International Trade Price Index
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NAME OF ORGANISATION PURPOSE Import and export prices are important extensions of domestic PPIs. They are used in the deflation of external trade values to provide indicators of the volume of international trade. Also, import prices feed into producer input indexes, since these are an important contribution to producer costs. Similarly, export prices feed into producer output indexes, since exports frequently represent a significant component of producer revenue. Price instability introduces uncertainty into economic analysis and decision making, so the main uses of the PPI and ITPI relate to efforts to minimise that uncertainty. They have the following main uses: SCOPE International Trade Price Indexes International trade price indexes measure changes in the price paid for imports of merchandise that are landed in Australia each quarter and prices received for exports of merchandise that are shipped from Australia each quarter. The import price index excludes the following items (representing approximately 5% of the value of merchandise imported during the weighting period) because of the inherent difficulties in pricing the items to constant quality: The export price index includes re-exports of merchandise (i.e. goods which are imported into Australia and exported at a later date without physical transformation). DATA DETAIL Conceptual framework The export price index includes re-exports of merchandise (i.e. goods which are imported into Australia and exported at a later date without physical transformation). Price measurement In general, prices of individual shipments are obtained from major importers and exporters of the selected items and relate to the quarter in which the imported goods physically arrive in Australia and the exported goods physically leave Australia. Imports are priced on a 'free on board' (f.o.b.), country of origin basis. Therefore freight and insurance charges involved in shipping goods from foreign to Australian ports are excluded from the prices used in the index, as are Australian import duties and taxes. Similarly, exports are priced on a f.o.b. basis at the main Australian ports of export. Exports are exempt from taxes on products. As the prices used in the indexes are expressed in Australian currency, changes in the relative value of the Australian dollar and overseas currencies can have a direct impact on price movements for the many commodities that are bought and sold in currencies other than Australian dollars. Prices reported in a foreign currency are converted to Australian dollars using relevant exchange rates. Where imports or exports are transacted in prices expressed in terms of a foreign currency and forward exchange cover is used, the prices in the indexes exclude the forward exchange cover. The main pricing methodology used is specification pricing, under which a manageable sample of precisely specified products is selected, in consultation with each reporting business, for repeat pricing. In specifying the products, care is taken to ensure that they are fully defined in terms of all the characteristics which influence their transaction prices. As such, all the relevant technical characteristics need to be described (e.g. make, model, features) along with the unit of sale, type of packaging, conditions of sale (e.g. delivered, payment within 30 days), etc. The goods are also specified by country and market in order to lessen the impact of price variations attributable solely to changes over time in the mix of countries, or markets. When the quality or specifications of an item being priced change over time, adjustments are made to the reported prices so that the index captures only pure price change. That is, any element of price change attributable to a change in quality is removed. If there is an increase (decrease) in the quality of an item, then the price index is adjusted downwards (upwards) to reflect the 'worth' of the quality change. This technique is known as pricing to constant quality. Wherever possible, prices from volume selling products being traded with predominant countries, or markets, are obtained to ensure specifications have a good chance of being re-priced over time and index series are representative of overall price movements. Individual product weights and weights between markets and countries are regularly reviewed to keep the indexes up to date. Items and weights The import price index and export price index are annually reweighted chained Lowe indexes. This method of weighting was introduced in the September quarter 2000 and replaces the 'fixed-base' method of weighting in which the weighting patterns are updated infrequently (generally once every 5 or 10 years). The annual reweighting and chaining process involves a number of steps in order to provide new weights each year. Each September quarter the weights of the import price index are updated to reflect the average value of merchandise imports landed in Australia in the previous financial year. This differs slightly from the export price index where the weights are updated in the September quarter of each year and are derived from the average value of export items during the two previous financial years, due to the greater volatility associated with the value of export items. The weights are revalued to reflect link period (June quarter of the latest year) price levels; this means, for example, that in the September quarter 2005, the weights for the import price index are effectively determined using quantities from 2004-05 and prices from June quarter 2005. Indexes derived by using the new weights for the September quarter 2005 are then linked to the already published June quarter 2005 (link period) levels which were derived using the previous series weights. Using this methodology, long-term chain linked series can be constructed over time on a consistent reference base for continuity and user convenience, but using annually refreshed weights. The reference base for each index series continues to be 2011-12=100 even though the weights are being updated each year. The commodities directly represented in each index (the index items) are selected on the basis of the significance of their import and export values in relevant weighting period. All significant commodities were selected for pricing. The weights for minor commodities which are not directly priced are included with those of comparable directly priced items whose prices are likely to move in a similar way. Main outputs Classifications
The import price index is also presented by Balance of Payments Broad Economic Categories which have been disaggregated into balance of payments groupings of consumption goods, capital goods and intermediate and other merchandise goods and ANZSIC division and subdivision. The export price index is also presented by Balance of Payments classification of export groupings and ANZSIC division and subdivision. Other concepts (summary) Comments and/or Other Regions Frequency comments Data availability comments Document Selection These documents will be presented in a new window.
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