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Chapter 15. Rebasing and reweighting of indexes
Introduction
15.1. Each of the producer and foreign trade price indexes is rebased and reweighted periodically on a rolling cycle. The rebases and reweights are conducted to ensure that:
- the scope and coverage of the indexes continue to meet the needs of users;
- the structure of the indexes reflect the up-to-date activities of the sector concerned;
- the burden on respondents is minimised; and
- the weights being used continue to be representative of the sector concerned.
Weighting patterns
15.2. Between index rebases and reweights the weighting for the index remains fixed at the regimen level (i.e. the level of detail for which weights have been published). Below the regimen level, the weights used to combine items or specifications are subject to change as the items and specifications being priced are changed to reflect current market experience. This is the process of on-going sample review and maintenance previously described in paragraph 12.10. It could be argued that, in order to compile a pure fixed-weight Laspeyres index, the weights should remain fixed at all levels. In practice, this is not feasible because of the constant changes in the range of specific goods that have to be priced in order to reflect current market behaviour.
15.3. It is, of course, a matter of judgement as to the precise level at which the weights should be fixed. In general, the objective is to fix the weights at a level which represents clear distinctions between individual goods that are not readily substitutable but that are still significant to the sector. Flexibility to change weights is retained at a lower level to reflect changes in proportions of sales/purchases of those goods that are readily substitutable for one another.
15.4. In selecting the weighting base period for a price index series there is normally an underlying assumption that the sales/purchases patterns in that period will remain broadly representative for at least a substantial part of the intended life of the series. Sometimes it is necessary, therefore, to use sales/purchases data for two or three years to derive an average (representative) pattern for an index. This approach removes any anomalies that arise because of unusual activity in any particular year.
15.5. In other cases, it may be recognised that the sales/purchases pattern is changing for a significant item (e.g. a substantial increase or decrease in the quantum being transacted is occurring). In such cases, it is desirable to reflect the change in the index and to depart from a strict adherence to the normal data source for the weighting base period. For example, in the recent review of the Articles Produced by Manufacturing Industries index the main weighting data used was the 1986-87 Manufacturing Census. However, this data did not reflect the large increase in gold refining that had subsequently taken place. As a result, export data from a more recent period was used to adjust the weights.
15.6. The fixed weighting patterns currently being used for each index are provided in Chapters 4 to 11. These chapters also discuss the data sources used to calculate these weights.
Other rebasing and reweighting activities
15.7. Apart from revising the weighting pattern for an index, the process also provides the opportunity for reassessing all other aspects of the index involved.
15.8. In particular, consultations are held with a sample of users of the indexes, including Federal Government, State Government, industry associations and other interested parties, to identify any changes that may be required.
15.9. Detailed consideration is given to the scope, coverage and structure of each index to ensure that they continue to appropriately reflect the sector concerned. Attention is also given to minimising the burden on respondents to the index while maintaining data quality.
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