Construction Industry Output Price Indexes

NAME OF ORGANISATION
Australian Bureau of Statistics (ABS)

OVERVIEW
Construction industry output price indexes are being developed to measure changes over time in the price of new construction outputs, other than houses. A price index for new houses is produced as part of the Consumer Price Index (CPI).

Price indexes of the output of the building other than house building industry and the road and bridge construction industry are in production and available for dissemination.

Indexes for other construction outputs will be developed and released progressively under a long term program to extend the scope of Producer Price Indexes (PPI).

PURPOSE
Construction industry output price indexes are used as deflators in the calculation of chain volume estimates of capital expenditure in the Australian National Accounts. The indexes are also important inputs into Stage of Production Producer Price Indexes.

The construction industry is one of the driving areas in the economy, having a significant contribution to GDP and a multiplier effect on the activity in other industries. Indicators of price movement of construction outputs will be a valuable tool in economic analysis.

Construction output indexes can also be used for contract adjustment and asset revaluation.

SCOPE
Building Other than Houses
Although in concept the scope of the index is the Australian output of Australian and New Zealand Standard Industrial Classification (ANZSIC) classes 4112 Residential Building Construction n.e.c. and 4113 Non-Residential Building Construction, user requirements and practical considerations have dictated a narrower coverage. Firstly, in line with user requirements, the index covers new construction only. Repair and maintenance are excluded. Secondly, although buildings of all functional categories, constructed in all regions of Australia are within scope, the practical difficulties of measuring price movements for such a great range of structures has required that the index focus on the movement in price of a selection of representative building types in capital cities (with the exception of Queensland where North Queensland is also covered). Building types were selected to cover a range of building complexity. The building types used for 4112 are flats and townhouses, and for 4113 are offices (large and small), shops (large and small), hotels, factories, warehouses and health buildings.

As construction indexes are output indexes the valuation basis of the building output is at basic prices. Therefore, the price excludes Goods and Services Tax (GST) and any subsidies. The price of a building is defined as excluding the price of land, siteworks (such as demolition, land clearance, roads), external services (such as drainage, water and electricity connection) and design.

Even within the focused coverage of the index, the output of the industry is of such a variable nature that conventional pricing methodology cannot be used. Instead, movement in the price of buildings is being measured using a component cost method. In this method, buildings are regarded as a set of standardised homogenous components. The price movement of a whole structure is effectively derived by measuring the price movements of its components.

Each quarter, component prices for each region are provided by a consulting quantity surveyor. Prices are for work in place, paid by a prime contractor to a subcontractor.

The component prices are as close as possible to market prices, that is they reflect not only labour, material and plant input costs, but also subcontractors' margin. The preliminary and overhead expenses are covered in the building price, however due to the difficulty in obtaining an objective measure of a prime contractor's margin which is representative of all the activity which is within the scope of the index, the prime contractor's margin is fixed.

DATA DETAIL

Conceptual framework
Building Other than Houses
These indexes measure changes in the price of the output of the building construction industries other than the house construction industry. These industries are Australian and New Zealand Standard Industrial Classification (ANZSIC) classes 4112 Residential Building Construction n.e.c. and 4113 Non-Residential Building Construction.

As construction indexes are output indexes the valuation basis is basic prices. Therefore, as far as possible, the builders' selling prices are reflected in the index, excluding GST. The value of land is also excluded.

The index is a fixed weights indexes. The items included in the index are chosen on the basis of work done, categorised by function and State of activity, as recorded in the ABS Building Activity statistics for the five years to 1998-99. At the top level of the index structure (ie the 4 digit ANZSIC classes: 4111, 4112 4113 and 4121), the values are calculated from National Accounts Input Output statistics.

Roads and Bridges
This index measures changes in the price of the output of the road and bridge construction industry, ANZSIC class 4121.

As construction indexes are output indexes the valuation basis is basic prices. Therefore, as far as possible, the constructors' selling prices are reflected in the index, excluding GST. The value of land is also excluded.

The index is a fixed weights indexes. The items included in the index are chosen on the basis of work done, categorised by type, sector and State of activity, as recorded in the ABS Engineering Construction Activity statistics for the five years to 1998-99.

Main outputs
The price indexes of residential building construction n.e.c., non-residential building, and road and bridge construction are components of the price index of the Output of the General Construction Industry published in Table 15 of Producer Price Indexes, Australia (ABS cat. no. 6427.0). These indexes are also published separately in Table 16 which measures changes in the price of the output of the constituent ANZSIC groups and classes of the General Construction subdivision.

The price indexes of residential building construction n.e.c., non-residential building, and road and bridge construction are components of the Stage of Production Producer Price Indexes also published in ABS cat no. 6427.0.

Classifications
The Australian and New Zealand Standard Industrial Classification (ANZSIC), 1993 provides the classification framework for the index.

Other concepts (summary)
All concepts have been noted in Conceptual Framework.

GEOGRAPHIC DETAIL
Australia
New South Wales
Victoria
Queensland
South Australia
Western Australia
Tasmania
Northern Territory
ACT

Comments and/or Other Regions
Not applicable

COLLECTION FREQUENCY
Quarterly

Frequency comments
Generally prices are collected on a quarterly basis but there are some prices collected on an annual basis.

COLLECTION HISTORY
Price Indexes of the Output of the Building Other Than House Building Industry (comprising of indexes for residential building construction n.e.c. and non-residential building) were first published as components of the price index of the Output of the Building Industry, in Table 16 of the June 2001 issue of Producer Price Indexes, Australia (ABS catalogue no. 6427.0). Compilation of the index began for the December quarter 1998, with a time series commencing in the June quarter of 1996. The index reference period is 1998-99=100.

The Price Index of the Output of the Road and Bridge Construction Industry was first produced in an experimental form in the March quarter 2000, and was first published in Table 16 of the September 2002 issue of Producer Price Indexes, Australia (ABS catalogue no. 6427.0). The index time series commences in the September quarter 1997 and the index reference period is 1998-99=100.

DATA AVAILABILITY
Yes