6467.0 - Pensioner and Beneficiary Living Cost Index, Jun 2012 
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Quality Declaration ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 17/08/2012
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MOCK-UP OF SELECTED LIVING COST INDEXES, AUSTRALIA
From the September quarter 2012, the product Pensioner and Beneficiary Living Cost Index (cat. no. 6467.0) will also include information previously released in product Analytical Living Cost Indexes for Selected Australian Households (cat. no. 6463.0). At that time, the title of the product will also change to Selected Living Cost Indexes, Australia (cat. no. 6467.0). To assist users of these statistics familiarise themselves with the changes to this product, the material following is a mock–up which presents the appearance of the new product. Additionally, the Downloads tab contains three Time Series Workbooks which contain the series identifiers for longer time series that will be included from the September quarter 2012 issue.
FORTHCOMING ISSUES
CHANGES IN FUTURE RELEASES From the September quarter 2012, all index numbers will be calculated on a new index reference period of 2011–12. This will result in the index numbers for each index series being reset to 100.0 for the financial year 2011–12. Period–to–period percentage changes may differ slightly to those previously published due to rounding and the re–referencing. These differences do not constitute a revision. Further information on re–referencing can be found in Chapter 12 of Information Paper: Consumer Price Index Concepts, Sources and Methods, 2011 (cat. no. 6461.0). ROUNDING Any discrepancies between totals and sums of components in this publication are due to rounding. TIME SERIES DATA Longer time series of statistics presented in this product are available from the Downloads tab for this product on the ABS website. They are available as Time Series Workbooks:
ABBREVIATIONS
INQUIRIES For further information about these and related statistics, contact the National Information and Referral Service on 1300 135 070.
The Living Cost Indexes (LCIs) have been designed to answer the question: 'By how much would after tax money incomes need to change to allow households to purchase the same quantity of consumer goods and services that they purchased in the base period?' In the June quarter 2012, the living costs of pensioner and beneficiary households (PBLCI) rose 0.5%. Over the same period, the living costs of other government transfer recipient households rose 0.6%, employee households and age pensioner households rose 0.5%, and self–funded retiree households rose 0.4%. For more information about the June quarter 2012 results, see Main Contributors to Change. These differences have come about for a number of reasons. The inclusion of mortgage interest and consumer credit charges in the living cost indexes has a significant impact on employee and other government transfer recipient households. The inclusion of mortgage interest and consumer credit charges and the different treatments of housing and insurance in the LCIs result in variations between the LCIs and the CPI series. The expenditure patterns of those households measured by the LCIs differ from those of the overall household sector covered by the CPI. This also contributes to differences in the percentage changes. For a discussion of the relationship between the LCIs and CPI, see the Explanatory Notes.
Pensioner and beneficiary households The PBLCI rose 0.5% for the June quarter 2012. Food and non–alcohol beverages (+0.6%) made the largest contribution primarily driven by the rises in vegetables and fruit as a result of cooler weather conditions with rain and flooding affecting crops in the eastern states. Rents, medical and hospital services and tobacco also recorded rises for the June quarter 2012. Recreation and culture (–1.1%) contributed the most significant offset largely due to falls in domestic holiday travel and accommodation. Audio, visual and computing equipment and pharmaceutical products also recorded falls for the June quarter 2012. The PBLCI and the CPI recorded the same movement (+0.5%) in the June quarter 2012. Pensioner and beneficiary households have a relatively higher proportion (compared to the CPI population) of expenditure on fruit and vegetables, which rose this quarter. This was offset by a higher weight for pharmaceutical products, which recorded a fall this quarter. The PBLCI rose 1.0% through the year to the June quarter 2012. The PBLCI showed a smaller rise compared to the CPI (+1.2%) through the year to the June quarter 2012.
Employee households The living cost index for employee households rose 0.5% for the June quarter 2012 mainly due to rises in medical and hospital services, furniture, rents and vegetables. The major offsetting falls were provided by domestic holiday travel and accommodation and audio, visual and computing equipment. The LCI for employee households recorded the same rise as the CPI for the June quarter 2012. Employee households have a relatively higher proportion of expenditure on furnishings, household equipment and services, transport and food and non–alcoholic beverages than the CPI population, all of which recorded a rise this quarter. This was largely offset by a fall in interest charges, which for conceptual reasons is not included in the CPI. The LCI for employee households rose 0.7% through the year to the June quarter 2012. This is a smaller rise compared to the CPI rise of 1.2% through the year to the June quarter 2012. Age pensioner households The living cost index for age pensioner households rose 0.5% for the June quarter 2012 mainly due to rises in medical and hospital services, vegetables, fruit and furniture. The major offsetting falls were provided by domestic holiday travel and accommodation and pharmaceutical products. The LCI for age pensioner households recorded the same rise as the CPI for the June quarter 2012. Age pensioner households have a relatively higher proportion of expenditure on food and non–alcoholic beverages and health than the CPI population, both of which recorded a rise this quarter. This was largely offset by a fall in utilities for which age pensioner households have a relatively higher expenditure. The LCI for age pensioner households rose 0.7% through the year to the June quarter 2012. This is a smaller rise compared to the CPI rise of 1.2% through the year to the June quarter 2012. Other government transfer recipient households The living cost index for other government transfer recipient households rose 0.6% for the June quarter 2012 mainly due to rises in rent, tobacco and vegetables. The major offsetting falls were provided by domestic holiday travel and accommodation and audio, visual and computing equipment. The LCI for other government transfer recipient households showed a larger rise than the CPI for the June quarter 2012. Other government transfer recipient households have a relatively higher proportion of expenditure on housing and alcohol and tobacco, both of which recorded a rise this quarter. The LCI for other government transfer recipient households rose 1.3% through the year to the June quarter 2012. This is a larger rise than the CPI rise of 1.2% through the year to the June quarter 2012. Self–funded retiree households The living cost index for self–funded retiree households rose 0.4% for the June quarter 2012 mainly due to rises in medical and hospital services, vegetables, furniture and fruit. The major offsetting falls were provided by domestic holiday travel and accommodation and audio, visual and computing equipment. The LCI for self–funded retiree households showed a smaller rise than the CPI for the June quarter 2012. Self–funded retiree households have a relatively higher proportion of expenditure on recreation and culture which recorded a fall this quarter. The LCI for self–funded retiree households rose 0.7% through the year to the June quarter 2012. This is a smaller rise compared to the CPI rise of 1.2% through the year to the June quarter 2012.
OVERVIEW OF THE SELECTED LIVING COST INDEXES, AUSTRALIA 1 The Selected Living Cost Indexes, Australia publication incorporates the Pensioner and Beneficiary Living Cost Index (PBLCI) and the Analytical Living Cost Indexes (ALCIs). The ALCIs have been compiled and published by the ABS since June 2000. The PBLCI has been published since the June quarter 2009. The Living Cost Indexes (LCIs) were developed in recognition of the widespread interest in the extent to which the impact of price change varies across different groups in the community. These indexes are the conceptually preferred measures for assessing the effect of changes in prices on the out–of–pocket living expenses of subgroups of the Australian population. 2 LCIs are prepared for four types of Australian households:
3 The PBLCI is prepared to measure the effect of changes in prices on the out–of–pocket living expenses experienced by two Australian household types:
4 Households have been categorised based on the principal source of household income, derived from the 2009–10 Household Expenditure Survey (HES). The four household types in the scope of the HES account for just over 90% of Australian households. MAIN CONCEPTUAL DIFFERENCES BETWEEN THE CPI AND THE SELECTED LIVING COST INDEXES 5 A living cost index reflects changes over time in the purchasing power of the after–tax incomes of households. It measures the impact of changes in prices on the out–of–pocket expenses incurred by households to gain access to a fixed basket of consumer goods and services. The Australian Consumer Price Index (CPI), on the other hand, is designed to measure price inflation for the household sector as a whole and is not the conceptually ideal measure for assessing the changes in the purchasing power of the disposable incomes of households. 6 There are a number of ways to construct a consumer price index with at least three widely accepted alternative approaches used by national statistical agencies:
7 A living cost index is intended to be used to assess changes over time in the purchasing power of the after–tax incomes of households. It is therefore concerned with measuring the impact of changes in prices on the out–of–pocket expenses incurred by households to gain access to consumer goods and services. The item coverage of such an index is determined by reference to the actual money outlays of households on all but investment items. 8 From the September quarter 1998, the CPI has been constructed using the acquisitions method. The LCIs have been constructed using the outlays approach. 9 In practice, for most goods and services purchased by the reference population, outlays and acquisitions occur within a relatively short space of time. There are three areas of expenditure in which these conceptual approaches provide significantly different results:
10 Under the acquisitions approach used in the CPI, the net purchase of housing, the increase in volume of housing due to renovations, extensions and other costs (e.g. maintenance costs and council rates) are included for all owner–occupied housing. Changes in rental are measured for that part of the population that resides in rented dwellings. The CPI excludes interest paid on mortgages. 11 Under the outlays approach used in the LCIs, the changes in the amount of interest paid on mortgages (measured as part of Insurance and financial services) and other costs (e.g. maintenance costs and council rates) are included for owner–occupied housing. In addition, changes in rental are measured for that part of the reference population that resides in rented dwellings. The LCIs therefore exclude the net purchase of housing and the increase in volume of housing due to renovations or extensions. 12 Insurance (other than health insurance) is treated differently in the LCIs. Under the acquisitions approach, the weight for insurance in the CPI relates to the net value of the service provided by the insurance company. In simple terms, the amount of premiums paid by households less the amounts reimbursed by way of claims. Under the outlays approach used for the LCIs, the weight relates to the gross value of insurance premiums paid by households. 13 Financial services are treated differently in the LCIs. The LCIs includes mortgage interest and consumer credit charges but excludes all other financial services (i.e. deposit and loan facilities (direct charges), and other financial services). 14 The Selected Living Cost Indexes are published for the weighted average of eight capital cities only. METHODOLOGY 15 Construction of the LCIs was essentially undertaken in three stages. Stage one was concerned with calculating weights representative of the expenditure patterns of the defined household types. Stage two involved identifying appropriate measures of price change for each of the expenditure weights. The third and final stage was to use the weights to aggregate or average the price change measures. 16 From the September quarter 2011, the expenditure weights for employee households, age pensioner households and other government transfer recipient households changed from using state/territory expenditures to capital city level expenditures, consistent with the approach used for the CPI. The 2009–10 HES included additional sampling of age pensioner and other government transfer recipient households. Analysis of the results of the 2009–10 HES showed that the expenditure weights at the capital city level were sufficiently reliable for all household types with the exception of self–funded retiree households, thus improving the alignment and scope of the price collection and expenditure estimates leading to improved overall estimates. 17 The expenditure weights for self–funded retiree households were retained at the state/territory level. LCIs for all four household types are published as totals for the weighted average of eight capital cities only. The LCIs weighting patterns from the September quarter 2011 are available in the downloads tab in Analytical Living Cost Indexes and Pensioner and Beneficiary Living Cost Index: 16th Series Weighting Patterns, 2011 (cat. no. 6472.0). 18 The measures of price change, with the exception of those for interest charges, were sourced from the CPI. Most item price indexes were constructed by direct reference to the equivalent CPI expenditure class indexes. Expenditure classes are the lowest level at which the expenditure weights are fixed for the duration of an index series. 19 Some item price indexes were constructed by reference to lower level CPI price data. Such exceptions relate to those items where it is known that different household types face different prices, such as subsidised public transport fares and pharmaceuticals for senior citizens. 20 The coverage of the expenditure weights for the PBLCI households (age pensioner households and other households whose principal source of income is government benefits) is capital city level expenditures, consistent with the approach used for the CPI. Prior to the September quarter 2011 the PBLCI was derived by combining two existing LCIs – age pensioner and other government transfer recipients using weights at the state or territory level as previous HES data did not support capital city weighting for these sub populations. The ABS expanded the sample for the 2009–10 HES used in the PBLCI from the September quarter 2011 to include more households in the reference population i.e. age pensioner households and other government transfer recipient households. 21 Price measures for interest charges have been collected separately by the ABS on a basis comparable with those employed in the CPI prior to the September quarter 1998. 22 The Selected Living Cost Indexes, like the CPI, use an index reference period of 2011–12 = 100.0. SERIES LINKS 23 The LCIs for employee households, age pensioner households, other government transfer recipient households and self–funded retiree households were constructed using four sets of weights. The first set of weights, based on the 1993–94 HES, was used to construct the indexes from the June quarter 1998 to the June quarter 2000. The second set of weights, based on the 1998–99 HES, was used to construct the indexes from the September quarter 2000 to the June quarter 2005. The third set of weights, based on the 2003–04 HES, was used to construct the indexes from the September quarter 2005 to the June quarter 2011. The fourth set of weights, based on the 2009–10 HES, was used to construct the indexes from the September quarter 2011 quarter onwards. 24 The PBLCI was constructed using two sets of weights. The first set of weights, based on the 2003–04 HES at the national level, was used to construct the PBLCI from the June quarter 2007 to the June quarter 2011. The second set of weights, based on the 2009–10 HES at the weighted average of the eight capital cities level, was used to construct the PBLCI from the September quarter 2011 onwards. EXPENDITURE PATTERNS OF THE SELECTED HOUSEHOLD TYPES 25 Calculation of the aggregate impact of price changes on each of the household types involves weighting together the price movements recorded for individual goods and services. For each household type, the weight assigned to any particular good or service reflects the proportion of total household expenditure accounted for by expenditure on the item. The Selected Living Cost Indexes' weekly average household expenditure, weighting patterns and comparison with the previous weighting pattern by household type are available in the downloads tab in Analytical Living Cost Indexes and Pensioner and Beneficiary Living Cost Index: 16th Series Weighting Patterns, 2011 (cat. no. 6472.0). 26 Table 1 shows average weekly expenditure during 2009–10 for each of the four household types, at June quarter 2011 prices. The commodity groups correspond to the commodity groups in the current (16th series) CPI. 27 Table 1 illustrates significant differences in expenditures, both in total and at the individual commodity group level across the household types. Although differences in incomes are likely to be a major reason for this, other factors such as the demographic make–up of the households and dwelling tenure would also play a part. For example, age pensioner households have on average the lowest number of persons per household and self–funded retiree households have a higher than average rate of outright home ownership. Table 2 provides the estimated household size during 2009–10.
28 Table 3 presents estimated average weekly expenditure data (see table 1) in percentage terms, along with the CPI for comparison purposes. It is this expenditure data that is used to produce the expenditure shares or weights that are assigned to each household type and to which the price movements are applied.
29 There are some notable differences in the expenditure weights across the household types. For example, the proportion of expenditure allocated to Food and non–alcoholic beverages is highest for age pensioner households. It is also relatively high for other government transfer recipient households. Employee households allocate a higher proportion of their expenditure to Transport, Education and Insurance and financial services (which includes interest charges) than the other household types. Other government transfer recipients allocate higher proportions of their expenditure to Housing, Alcohol and tobacco and Communication than the other household types. Self–funded retiree households have higher relative expenditure on Furnishings, household equipment and services, and Recreation and culture than the other household types. Health costs account for a significantly higher proportion of expenditure of age pensioner and self–funded retiree households than the other household types. ROUNDING 30 The Living Cost Indexes use a hierarchy of rounding procedures to ensure consistency between published index numbers and percentage changes. However, rounding differences can arise in the 'points contributions' published because of the different levels of precision required in those data. Document Selection These documents will be presented in a new window.
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