ABS Letter to the Canberra Times Editor "Measuring inflation" (published 19 May 2005)

Dear Sir

The ABS would like to respond to J. W. Anderson's question on inflation (CT Letters, 16 May page 12). The Consumer Price Index (CPI) has been specifically designed as a general measure of price inflation for all metropolitan Australian households and therefore does not necessarily reflect an individual's spending pattern. In practice, the CPI measures price changes in a basket of goods and services that are typically bought by those households.

The CPI reflects Mr Anderson's view that prices rose for fuel, meat, medical insurance etc, in the couple of years to the March quarter 2005. However, prices fell for a range of items including many household furnishings, appliances and supplies, motor vehicles, audio, visual and computing equipment, and toys and sporting goods over the same period.

Overall the CPI rose by 4.4% in the two years from March quarter 2003 to March quarter 2005.

The ABS is charged with providing an independent, relevant and trusted statistical service to governments, business and the community and encourages informed debate. Interested readers may wish to check the ABS publication A Guide to the Consumer Price Index (cat. no. 6440.0), available on the ABS web site (www.abs.gov.au), for more information on how the CPI is compiled.

Yours sincerely

Peter Harper
Deputy Australian Statistician (Economics)