CHAPTER 5: OTHER ISSUES
Introduction
Frequency of the release of the Producer and International Trade Price Indexes
Re-referencing the Producer and International Trade Price Indexes
Frequency of re-weighting the Producer Price Indexes
Terminology changes

INTRODUCTION

5.1 This chapter contains other issues related to improving aspects of the Producer Price Indexes (PPIs) and International Trade Prices Indexes (ITPIs). These were: the frequency of the release of the PPIs and ITPIs; re-referencing the PPIs and ITPIs; the frequency of re-weighting the PPIs; and terminology changes.

FREQUENCY OF THE RELEASE OF THE PRODUCER AND INTERNATIONAL TRADE PRICE INDEXES

ISSUE

5.2 The demand for more frequent release of the PPIs and ITPIs has been explored previously during the International Monetary Fund's (IMF) Report on the Observance of Standards and Codes (ROSC). There have been no further calls for monthly PPIs.


OUTCOME

5.3 The ABS will continue to focus on high quality, quarterly PPIs and ITPIs, which support the compilation and analysis of macroeconomic statistics, rather than releasing these series on a monthly basis.

RE–REFERENCING THE PRODUCER AND INTERNATIONAL TRADE PRICE INDEXES

ISSUE

5.4 The PPIs, ITPIs and the Consumer Price Index (CPI) have a variety of index reference periods (the index reference period is the period in which all index numbers have a value of 100.0). Differences in index reference periods make it difficult for users to compare index series.

5.5 The ABS proposes to harmonise the index reference periods for the PPIs, ITPIs and the CPI. This will simplify comparison of price movements between different price indexes. Re-referencing of the Labour Price Index and House Price Indexes will be undertaken at a later date.

5.6 Re–referencing should not be confused with re–weighting. Re-weighting updates a product or industry's weight to reflect changes in its relative importance. Re-weighting is discussed further below.


OUTCOME

5.7 From the September quarter 2012, the ABS will harmonise the index reference periods for PPIs (including the SOP indexes), ITPIs and the Consumer Price Index. These series will be presented on an index reference period of 2011–12 = 100.0.

FREQUENCY OF RE–WEIGHTING THE PRODUCER PRICE INDEXES

ISSUE

5.8 The review evaluated the periodicity of re–weighting the aggregate PPIs and ITPIs to ensure the indexes remain representative.

5.9 Over time, establishment production (or import and export) levels shift in response to economic conditions. Some products and industries become more important while others become less important. The IMF recommends statistical offices periodically update the weights in the PPI to reflect these changes in market structure. Best practice suggests that this be done at least once every five years. However, the faster the change in an economy's market structure, the more frequently the weights in the PPIs should be updated. For more information on updating index weights, see Information Paper: Producer and International Trade Price Indexes, Concepts, Sources and Methods, 2006 (cat. no. 6429.0).

5.10 The main data source for aggregate PPI weights are the 2008 SNA Input–Output (I–O) tables. The aggregate PPIs are re–weighted infrequently, with the SOP indexes last re–weighted for the December quarter 2002 (based on 1996–97 I–O tables) and other aggregate PPIs re–weighted for the September quarter 2009 (based on the 2001–02 I–O tables).

5.11 The frequency at which the Australian PPI is re–weighted is constrained by the frequency of the I–O tables. The production of I–O tables is not accounted for within the ABS baseline budget and has been dependant on additional government funding from time to time.

5.12 The ITPIs are currently weighted annually using International Merchandise Trade data from the Australian Customs and Boarder Protection Service. The annual re-weighting frequency is necessary due to the regular shifts in the product mix for imports and exports in response to changing economic conditions.


OUTCOME

5.13 The ABS will increase the frequency of re–weighting the PPIs in line with international recommendations to update weights at a minimum of once every five years. The ABS will undertake additional research to firm up the possibility for more frequent PPI re–weighting. The schedule of release of the National Accounts I–O tables will influence this outcome. The re–weighting frequency of the ITPIs will remain annual.

TERMINOLOGY CHANGES

ISSUE

5.14 Some of the terminology used in the PPIs and ITPIs is confusing. As a result the ABS proposes to change some terminology to better align with international standard terminology as used in the international frameworks, such as the 2008 System of National Accounts (2008 SNA) and the IMF's 2004 Producer Price Index Manual. Aligning with international standards will provide clarity of meaning and comparability.

5.15 Terminology will be updated in related publications (such as the Producer and International Trade Price Indexes: Concepts Sources and Methods) in early 2013.

5.16 Table 5.1 below describes the current terms in use, their meanings and a preferred term supported by current international frameworks and manuals.

Term	Context	Corresponding 2008 SNA term	Outcome
Sector	In the PPI context, sector has been taken to describe groupings of enterprises under an industrial classification such as ANZSIC (Division, Sub-division, Group or Class). Sector should only refer to groupings of institutions of similar ownership and role, such as the private non–financial corporations sector.	The correct terminology to describe those enterprises grouped under an industrial classification is Industry.	Industry or industry grouping will replace sector.
Materials	In the PPI context, materials has been used to describe intermediate inputs into production.	The 2008 SNA describes materials (and supplies) as consisting of all products that an enterprise holds in inventory with the intention of using them as intermediate inputs into production.	Products (goods and services) will replace Materials.
Articles	In the PPI context, articles has been used to describe the result of a process of production.	The 2008 SNA describes Products as goods and services that result from a process of production.	Products Produced will replace Articles Produced.
Commodity	In the PPI context a commodity is used to describe various states of product, from a raw material to a final good.	Commodities are generically described as goods.	Product will replace commodity.
Items	In the PPI context an item is used to describe the result of a process of production.	The 2008 SNA describes Products as goods and services that result from a process of production.	Product will replace item

5.17 As a consequence of the table above, there will be changes to the titles of the PPI and SOP indexes. Table 5.2 outlines the changes proposed to index titles from the September quarter 2012.

Table number	Index title pre September quarter 2012	Index title post September quarter 2012
Time series spreadsheets
Tables 1, 2, 3, 4, 24 and 25.	Stage of Production, Index Numbers and Percentage Changes	Stage of Production, Index Numbers and Percentage Changes
Tables 10 and 11	Articles Produced by manufacturing industries, division index numbers and percentage changes and index numbers for subdivisions, groups and classes	Output of the manufacturing industries, division index numbers and percentage changes and index numbers for subdivisions, groups and classes
Tables 12 and 13	Materials used in manufacturing industries, division index numbers and percentage changes and index numbers for selected materials	Input to the manufacturing industries, division index numbers and percentage changes and index numbers for selected industries
Table 14	Materials used in manufacturing industries, index numbers for subdivisions	Input to the manufacturing industries, index numbers for subdivisions
Table 15	Selected output of division E construction, subdivision and class index numbers	Output of the construction industries, subdivision and class index numbers
Tables 16 and 17	Materials used in house building, index numbers and percentage changes by state capital city	Input to the house construction industry, index numbers and percentage changes by state capital city
Table 18	Materials used in coal mining, index numbers and percentage changes	Input to the coal mining industry, index numbers and percentage changes
Table 19	Selected output of division I transport, postal and warehousing, group and class index numbers	Output of the transport, postal and warehousing industries, group and class index numbers
Table 20	Selected output of divisions J (information media and telecommunications), O (public administration and safety) and S (other services), group and class index numbers	Output of the information media and telecommunications, public administration and safety, and other services industries, group and class index numbers
Table 21	Selected output of division L rental, hiring and real estate services, subdivision, group and class index numbers	Output of the rental, hiring and real estate services industries, subdivision, group and class index numbers
Table 22	Selected output of division M professional, scientific and technical services, group and class index numbers	Output of the professional, scientific and technical services industries, group and class index numbers
Table 23	Selected output of division N administrative and support services, group and class index numbers	Output of the administrative and support services industries, group and class index numbers
Table 28	Indexes of metallic materials used in the fabricated metal products industry, index numbers	Metallic input to the fabricated metal products industry, index numbers
Table 30	Copper materials used in the manufacture of electrical equipment, index numbers and percentage changes	Copper input to the other electrical equipment manufacturing industry, index numbers and percentage changes
Data Cubes
Table 5	Stage of Production, Final commodities index points change: Final commodities index points change	Stage of Production: Final demand index points change
Table 6	Stage of Production: Domestic final commodities index points change	Stage of Production: Domestic final demand index points change
Table 7	Stage of Production: Imported final commodities index points change	Stage of Production: Imported final demand index points change
Table 8	Stage of Production Price Indexes: Intermediate commodities index points change	Stage of Production: Intermediate demand index points change
Table 9	Stage of Production Price Indexes: Preliminary commodities index points change	Stage of Production: Preliminary demand index points change
Table 26	Price indexes of articles produced by manufacturing industries, contribution of subdivisions and groups	Output of the manufacturing industries, subdivisions and groups index points change
Table 27	Price indexes of materials used in manufacturing industries, contribution of selected materials	Input to the manufacturing industries, index points change
Table 29	Price indexes of materials used in house building, All groups index: contribution of major building materials–Groups: contribution to weighted average of six State capital cities index (index points)	Input to the house construction industry, All groups and six State capital cities indexes: Index points change.

OUTCOME

5.18 From the September quarter 2012, the ABS will adopt 2008 SNA terminology when referencing indexes that align with the 2008 SNA. This will result in some changes to PPI series titles.