EMPIRICAL RESULTS


3.1 Empirical results at the published level are presented below for a selection of indexes which combine the price movements of both transactions and non-transactions data respondents. The figures plot both the published CPI and the CPI with the GEKS-Törnqvist index to measure the statistical impact of the methodological changes proposed in this publication. The time series produced covers the periods December quarter 2013 to March quarter 2017 for the weighted average of Australia's eight capital cities.

3.2 Figure 3.1 plots the published CPI and the CPI (GEKS-Törnqvist) at the All Groups level. Across the analysis period, the proposed changes had a minor downward impact on inflation where the CPI reported a price increase of 5.4 per cent while the CPI (GEKS-Törnqvist) reported a smaller rise of 5.3 per cent. In terms of quarterly percentage change, Figure 3.2 plots both series with the largest divergence occurring in September quarter 2016 due to the CPI (GEKS-Törnqvist) reporting lower inflation for the Fruit EC.

3.3 The following eight figures compare the published CPI and CPI (GEKS-Törnqvist) at the sub-group level where transactions data exhibits a large expenditure (market) share. Figure 3.3 plots price indexes for the Tobacco sub-group, where the CPI reported a rise of 52.9 per cent while the CPI (GEKS-Törnqvist) reported a larger rise of 57.8 per cent across the analysis period. The divergence between the two series is due to the CPI (GEKS-Törnqvist) capturing a higher expenditure weight for cheaper tobacco products that experienced larger price rises relative to more expensive tobacco products as a result of taxation increases on tobacco products. Figure 3.4 plots the quarterly percentage change - the results are very similar with the largest divergence occurring in December quarter 2014 following the biannual increase to the tobacco excise.

3.4 The remaining figures plot similar comparisons for the Fruit and vegetables, Meat and seafood and Bread and cereal products sub-groups. The price indexes show the published CPI and CPI (GEKS-Törnqvist) follow similar price trends overtime. Across the different sub-groups, the quarterly percentage between the published CPI and CPI (GEKS-Törnqvist) is mixed, with the published CPI reporting higher/lower price change relative to the CPI (GEKS-Törnqvist) for certain quarters. In general, the quarterly percentage change reported by the CPI (GEKS-Törnqvist) is less volatile relative to the published CPI. This is particularly evident with the Fruit and vegetables sub-group results, with the CPI (GEKS-Törnqvist) accounting for consumer substitution in response to large price increases from fruit products. In contrast, the CPI assumes consumers purchase the same quantity of fruit each period irrespective of relative price change.