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BRIEF DESCRIPTION OF THE CPI

1 The Consumer Price Index (CPI) measures quarterly changes in the price of a ‘basket’ of goods and services which account for a high proportion of expenditure by the CPI population group (i.e. metropolitan households). This ‘basket’ covers a wide range of goods and services, arranged in the following eleven groups:

food
alcohol and tobacco
clothing and footwear
housing
household furnishings, supplies and services
health
transportation
communication
recreation
education
miscellaneous.

3 Further information about the CPI is contained in Australian Consumer Price Index: Concepts, Sources and Methods (cat. no. 6461.0) which is available on the ABS web site <https://www.abs.gov.au>.

PRICES

4 The frequency of price collection by item varies as necessary to obtain reliable price measures. Prices of some items are volatile (i.e. their prices may vary many times each quarter) and for these items frequent price observations are necessary to obtain a reliable measure of the average price for the quarter. Each month prices are collected at regular intervals for goods such as milk, bread, fresh meat and seafood, fresh fruit and vegetables, alcohol, tobacco, women's outerwear, project homes, motor vehicles, petrol and holiday travel and accommodation. For most other items, price volatility is not a problem and prices are collected once a quarter. There are a few items where prices are changed at infrequent intervals, for example education fees where prices are set once a year. In these cases, the frequency of price collection is modified accordingly.

5 In order to facilitate a more even spread of field collection workload, the number of items for which prices are collected quarterly is distributed roughly equally across each month of each quarter. In all cases, however, individual items are priced in the same month of each quarter. For example, items for which prices are collected in the first month of the September quarter, July, are also priced in the first month of subsequent quarters, namely October, January and April.

WEIGHTING PATTERN

6 There are 89 expenditure classes (that is, groupings of like items) in the fourteenth series CPI and each expenditure class has its own weight, or measure of relative importance. In calculating the index, price changes for the various expenditure classes are combined using these weights.

7 Changes in the weighting pattern have been made at approximately five-yearly intervals to take account of changes in household spending patterns. The CPI now comprises fourteen series of price indexes which have been linked to form a continuous series. The current weighting pattern for the CPI is given in A Guide to the Consumer Price Index, 14th Series (cat. no. 6440.0) and Australian Consumer Price Index: Concepts, Sources and Methods (cat. no. 6461.0) which are available on the ABS web site <https://www.abs.gov.au>.

ANALYSIS OF CPI CHANGES

8 Movements in indexes from one period to another can be expressed either as changes in index points or as percentage changes. The following example illustrates the method of calculating changes in index points and percentage changes between any two periods:
All groups CPI: Weighted average of eight capital cities. Index numbers:

March Quarter 2005 147.5 (see table 1)
less December Quarter 2004 146.5 (see table 1)
Change in index points 1.0
Percentage change 1.0/146.5 X 100 = 0.7%

• movements between consecutive financial years (where the index numbers for financial years are simple averages of the quarterly index numbers)
• movements between corresponding quarters of consecutive years
• movements between consecutive quarters.

SPECIAL SERIES

11 Various series are presented in tables 8, 9 and 10 in this publication which are helpful for analytical purposes. These series are compiled by taking subsets of the CPI basket. (A complete list of CPI groups, subgroups and expenditure classes is contained in tables 6 and 7.)

12 Some of the compiled series are self explanatory, such as ‘All groups excluding Food’. Other series and their composition are described below:

• All groups, goods component: comprises the Food group (except Restaurant meals), Alcohol and tobacco group, Clothing and footwear group (except Clothing services and shoe repair) and Household furnishings, supplies and services group (except Household services); the Utilities, Audio, visual and computing and Books, newspapers and magazines sub-groups; and the House purchase, Pharmaceuticals, Motor vehicles, Automotive fuel, Motor vehicle parts and accessories, Sports and recreational equipment, Toys, games and hobbies, Pets, pet foods and supplies and Toiletries and personal care products expenditure classes.
• All groups, services component: comprises all items not included in the ‘All groups, goods component’.
• All groups, tradables component: comprises all items whose prices are largely determined on the world market.
• All groups, non-tradables component: comprises all items not included in the 'All groups, tradables component'.
• All groups excluding ‘volatile items’: comprises the All groups CPI excluding Fruit and vegetables and Automotive fuel.
• Market goods and services excluding ‘volatile items’: in addition to the items excluded from the series 'All groups excluding ‘volatile items’', also excludes: Utilities, Property rates and charges, Health, Other motoring charges, Urban transport fares, Postal, Education and Child care.

INTERNATIONAL COMPARISONS

14 In analysing price movements in Australia, an important consideration is Australia's performance relative to other countries. However, due to the many differences in the structure of the housing sector in different countries and in the way that housing is treated in their CPIs, a simple comparison of All groups (or headline) CPIs is often inappropriate. To provide a better basis for international comparisons, the Fourteenth International Conference of Labour Statisticians adopted a resolution which called for countries to ‘provide for dissemination at the international level of an index which excludes shelter, in addition to the all-items index’.

15 Table 11 presents indexes for selected countries on a basis consistent with the above resolution and broadly comparable to the Australian series ‘All groups excluding Housing’. To facilitate comparisons all indexes in this table have been converted, where necessary, to a quarterly basis and re-referenced to a base of 1989-90 = 100.0.

16 In producing table 11, the ABS is grateful for the assistance of the relevant national statistical agencies which have either directly supplied indexes for all items excluding shelter or data to enable their derivation.

RELATED PUBLICATIONS

17 Current publications and other products released by the ABS are listed in the Catalogue of Publications and Products (cat. no. 1101.0). The Catalogue is available from any ABS office or the ABS web site <https://www.abs.gov.au>. The ABS also issues a daily Release Advice on the web site which details products to be released in the week ahead.

18 Users may also wish to refer to the following publications and other data products:

• A Guide to the Consumer Price Index, 14th Series (cat. no. 6440.0)
• Average Retail Prices of Selected Items, Eight Capital Cities (cat. no. 6403.0.55.001)
• House Price Indexes: Eight Capital Cities (cat. no. 6416.0)
• Information Paper: Price Indexes and the New Tax System (cat. no. 6425.0)
• Information Paper: Introduction of the 14th Series Australian Consumer Price Index (cat. no. 6456.0)
• Australian Consumer Price Index: Concepts, Sources and Methods (cat. no. 6461.0).