket is divided into the following 11 major commodity groups: Food and non-alcoholic beverages; Alcohol and tobacco; Clothing and footwear; Housing; Furnishings, household equipment and services; Health; Transport; Communication; Recreation and culture; Education; and Insurance and financial services. These groups are, in turn, divided into 33 sub-groups and the sub-groups into 87 expenditure classes.
In addition to the aggregate 'All groups' index, indexes are compiled and published for each of the groups, sub-groups and expenditure classes for each state and territory capital city. National indexes are constructed as the weighted average of the indexes compiled for each of the eight capital cities.
The 16th series CPI is the latest of a number of retail/consumer price indexes that have been constructed for various purposes by the ABS. More information about the CPI can be found in Consumer Price Index: Concepts, Sources and Methods, 2011 (6461.0).
Table 29.25 at the end of this chapter presents internationally comparable CPI data for selected countries.
16TH SERIES REVIEW
Australia has produced indexes of price inflation facing households going back as far as 1901. Prior to the introduction of the CPI in 1960, there were five series of retail price indexes compiled by the (then) Commonwealth Bureau of Census and Statistics. Since 1960, when the CPI was first compiled, the ABS has maintained a program of periodic reviews of the CPI to ensure that it continues to remain relevant and accurate. The most important objective of these reviews is to update the CPI weighting patterns, which represent the average Australian household expenditure on goods and services. These reviews also provide an opportunity to reassess the scope and coverage of the index.
The 16th series review of the Australian CPI was undertaken during 2010 to look at the conceptual basis, scope and coverage of the CPI and was the first major review since 1997. The issues considered in the review were set out in the Information Paper: Issues to be considered during the 16th Series Australian Consumer Price Index Review (6468.0) released on 15 December 2009. Following the release of the paper, there was extensive public consultation. The CPI Review Advisory Group represents a broad cross-section of CPI users and was established to provide advice to the ABS.
The outcomes of the review were published in Outcome of the 16th Series Australian Consumer Price Index Review (6469.0) released on 6 December 2010. Key changes for the 16th series CPI included:
A paper entitled Information Paper: Introduction of the 16th Series Australian Consumer Price Index, 2011 (6470.0) was released on 22 September, 2011 and the first publication of the 16th series CPI was released on 26 October 2011 (6401.0).
PRICE MOVEMENTS BY CITY
Table 29.1 presents All groups CPI numbers for each of the eight capital cities and for the weighted average of the eight capital cities, together with percentage changes.
The capital city indexes measure price movements over time in each city individually. They cannot be used to compare price levels between capital cities. For example, the index for Sydney in 2010–11 of 174.8, compared with the corresponding index for Darwin of 173.2, does not mean that prices in Sydney are higher than those in Darwin. It means that, since the reference base period (1989–90), prices in Sydney have increased by a greater percentage than those in Darwin (74.8% compared with 73.2%).
PRICE MOVEMENTS BY COMMODITY GROUP
Table 29.2 presents, for the weighted average of the eight capital cities, index numbers for each of the 11 commodity groups of the 16th Series CPI and for All groups, together with percentage changes.
LIVING COST INDEXES
The ABS compiles and publishes Living cost indexes (LCIs) specifically designed to measure changes in living costs for selected population sub-groups. There are two LCI publications produced by the ABS on a quarterly basis: Analytical Living Cost Indexes for Selected Australian Household Types (6463.0) (ALCIs) and the Pensioner and Beneficiary Living Cost Index (6467.0) (PBLCI). The LCIs are produced as a by-product of the CPI and are the conceptually preferred measures for assessing the effect of changes in prices on the out-of-pocket living expenses experienced by different types of Australian households.
Conceptually, the most notable difference between the LCIs and the CPI is that the LCIs include interest charges but do not include new house purchases, while the CPI includes new house purchases but does not include interest charges. Insurance (other than health insurance) is also treated differently in the LCIs. Under the acquisitions approach used in the CPI, the weight for insurance relates to the net value of the service provided by the insurance company – in simple terms, the amount of premiums paid by households less the amounts reimbursed by way of claims. Under the outlays approach used in the LCIs, the weight relates to the gross value of insurance premiums paid by households.
The ALCIs and the PBLCI have recently been updated to reflect household expenditure weighting patterns derived from the 2009–10 Household Expenditure Survey (HES) and data from other sources. The 16th series ALCIs and PBLCI were introduced in respect of the September quarter 2011 and were linked to the 15th series at the June quarter 2011. As the ALCIs and PBLCI are constructed using information from the CPI, they will be affected by changes as a result of the introduction of the 16th series CPI. For more information regarding the 16th series CPI, please refer to Information Paper: Introduction of the 16th Series Australian Consumer Price Index, 2011 (6470.0).
Due to the improved quality of some of the estimates of household expenditure available from the 2009–10 HES, the scope of the 16th series weights for Employee households, Age pensioner households and Other government transfer recipient households has changed from national estimates to estimates based on the weighted average of eight capital cities. This is consistent with the price collection and weighting pattern used for the CPI. The 16th series weights for Self-funded retiree households continue to be derived using national expenditures, consistent with the approach for the 15th series.
ANALYTICAL LIVING COST INDEXES
The Analytical living cost indexes (ALCIs) are specifically designed to measure changes in living costs for four selected household types: Employee households, Age pensioner households, Other government transfer recipient households and Self-funded retiree households. The ALCIs have been compiled and published by the ABS since June 2000. In recognition of the widespread interest in the extent to which the impact of price change varies across different sub-groups of the Australian population, the ALCIs have been published on a quarterly basis from the September quarter 2009.
Graph 29.3 presents the ALCIs and table 29.4 compares them to the CPI.
Between 2009–10 and 2010–11, changes in living costs ranged from a rise of 3.2% for Self-funded retiree households to a rise of 4.7% for Other government transfer recipient households (table 29.4). The CPI rose by 3.1% over the same period. Over the period from 1998–99 to 2010–11, changes in living costs for three of the four selected Australian household types were larger than the change in the CPI. Changes in living costs ranged from 44.9% for Self-funded retiree households to 51.7% for Other government transfer recipient households. The CPI rose by 45.1% over the same period.
PENSIONER AND BENEFICIARY LIVING COST INDEX (PBLCI)
The government's Pension Review Report was completed by Dr Jeff Harmer in February 2009 and followed a comprehensive review of Australia's pension system. In response to the review, the government funded the ABS to produce a new price index that reflects changes in the living costs of pensioners and other households receiving income support more explicitly than the CPI. In the 2009 Federal Budget, the government indicated that it will use the new index, known as the PBLCI, to index base pension rates where it is higher than the CPI. The PBLCI was first published on 24 August 2009, with quarterly data dating back to the June quarter 2007. The index is published by the ABS on a quarterly basis.
The PBLCI is a measure of the effect of changes in prices on the living expenses of a sub-group of the Australian population: Age pensioner households and Other government transfer recipient households. The PBLCI is based on the Analytical living cost indexes (ALCIs), which have been compiled and published by the ABS since June 2000 (table 29.5).
The PBLCI publication also compares the percentage movements of the PBLCI with the percentage movements of the CPI (graphs 29.6 and 29.7).
LONG-TERM PRICE SERIES
Although the CPI has only been compiled from 1948, an approximate long-term measure of inflation faced by households has been constructed by linking together earlier selected retail price index series (table 29.8). The index numbers are expressed on the reference base period of 1945 = 100.0.
For more information about these former retail price index series see the article History of retail/consumer price indexes in Australia in Year Book Australia 2005.
Source: Consumer Price Index: Concepts, Sources and Methods, 2011 (6461.0).
Graph 29.9 shows the annual percentage changes derived from this retail/consumer price index series for the period 1911–2011.