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QUALITY DECLARATION - SUMMARY

INSTITUTIONAL ENVIRONMENT

The ABS is independent of government, with the Australian Bureau of Statistics Act 1975 giving the Statistician the power to control the operations of the ABS. For information on the institutional environment of the Australian Bureau of Statistics (ABS), including the legislative obligations of the ABS, financing and governance arrangements, and mechanisms for scrutiny of ABS operations, please see ABS Institutional Environment.


RELEVANCE

The Analytical Living Cost Indexes (ALCIs) provide quarterly information about the price change on out-of-pocket living expenses for four population sub-groups: employee households; age pensioner households; other government transfer recipient households; and self-funded retiree households. The ALCIs inform users of the extent to which the impact of price change varies across these different subgroups of the Australian population.

The ALCIs are designed to measure effect of price change on out-of-pocket living expenses of households (outlays approach), while the CPI is designed to provide a general measure of price inflation for all Australian households (acquisitions approach). In practice, for most goods and services purchased by households there is no difference between the two approaches. However, there are three areas of expenditure in which these conceptual approaches provide significantly different results: purchase of dwellings; purchase of durable items; and financial services and the use of credit.

The movements for the ALCIs are produced as a by-product of the equivalent CPI expenditure class in the majority of cases. The composition of the ALCIs baskets are based on the pattern of household expenditure, and is based primarily on data obtained from the Household Expenditure Survey (HES). The ALCIs are published at the national level only.


TIMELINESS

The ALCIs are released each quarter (three months ending March, June, September and December). The data are typically released on the third Monday of the second month after the end of the reference quarter, depending on public holidays, but no later than the last Monday of the second month after the end of the reference quarter.


ACCURACY

The ALCIs provide a measure of the impact of price change on out-of-pocket expenses incurred by selected household types to obtain a fixed basket of consumer goods. In calculating an average measure of this type it is necessary to recognise that some items are more important than others. Measures of expenditure on each of the expenditure classes are obtained from the latest available HES, which is the only authoritative source of data on the expenditures of different household types. As the HES sample is currently not considered large enough to provide reliable estimates for ALCI households at the capital city level, the expenditure weights for ALCI households are derived at a national level only.

With the exception of interest charges, all price movements used in the ALCIs are sourced from the CPI typically at the expenditure class level. The collection of prices in each capital city is largely carried out by trained field staff. Prices are collected in the kinds of retail outlets and other places where metropolitan households purchase goods and services. This involves collecting prices from many sources such as supermarkets, restaurants, travel agents and schools. Prices are collected by personal visits, telephone or internet as appropriate. The frequency of price collection by item varies as necessary to obtain reliable price measures.

As the ALCIs aim to measure price changes for a fixed basket of goods and services over time, identical or equivalent items must be priced in successive periods. However, as items available in stores are constantly changing, these changes in the quality must be identified and adjusted for to ensure that the index reflects only 'pure' price changes. These adjustments take place during the compilation of the CPI and are also used in the ALCIs price movements.

The ALCIs are produced as index numbers rounded to one decimal place. Revisions have never occurred and will only occur in exceptional circumstances.


COHERENCE

The ALCIs were first compiled and published for June quarter 2000, with the series backdated to June quarter 1998. Prior to June quarter 1998, the CPI was designed as a measure of changing living costs of wage and salary earner households and compiled on the outlays approach. The ABS regularly reviews weights of items for the four household types, and has expanded the sample for the 2009-10 HES to include more households in order to improve the reliability of the pensioner household expenditure estimates.


INTERPRETABILITY

Movements in indexes from one period to another can be expressed either as changes in index points or as percentage changes. Percentage changes are calculated to illustrate two different kinds of movements in index numbers:

• movements between corresponding quarters of consecutive years
• movements between consecutive quarters.