Australian CPI, Concepts, Sources and Methods
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Warning - this online document is now out of date. An acrobat version of this document was recently released. Please use this version for the most up to date information. See Australian Consumer Price Index: Concepts, Sources and Methods (cat. no. 6461.0). TABLE 8.1: FOOD GROUP INDEX STRUCTURE
Specific issues Price collection 8.33 In general, prices for processed foods are collected quarterly while prices for fresh foods are collected monthly as they tend to fluctuate more. Areas requiring special pricing procedures Bread 8.34 The prices of packaged loaves of bread tend to fluctuate a lot. Consequently this product is priced monthly while loaves of fresh baked bread are priced quarterly. Products such as bread rolls are sold by piece rather than by weight and are excluded since it is generally not possible to ensure that they are priced to a constant quality. Price movements for similar products are used to represent price movements for these products. For example, in the case of bread rolls, price movements are represented by the movements in prices for loaves of bread. Fresh fruit and vegetables 8.35 Fresh fruit and vegetables are usually priced on a ‘volume seller’ basis, whereby the variety of a particular fruit or vegetable in greatest demand is priced. When fruit and vegetables are not available due to being out of season, prices are imputed based on price movements of substitute produce that is available. Meals out and take away food 8.36 Restaurant meals are priced at a variety of restaurant types (categorised with regard to level of service and of food styles). Entrees, main meals and desserts are priced separately, and to ensure adequate coverage, main meals based on several types of meat dishes, and a variety of entrees and desserts, are priced. 8.37 In certain cases, the distinction between an eat-in restaurant meal and a takeaway meal can be blurred. For example, some take away food establishments have tables on their premises for customers to consume their food, despite their main business being a takeaway food outlet. A general rule used to distinguish between restaurant and takeaway meals is that table service will be provided in restaurant meals. In the example provided earlier, no table service is provided for the meals consumed at the tables provided by the establishment and therefore, these will be treated as takeaway meals. Seasonality 8.38 A number of items in the Food group are subject to seasonal influences, especially fresh meat, fresh seafood and fresh fruits and vegetables. When an item is out of season and unavailable, the price of the item is normally moved forward in line with changes observed in prices of close substitute products or items in the same expenditure class. For example, the expenditure class 'Citrus fruits' consists of three different types of fruits, which are grapefruit, mandarins and oranges. If mandarins are out of season, then the price movement for 'Citrus fruits' generated by changes in orange and grapefruit prices will be used to impute the price of mandarins. Refer to Chapter 7 for a more detailed explanation of the treatment of seasonal items. 8.39 In some cases, it is not unusual for products that are out of season to be still available, although the product may be of substandard quality and in low supply. Field officers will not accept prices in these cases and will treat the product as though it were not available. Quality adjustments 8.40 Quality adjustments are frequently required for items priced within the Food group. Food items sold in packages (e.g. breakfast cereals) often undergo changes in packaging sizes and content mixture. To ensure that such items are priced on a 'constant quality' basis, the collected prices are quality adjusted to remove the packaging size or content changes. 8.41 Products in the Food group are also subject to regular market innovations, for example, the addition of new ingredients into food products or the existing product is now marketed under a new formula. In these cases, it is sometimes difficult to decide whether to treat the change as a quality adjustment or to assume that a new product has been put on the market. Generally, the choice of treatment will depend on the results of analysis based on sales and market information and close monitoring of these modified products for an extended period. 8.42 An area of the Food group where quality is an important issue is in the pricing of fresh meat, seafood and vegetable products. Mincemeat, for example, can come in normal or premium grade and considerable care is taken by field officers to ensure that comparable grades are priced in each period. Regular assessments of the consumption of each grade type are also conducted to ascertain which grade should be priced. Prices of most meat items are taken from the price displayed in the retail outlets, which are usually quoted on a per kilo basis. However, some particular cuts of meat are sold as an item, for example, a leg of lamb. In these cases, both the actual weight of the item and the associated price are collected to enable a comparison on a per kilo basis, thus removing any price variations caused by weight differences. Similarly, some vegetable produce (e.g. cauliflower and lettuce) are also sold as a whole item and not by weight. To ensure that price comparisons of these items are on a 'constant quality' basis, a per kilo price is estimated by the field officer. Several pieces of the vegetable produce are weighed to determine an average weight and the price is divided by the average weight to derive the per kilo price. 8.43 Assessing the quality change in restaurant meals and takeaway foods can be very difficult as there is no reliable indicator of changes in the quality of the meals. Prices of meals tend to remain the same between one pricing period and another but side salads and vegetables may be adjusted to meet seasonal availability or the weight of cuts of meat in the meals may be varied because of price changes in the meat industry. Field officers will note any changes of this nature where possible and will attach comments to the prices to highlight these situations so that consistent quality adjustments can be made if considered necessary. 8.44 Another quality issue with meals and takeaway foods is the treatment of special meal deals. Although these ‘meal deals’ are frequently the most popular product sold, the items in the meal deal are priced separately because identifying the quality change for the meal deal as a whole can often be difficult. For example, the items within the meal deal can be varied or the meal deal cancelled entirely, and these changes would present problems in calculating price movements based on the 'constant' quality concept. Many of these meal deals are also likely to be affected by product launch promotions, and new meal deals are only included in the list of items to be priced when they have a proven sales record. ALCOHOL AND TOBACCO 8.45 The Alcohol and tobacco group includes expenditure on all types of beverages containing alcohol, such as beer, wine and spirits and all tobacco related products such as cigarettes, cigars and loose tobacco. The Alcohol and tobacco group accounted for just over 7% of the CPI basket at the time of the 14th series review. 8.46 Table 8.2 shows the structure of the Alcohol and tobacco group. Examples of products priced and the source of the data are also shown in the table. TABLE 8.2: ALCOHOL AND TOBACCO GROUP INDEX STRUCTURE
Price collection 8.47 Nearly all alcoholic products, whether consumed on the premises of the retailer or consumed elsewhere are priced monthly. The only exception is alcohol purchased in restaurants because prices tend to be more stable in these establishments. Tobacco products are priced on a monthly basis. Field officers collect prices of all products in this group. Areas requiring special pricing procedures Alcoholic drinks 8.48 Alcoholic products are often subject to specialling activity, where large discounts are offered on a few products for a short time period only. Prices of alcoholic drinks are also affected by seasonal celebrations, for example, during the Christmas holiday period and the running of the Melbourne Cup. To ensure price fluctuations caused by specialling activity and seasonal celebrations are captured in the CPI, all alcoholic drinks, except those sold in restaurants, are priced monthly. 8.49 The alcoholic products priced are selected according to the purchasing patterns of consumers. In the case of beer, strong preferences for particular brand names tend to exist and the brands are selected according to analysis of their market shares in the retail beer industry. For sparkling wines, cask wines and some types of spirits, the consumer's choice is significantly influenced by the price of the product. Consequently, the brand names selected for pricing are determined according to a ‘volume seller’ basis (explained in paragraph 8.6), where the brand priced in any particular quarter is the cheapest variety available from a given list of brands. The consumption of bottled wine and a few other types of spirits tend to be affected more by locality and, therefore, are priced on a ‘respondent standard’ basis. Under this pricing procedure, field officers will seek advice from the respective retailers to determine which particular brands are the most representative of the purchasing pattern of customers in that geographical region and these brands are priced. Cigarettes and tobacco 8.50 The brand names of cigarettes, cigars, and pipe tobacco selected for pricing are based on their market shares in the tobacco industry. Excise duty on alcohol and tobacco 8.51 In accordance with the indexation provisions of the Excise Tariff Act 1921 and the Customs Tariff Act 1987, the rates of customs and excise duties on spirits, beer and tobacco products are changed twice yearly in line with movements in the Consumer Price Index. The new rates take effect from 1 February and 1 August each year. The price change due to the change in the rate of custom or excise duty is collected as part of the general price movement of alcohol and tobacco products. Quality adjustment Alcoholic drinks 8.52 Prices of alcoholic drinks, where necessary, are adjusted to ensure that price comparisons are on a 'constant quality' basis. Producers of alcoholic drinks will sometimes make no changes to the prices of their products but will make specification changes that will impact on the quality of these products. Examples of these changes include changing the alcoholic content of a product or modifying the packaging to change the volume content. Adjustments will be made to take into account these specification changes to ensure the concept of pricing to 'constant quality' is maintained. However, no quality adjustment is made to wine products for changes in the alcoholic content as this is a function of the fermentation process and the climate experienced during the grape growing season. Cigarettes and tobacco 8.53 Prices of cigarette products are quality adjusted where necessary and quality is measured by the quantity of tobacco used in each cigarette. Information is obtained on a regular basis from the major cigarette manufacturers to monitor changes in the quantity of tobacco in cigarettes. If a significant change in the tobacco content of a particular brand of cigarette is identified, the price will be adjusted to remove the effect due to the quality change. CLOTHING AND FOOTWEAR 8.54 Conceptually, this group includes expenditure on clothing, footwear, accessories such as watches and jewellery, clothing services such as dry cleaning and shoe repair services. The Clothing and footwear group accounted for just over 5% of the CPI basket at the time of the 14th series review. 8.55 Table 8.3 shows the structure of the Clothing and footwear group. Examples of products priced and the source of the data are also shown in the table. TABLE 8.3: CLOTHING AND FOOTWEAR GROUP INDEX STRUCTURE
Specific issues Price collection Clothing 8.56 All products priced for this group are priced quarterly with the exception of seasonal clothing. Summer seasonal clothing is priced in the December quarter each year and winter seasonal clothing in June quarter. ‘Clearance’ prices are ignored unless the product concerned is available in sufficient quantity for all prospective customers over the full quarter. 8.57 Much of seasonal women’s clothing exhibits a significant fashion content. As a result, from season to season, the individual products can show significant physical changes. Information from garment manufacturers, importers and major retailers is used to determine corresponding replacement products from the new season line-up. Footwear 8.58 The range of footwear products priced includes business shoes, casual and fashion footwear, school shoes and sports shoes. Brand names selected for pricing are normally widely available across the retail sector and selection is based on information of the market share of the major footwear brand names. Prices are collected from specialist footwear retail outlets and from large department stores with footwear sections. Clothing accessories, supplies and services 8.59 Clothing accessories comprise personal effects such as watches, wallets, umbrellas, suitcases and backpacks. Included in clothing supplies are fabrics and haberdashery used for clothing homecraft, repairs and alterations. Examples of items classified under clothing services are dry-cleaning and shoe repairs. Prices of items in this subgroup are collected quarterly by field officers at retail outlets such as jewellers, homecraft shops and clothing repairers. 'Special' prices 8.60 'Sale' or special prices for clothing items are acceptable for the CPI provided:
8.61 ‘Specials’ on clothing and footwear can often be associated with the cessation of a particular style or product range. In these cases, where there is only a limited range of the product available at the sale price, the drop in price would be ignored, as it would not be representative of genuine price changes. Specialling activity is closely monitored, especially to check whether the specialling is widely available across the range of the product or limited to certain items only.
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