1301.0 - Year Book Australia, 2005  
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Contents >> Prices >> Producer price indexes

The producer price indexes measure changes in the prices received, or paid, by producers of commodities and providers of services. In Australia they generally relate to prices for goods and services as they affect businesses, for example, the price of goods used as input to or output from the manufacturing sector, the price of materials used as input to the building industry and, more recently, the price of services provided by the property and business services, and transport (freight) and storage industries. This contrasts with the CPI which measures changes in the retail prices paid by consumers, as explained earlier in this chapter.

Stage of production producer price indexes

These indexes are compiled using the 'stage of production' concept. Under this concept, flows of commodities are categorised according to their economic destination on a sequential basis along the production chain. The basis for the categorisation is the 1996-97 Australian input-output tables. The principal categorisation is between final commodities (i.e. commodities destined for final consumption, capital formation or export) and those commodities that will be processed further (referred to as 'non-final' commodities).

This initial breakdown of the commodity flows into final and non-final represents a useful economic dissection of producers' transactions. However, the non-final commodities can flow into the production of either final or other non-final commodities. Therefore, to aid analysis, the non-final commodity flows have been divided on a sequential basis between stage 1 (or preliminary) commodities and stage 2 (or intermediate) commodities. This approach results in three separate stages of production.

In order to avoid multiple counting of transactions, the three stages are not aggregated.

Under this framework, preliminary (stage 1) commodities are used in the production of intermediate (stage 2) commodities which, in turn, flow into the production of final (stage 3) commodities.

The framework allows for analyses of price change as commodities flow through production processes. Price changes for earlier stages of production may be indicators of possible future price changes for later stages.

Market transactions approach

The ABS has adopted a market transactions approach in disaggregating commodity supply into the various production stages. Under this approach, the individual transactions in a given commodity are assigned to the relevant stage, based on identification of the market(s) in which that commodity is transacted, which in turn is determined by the usage pattern of that commodity. A particular 'commodity', within the index classification system, can be assigned to more than one stage of production, on the basis of its usage pattern as identified in the input-output tables.

Index coverage

In concept, the scope of the stage of production indexes is economy-wide, relating to the output of all the goods and services industries. However, there are limits on the availability of price indexes for service industries, and coverage is currently restricted to the output of the accommodation, transport (freight) and storage, and property and business services sectors. Similarly, coverage of the construction sector is confined to indexes for the output of the following industries: house construction, residential building construction not elsewhere classified (n.e.c.), non-residential building construction, and road and bridge construction. Coverage of the stage of production indexes will be progressively extended as additional service and construction industry collections are established. Table 28.11 shows stage of production producer price indexes from 1998-99 to 2003-04.


28.11 STAGE OF PRODUCTION PRODUCER PRICE INDEXES(a), By stage and source
Preliminary
Intermediate
Final (excl. exports)
Domestic
Imports
Total
Domestic
Imports
Total
Domestic
Imports
Total
1998-99
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
1999-2000
104.1
107.1
104.5
103.4
104.4
103.6
104.3
95.7
102.6
2000-01
110.3
126.1
112.4
108.9
119.7
110.3
107.7
104.0
107.0
2001-02
111.8
120.3
112.9
111.3
115.9
111.9
110.0
103.7
108.8
2002-03
114.3
117.4
114.6
113.6
112.1
113.3
113.7
97.5
110.5
2003-04
115.3
105.6
113.8
114.9
99.9
112.7
118.5
86.7
112.0
(a) Reference base year is 1998-99 = 100.0.

Source: Producer Price Indexes, Australia (6427.0).


Manufacturing price indexes

Price indexes of articles produced by manufacturing industries

These indexes measure movements in the prices of articles produced by establishments classified to the Manufacturing Division of the Australian and New Zealand Standard Industrial Classification (ANZSIC), 1993 edition.

The indexes are constructed on a net sector basis. This approach means that the 'all manufacturing industry' index represents price movements of goods which are produced by establishments in the Manufacturing Division, for sale or transfer to establishments outside the Manufacturing Division, for export, or for use as capital equipment. Articles which are sold or transferred to other establishments within the manufacturing industry, for further processing or for use as inputs, are excluded.

The composition and weighting pattern of these indexes are based on the value of production in 1993-94 and they have a reference base of 1989-90 = 100.0.

The indexes were first published in June 1976 on a reference base of 1968-69 = 100.0, with indexes compiled retrospectively to July 1968. The composition and weighting patterns of the indexes were based on the value of production in 1971-72.

Table 28.12 sets out a summary index for articles produced. More detailed index numbers are contained in Chapter 18 Manufacturing.


28.12 PRICE INDEXES OF ARTICLES PRODUCED BY MANUFACTURING INDUSTRIES(a)(b)
Manufacturing Division index
1998-99
115.6
1999-2000
120.6
2000-01
128.5
2001-02
128.8
2002-03
130.3
2003-04
130.4
(a) Reference base year is 1989-90 = 100.0.
(b) For a full description of Division C, Manufacturing and the subdivisions within the Manufacturing Division, see the 'Australian and New Zealand Standard Industrial Classification (ANZSIC), 1993' (1292.0).

Source: Producer Price Indexes, Australia (6427.0).


Price indexes of materials used in manufacturing industries

These indexes measure changes in the prices of materials used by establishments classified to the Manufacturing Division of ANZSIC, 1993 edition.

Indexes are published for materials used in the manufacturing industry as a whole (split into imported and domestic materials) and for each of 17 separate manufacturing sectors (defined in terms of ANZSIC Subdivisions or ANZSIC Groups). Indexes are also published for materials sourced domestically and those that are imported.

The indexes are compiled and published on a net sector basis. That is, each index includes only those materials which are used in the defined sector of Australian manufacturing industry and which have been produced by establishments outside that sector.

The current index series were introduced in July 1996 on a reference base of 1989-90 = 100.0. The items included in the indexes were allocated weights in accordance with the estimated value of manufacturing usage in 1989-90.

The indexes were first compiled on a reference base of 1968-69 = 100.0, using a weighting pattern derived from the estimated manufacturing usage in 1971-72. Index numbers for this first series are available for the period July 1968 to November 1985.

A rebased series was introduced in December 1985 on a reference base of 1984-85 = 100.0 using a weighting pattern based on estimated manufacturing usage in 1977-78.

Table 28.13 shows summary indexes for materials used. More detailed index numbers are contained in Chapter 18 Manufacturing.


28.13 PRICE INDEXES OF MATERIALS USED IN MANUFACTURING INDUSTRIES(a)
Imported materials
Domestic materials
All materials
1998-99
113.5
101.5
105.9
1999-2000
118.8
114.5
115.8
2000-01
134.0
131.9
132.4
2001-02
130.3
134.1
132.4
2002-03
125.4
136.7
131.9
2003-04
115.2
134.1
125.9
(a) Reference base year is 1989-90 = 100.0.

Source: Producer Price Indexes, Australia (6427.0).


Construction price indexes

Price indexes of the output of the construction industry

The price indexes of the output of the general construction industry (table 28.14) measure changes in prices of the output of ANZSIC Subdivision 41 - General construction and in the output of the constituent groups and classes of this subdivision. These include house construction (measured using the CPI project home series, excluding sponsored government home buyers' schemes), other residential building construction, non-residential building construction and non-building construction. These indexes are used for the following purposes:
  • as an important input into the Australian national accounts by providing deflators for current price expenditure on general construction to calculate chain volume estimates
  • as an input into broader measures of price change, such as the economy-wide stage of production indexes
  • to aid industry analysis.

28.14 PRICE INDEX OF THE OUTPUT OF THE GENERAL CONSTRUCTION INDUSTRY(a)
1998-99
1999-2000
2000-01
2001-02
2002-03
2003-04
General construction subdivision (41)
100.0
104.9
106.1
107.9
112.7
121.1
Building construction (411)
100.0
105.0
106.0
107.8
112.4
121.2
House construction (4111)
100.0
107.2
109.1
112.0
116.5
123.7
Residential building construction n.e.c. (4112)
100.0
104.7
104.2
105.1
110.4
121.0
Non-residential building construction (4113)
100.0
103.3
103.9
105.1
109.6
119.5
Non-building construction(b) (412)
100.0
103.7
107.9
109.7
116.0
120.8
Road and bridge construction (4121)
100.0
103.7
107.9
109.7
116.0
120.8
(a) Reference base year is 1998-99 = 100.0.
(b) Road and bridge construction is the sole contributor to Non-building construction.

Source: Producer Price Indexes, Australia (6427.0).


Currently, road and bridge construction is the sole contributor to the index for ANZSIC Group 412 (Non-building construction). However, work is currently under way to extend the coverage to include ANZSIC Class 4122 (Non-building construction n.e.c.).

Price indexes of materials used in house building

The price index of materials used in house building measures changes in the prices of selected materials used in the construction of houses in the Statistical Division containing each state capital city.

The current index series were introduced in December 1995 on a reference base of 1989-90 = 100.0 and were linked to previous series. The items and weights for the current series are based on estimated materials usage in a sample of representative houses constructed in the three years ending June 1993.

The index was first compiled on a reference base of 1966-67 = 100.0, using a weighting pattern derived from estimated materials usage in 1968-69.

A rebased series of indexes, linked to the previous series, were introduced in October 1986 on a reference base of 1985-86 = 100.0. The items in the rebased series were selected and allocated weights on the basis of the estimated values of each material used in a sample of representative houses constructed in 1985-86.

Table 28.15 shows price index series for each of the six state capital cities and for the weighted average of the six state capital cities. The movements in the index are discussed in Chapter 19 Construction.


28.15 PRICE INDEXES OF MATERIALS USED IN HOUSE BUILDING(a)(b)
Sydney
Melbourne
Brisbane
Adelaide
Perth
Hobart
Weighted average of six state capital cities
1998-99
121.6
118.0
118.2
125.0
116.1
122.2
119.5
1999-2000
126.8
121.7
120.8
127.2
117.7
123.8
122.8
2000-01
130.0
123.1
120.6
129.6
118.8
126.0
124.4
2001-02
132.0
125.0
122.0
130.6
119.4
128.4
126.0
2002-03
137.2
128.4
127.6
135.7
123.0
133.7
130.5
2003-04
142.3
131.1
132.1
138.4
125.8
139.4
134.3
(a) Reference base year is 1989-90 = 100.0.
(b) The separate city indexes measure price movement within each city individually. They do not compare price levels between cities.

Source: Producer Price Indexes, Australia (6427.0).


Price indexes of materials used in building other than house building

The price index of materials used in building other than house building measures changes in the prices of selected materials used in the construction of buildings other than houses in the Statistical Division containing each state capital city. The types of building directly represented in the index are: flats and other dwellings; hotels, motels and hostels; shops; factories; offices; other business premises; education buildings; health buildings; and other non-residential buildings.

The current index series were introduced in October 1993 on a reference base of 1989-90 = 100.0. The composition of these indexes reflects the usage of materials in the five years ending June 1992.

The index was first compiled on a reference base of 1966-67 = 100.0 using a weighting pattern derived from estimated materials usage in 1966-67. Rebased indexes for the six state capital cities were introduced in February 1981 on a reference base of 1979-80 = 100.0. The composition of these indexes reflected the usage of materials in the three years ending June 1977.

Table 28.16 shows price index series for each of the six state capital cities and for the weighted average of the six state capital cities. The movements in the index are discussed in Chapter 19 Construction.


28.16 PRICE INDEXES OF MATERIALS USED IN BUILDING OTHER THAN HOUSE BUILDING(a)(b)
Sydney
Melbourne
Brisbane
Adelaide
Perth
Hobart
Weighted average of six state capital cities
1998-99
115.2
113.2
118.4
115.5
114.1
118.5
115.2
1999-2000
116.0
114.4
119.3
116.1
115.4
119.0
116.1
2000-01
116.1
115.4
119.1
116.8
115.6
119.3
116.4
2001-02
118.2
117.8
120.8
118.8
117.7
121.3
118.6
2002-03
123.0
122.7
126.9
123.5
122.8
124.2
123.6
2003-04(c)
127.1
126.7
131.2
126.8
127.7
127.0
127.7
(a) Reference base year is 1989-90 = 100.0.
(b) The separate city indexes measure price movements within each city individually. They do not compare price levels between cities.
(c) This index has been discontinued from 2003-04.

Source: Producer Price Indexes, Australia (6427.0).


Service industries price indexes

In recognition of the increasing contribution of service industries to the Australian economy, the ABS has progressively extended the scope of the producer price indexes into the service sectors of the economy. Service industry price indexes are an important part of a broader ABS plan to provide a range of statistics that will improve the measurement of various aspects of service industries in the Australian economy.

Since April 2000, the ABS has been publishing quarterly producer price indexes for the output of the Transport (freight) and Storage Division, and the Property and Business Services Division of ANZSIC. The Transport (freight) and storage index contains important freight transport industries such as road, rail, sea and air. The Property Services index contains services such as real estate agents and the hire and lease of machinery and equipment. The Business Services index contains a diverse range of services including surveying, computer services, legal and accounting services, employment placement, pest control and security services. The index numbers are calculated on the reference base 1998-99 = 100.0 using weighting patterns derived from the 1996-97 input-output domestic production tables and are released quarterly in Producer Price Indexes, Australia (6427.0).

As part of an ongoing program to improve the coverage and quality of ABS price indexes, a price index for accommodation has been developed and research is currently under way to extend the coverage of the services price indexes to include Postal and courier services and Telecommunication services.

The services price indexes aim to:
  • assist in improving the quality of the Australian national accounts by providing a wider range of deflators for deriving real (chain volume) measures of economic growth
  • contribute to the development of new measures of inflation by expanding the coverage of the indexes compiled under the economy-wide stage of production price indexes (see Stage of production producer price indexes)
  • be of use in their own right for industry analysis.

Tables 28.17, 28.18 and 28.19 provide broad level, summary index series.


28.17 PRODUCER PRICE INDEXES FOR SELECTED SERVICE INDUSTRIES, Transport (freight) and storage(a)
Road
transport
Rail
transport
Water
transport
Air and
space transport
Other
transport
Services to
transport
Storage
Transport (freight) and storage Division
1998-99
100.0
100.0
100.0
100.0
n.a.
100.0
100.0
100.0
1999-2000
101.0
94.4
103.8
99.1
n.a.
97.2
100.9
100.2
2000-01
103.1
95.3
109.8
102.7
101.8
97.2
102.1
102.3
2001-02
105.0
94.9
109.4
103.5
102.9
97.0
102.2
103.2
2002-03
107.3
94.8
106.3
111.4
103.4
100.2
103.3
105.2
2003-04
110.2
95.7
105.2
114.4
101.7
101.4
104.9
107.1
(a) Reference base year is 1998-99 = 100.0.

Source: Producer Price Indexes, Australia (6427.0).


28.18 PRODUCER PRICE INDEXES FOR SELECTED SERVICE INDUSTRIES, Property services(a)
Property operators
and developers
Real estate
agents
Machinery equipment
hiring and leasing
Property services Subdivision
1998-99
100.0
100.0
100.0
100.0
1999-2000
102.8
109.9
101.3
103.2
2000-01
109.0
121.6
100.9
108.7
2001-02
111.8
133.9
98.8
111.5
2002-03
111.2
149.7
100.0
113.3
2003-04
111.6
169.0
104.0
116.9
(a) Reference base year is 1998-99 = 100.0.
Source: Producer Price Indexes, Australia (6427.0).


28.19 PRODUCER PRICE INDEXES FOR SELECTED SERVICE INDUSTRIES, Business services(a)
Scientific
research
Technical
services
Computer
services
Legal and accounting services
Marketing and business management services
Other
business services
Business services Subdivision
1998-99
100.0
100.0
100.0
100.0
100.0
100.0
100.0
1999-2000
102.7
102.2
108.0
103.1
104.7
102.1
103.8
2000-01
104.7
103.6
111.2
107.7
109.5
103.7
106.9
2001-02
107.0
106.7
112.6
113.2
114.4
105.7
110.1
2002-03
113.5
113.4
114.7
117.7
117.0
108.9
113.6
2003-04
114.3
119.7
115.4
124.4
120.1
113.3
117.5
(a) Reference base year is 1998-99 = 100.0.

Source: Producer Price Indexes, Australia (6427.0).



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