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International Trade Price Indexes, Australia methodology

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Reference period

June 2020

Released

30/07/2020

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Explanatory notes

Introduction

This publication contains indexes measuring changes in the prices paid for imports of merchandise that are landed in Australia each quarter, and prices received for exports of merchandise that are shipped from Australia each quarter. The Import Price Indexes are in tables 1-6 and the Export Price Indexes are in tables 7-11.

The indexes are calculated on the index reference period 2011-12 = 100.0.

Scope

The Import Price Index excludes the following items (representing less than 2% of the value of merchandise imported during the weighting period) because of the inherent difficulties in pricing the items to constant quality (see under Price measurement, below):

live animals (not for food)
jewellery and other articles of precious metal, n.e.s.
military equipment
commodities not classified according to kind
works of art, collectors' pieces, antiques
railway vehicles
ships of various types.

The Export Price Index includes re-exports of merchandise (i.e. goods which are imported into Australia and exported at a later date without physical transformation).

Classifications

Index numbers for selected sections of the Standard International Trade Classification (SITC) are provided in table 1, 3 and 12 (Import Price Index) and table 7 and 9 (Export Price Index). The SITC (Revision 4) used from the September quarter 2008 onwards is the United Nations' updated version, replacing SITC (Revision 3). SITC (Revision 4) retains the overall structure of SITC (Revision 3) and consists of the same number of sections, divisions and groups. Changes to the classification labels and components were made at levels lower than those used in the Import and Export Price Indexes. As a result, there has been no material impact on the indexes, which remain comparable across the changes in classification.

The Import Price Index is also presented by Balance of Payments Broad Economic Categories in tables 4-6, which have been disaggregated into Balance of Payments groupings of Consumption goods, Capital goods and Intermediate and other merchandise goods. From the September quarter 2008 onwards, the previous heading of Classification of Broad Economic Categories (BEC) End Use, has been replaced with Balance of Payments Broad Economic Categories. This is simply a name change, with the series remaining comparable to previously published series.

The Export Price Index is also presented by Balance of Payments Classification of Exports groupings in tables 10 and 11.

Items and weights

The Import Price Index and Export Price Index are annually reweighted chained Lowe indexes. This method of weighting was introduced for the September quarter 2000 and replaced the 'fixed-base' method of weighting in which the weighting patterns were updated infrequently (generally once every 5 or 10 years).

The annual reweighting and chaining process involves a number of steps to implement new weights for the Import and Export Price Indexes. The current weighting basis for the Import Price Index is derived from the value of import items during 2018-19. The weighting basis for the Export Price Index is generally derived using the average value of export items during 2017-18 and 2018-19, to account for volatility in export prices. This method can understate the weight of products which are increasing rapidly in export value and are expected to maintain that high value. Accordingly, the weight for Gas, natural and manufactured (SITC 34) in the Export Price Index has been derived from its export value during 2018-19 only. The Import Price Index and Export Price Index weights were then revalued to reflect June quarter 2019 price levels. Indexes using the new weights for the September quarter 2019 were linked to the published June quarter 2019 (link period) levels, which were derived using weights from the previous series. The index reference period for each series continues to be 2011-12 = 100.0.

The commodities directly represented in each index (the index items) have been selected on the basis of the significance of their import and export values in the period 2018-19 for imports and 2017-18 and 2018-19 for exports. All significant commodities have been selected for pricing. The weights for minor commodities which are not directly priced are included with those of comparable directly priced products, where prices are likely to move in a similar way.

Price measurement

In general, prices of individual shipments are obtained from major importers and exporters of the selected items and relate to the quarter in which the imported goods physically arrive in Australia and the exported goods physically leave Australia.

Imports are priced on a 'free on board' (f.o.b.), country of origin basis. Therefore freight and insurance charges involved in shipping goods from foreign to Australian ports are excluded from the prices used in the index, as are Australian import duties and taxes. Similarly, exports are priced on a f.o.b. basis at the main Australian ports of export. Exports are exempt from taxes on products.

As the prices used in the indexes are expressed in Australian currency, changes in the relative value of the Australian dollar and overseas currencies can have a direct impact on price movements for the many commodities that are bought and sold in currencies other than Australian dollars. Prices reported in a foreign currency are converted to Australian dollars using relevant exchange rates. Where imports or exports are transacted in prices expressed in terms of a foreign currency and forward exchange cover is used, the prices in the indexes exclude the forward exchange cover. As noted, imports are priced on a country of origin basis. Therefore the exchange rates applied are impacted by the differences between the date of transaction (ownership change) and the shipping time from the country of origin to Australia.

The main pricing methodology used is specification pricing, under which a manageable sample of precisely specified products is selected, in consultation with each reporting business, for repeat pricing. In specifying the products, care is taken to ensure that they are fully defined in terms of all the characteristics which influence their transaction prices. As such, all the relevant technical characteristics need to be described (e.g. make, model, features) along with the unit of sale, type of packaging, conditions of sale (e.g. delivered, payment within 30 days), etc. The goods are also specified by country and market in order to lessen the impact of price variations attributable solely to changes over time in the mix of countries, or markets.

When the quality or specifications of an item being priced change over time, adjustments are made to the reported prices so that the index captures only pure price change. That is, any element of price change attributable to a change in quality is removed. If there is an increase (decrease) in the quality of an item, then the price index is adjusted downwards (upwards) to reflect the 'worth' of the quality change. This technique is known as pricing to constant quality.

Wherever possible, prices from volume selling products being traded with predominant countries, or markets, are obtained to ensure specifications have a good chance of being re-priced over time and index series are representative of overall price movements. Individual product weights and weights between markets and countries are regularly reviewed to keep the indexes up to date. The ABS has access to a rich source of international merchandise trade data and selectively uses average unit values in the Export Price Index, and to a limited extent in the Import Price Index, to augment specification pricing. Imported commodities are typically more stable in price but non-homogenous in character, and generally do not lend themselves to measurement by average unit value.

Differences between export price index and export IPD

There are differences between the Export Price Index presented in this publication, and the export Implicit Price Deflator (IPD) presented in National Accounts: National Income, Expenditure and Product (cat. no. 5206.0) and Balance of Payments and International Investment Position, Australia (cat. no. 5302.0). The differences are mainly due to the index methodology (fixed basket price index for the Export Price Index, whereas the IPD is a quarterly weighted index, which includes price change and compositional change from period to period), the completeness of the dataset used and the source of the data. Further, the Export Price Index is calculated from predominantly sampled businesses, whereas the export IPD is calculated from predominantly international merchandise trade data supplied by the Department of Home Affairs. These differences can result in significant divergences between the measures when prices of commodities which form a large proportion of exports are volatile.

Index numbers

Index numbers for financial years are simple averages of the relevant quarterly index numbers.

Rounding

Any discrepancies between totals and sums of components in this publication are due to rounding.

Analysis of index changes

Movements in indexes from one period to another can be expressed either as changes in index points or as percentage changes. The following example illustrates the method of calculating index points changes and percentage changes between any two periods:

Export Price Index, All groups index number:
June quarter 2020 109.0 (see table 7)
less March quarter 2020 111.7 (see table 7)
Change in index points -2.7
Percentage change -2.7/111.7 x 100 = -2.4%

Tables 2 and 8 provide analyses of the contribution which SITC sections and divisions make to the All groups Import Price Index and Export Price Index, respectively.

Further information

For further information on price indexes in the ABS refer to the following publications:

Producer and International Trade Price Indexes: Concepts, Sources and Methods (cat. no. 6429.0)
Information Paper: Changes to Time Series Spreadsheets for Producer Price Indexes, Australia (cat. no. 6427.0.55.001)
Update on ANZSIC 2006 Implementation for Producer and International Trade Price Indexes (cat. no. 6427.0.55.002)
Information Paper: Review of the Producer and International Trade Price Indexes (cat. no. 6427.0.55.003)
Information Paper: Outcome of the Review of the Producer and International Trade Price Indexes (cat. no. 6427.0.55.004)
Implementation of the Review of the Producer and International Trade Price Indexes (cat. no. 6427.0.55.005)
Information Paper: An Analytical Framework for Price Indexes in Australia (cat. no. 6421.0)
Information Paper: Producer Price Index Developments (cat. no. 6422.0)
Information Paper: Review of the Import Price Index and Export Price Index, Australia (cat. no. 6424.0)
Information Paper: Price Indexes and The New Tax System (cat. no. 6425.0).

Related publications

Users may also wish to refer to the following related publications, which are available from the ABS website:

Producer Price Indexes, Australia (cat. no. 6427.0)
Consumer Price Index, Australia (cat. no. 6401.0)
Wage Price Index, Australia (cat. no. 6345.0)
Australian National Accounts: Input-Output Tables (cat. no. 5209.0)
Balance of Payments and International Investment Position, Australia (cat. no. 5302.0).

Current publications and other products released by the ABS are listed on the ABS website http://www.abs.gov.au. The ABS also issues a daily Release Advice on the website which details products to be released in the week ahead.

Appendix - index structures and weighting patterns

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Composition

Both the Import Price Index and the Export Price Index have been reweighted in the September quarter 2019. These indexes are reweighted annually each September quarter, as explained in the Explanatory Notes under Items and weights. The current weighting patterns for both the Import Price Index and Export Price Index, based on the Standard International Trade Classification (SITC) Revision 4, are presented in this Appendix.

All SITC sections and divisions are included in the reweighted index structure for completeness. However, indexes for some of the lower weighted SITC divisions are not constructed separately and so are not available for publication.

Corresponding weighting patterns based on classification by Broad Economic Categories (BEC), Harmonized Tariff Item Statistical Classification (HTISC) and Australian and New Zealand Standard Industrial Classification (ANZSIC) for the Import Price Index, and Australian Harmonized Export Commodity Classification (AHECC) and ANZSIC for the Export Price Index, can be made available on request.

Import price index grouped by SITC revision 4(a)(b)(c)

		Percentage contribution
SITC Code		Divisions to Sections 2019	Divisions and Sections to All Groups 2019
0	Food and live animals	100.00	5.45
01	Meat and meat preparations	5.64	0.31
02	Dairy products and birds' eggs	9.08	0.49
03	Fish (not marine mammals), crustaceans, molluscs and aquatic invertebrates, and preparations thereof	12.82	0.70
04	Cereals and cereal preparations	10.19	0.56
05	Vegetables and fruit	16.68	0.91
06	Sugars, sugar preparations and honey	3.06	0.17
07	Coffee, tea, cocoa, spices, and manufactures thereof	13.14	0.72
08	Feeding stuff for animals (not including unmilled cereals)	7.55	0.41
09	Miscellaneous edible products and preparations	21.85	1.19
1	Beverages and tobacco	100.00	1.25
11	Beverages	67.36	0.84
12	Tobacco and tobacco manufactures	32.64	0.41
2	Crude materials, inedible, except fuels	100.00	1.14
21	Hides, skins and furskins, raw	0.15	0.00
22	Oil-seeds and oleaginous fruits	3.60	0.04
23	Crude rubber (including synthetic and reclaimed)	4.04	0.05
24	Cork and wood	27.54	0.31
25	Pulp and waste paper	7.85	0.09
26	Textile fibres (other than wool tops and other combed wool) and their wastes (not manufactured into yarn or fabric)	2.89	0.03
27	Crude fertilisers, other than those of Division 56, and crude minerals (excluding coal, petroleum and precious stones)	7.60	0.09
28	Metalliferous ores and metal scrap	26.74	0.31
29	Crude animal and vegetable materials, n.e.s.	19.59	0.22
3	Mineral fuels, lubricants and related materials	100.00	13.62
32	Coal, coke and briquettes	0.51	0.07
33	Petroleum, petroleum products and related materials	95.64	13.03
34	Gas, natural and manufactured	3.85	0.52
4	Animal and vegetable oils, fats and waxes	100.00	0.24
41	Animal oils and fats	11.28	0.03
42	Fixed vegetable fats and oils, crude, refined or fractionated	81.27	0.20
43	Animal or vegetable fats and oils, processed; waxes of animal or vegetable origin; inedible mixtures or preparations of animal or vegetable fats or oils, n.e.s.	7.46	0.02
5	Chemicals and related products, n.e.s.	100.00	10.35
51	Organic chemicals	7.60	0.79
52	Inorganic chemicals	6.03	0.62
53	Dyeing, tanning and colouring materials	3.35	0.35
54	Medicinal and pharmaceutical products	39.04	4.04
55	Essential oils and resinoids and perfume materials; toilet, polishing and cleansing preparations	12.02	1.24
56	Fertilisers (other than those of Group 272)	6.49	0.67
57	Plastics in primary forms	7.65	0.79
58	Plastics in non-primary forms	7.23	0.75
59	Chemical materials and products, n.e.s.	10.59	1.10
6	Manufactured goods classified chiefly by material	100.00	11.02
61	Leather, leather manufactures, n.e.s., and dressed furskins	0.39	0.04
62	Rubber manufactures, n.e.s.	12.54	1.38
63	Cork and wood manufactures (excluding furniture)	4.64	0.51
64	Paper, paperboard and articles of paper pulp, of paper or of paperboard	10.14	1.12
65	Textile yarn, fabrics, made-up articles, n.e.s., and related products	11.76	1.30
66	Non-metallic mineral manufactures, n.e.s.	12.46	1.37
67	Iron and steel	12.04	1.33
68	Non-ferrous metals	8.17	0.90
69	Manufactures of metals, n.e.s.	27.87	3.07
7	Machinery and transport equipment	100.00	40.67
71	Power-generating machinery and equipment	4.97	2.02
72	Machinery specialised for particular industries	8.87	3.61
73	Metalworking machinery	0.69	0.28
74	General industrial machinery and equipment, n.e.s., and machine parts, n.e.s.	12.87	5.23
75	Office machines and automatic data-processing machines	9.77	3.97
76	Telecommunications and sound-recording and reproducing apparatus and equipment	14.13	5.75
77	Electrical machinery, apparatus and appliances, n.e.s., and electrical parts thereof (including non-electrical counterparts, n.e.s., of electrical household-type equipment)	14.17	5.76
78	Road vehicles (including air-cushion vehicles)	31.09	12.64
79	Other transport equipment	3.45	1.40
8	Miscellaneous manufactured articles	100.00	14.32
81	Prefabricated buildings; sanitary, plumbing, heating and lighting fixtures and fittings, n.e.s.	4.28	0.61
82	Furniture and parts thereof; bedding, mattresses, mattress supports, cushions and similar stuffed furnishings	11.89	1.70
83	Travel goods, handbags and similar containers	4.18	0.60
84	Articles of apparel and clothing accessories	23.36	3.35
85	Footwear	5.73	0.82
87	Professional, scientific and controlling instruments and apparatus, n.e.s.	17.49	2.51
88	Photographic apparatus, equipment and supplies and optical goods, n.e.s.; watches and clocks	4.69	0.67
89	Miscellaneous manufactured articles, n.e.s.	28.38	4.06
9	Commodities and transactions not classified elsewhere in the SITC	100.00	1.93
97	Gold, non-monetary (excluding gold ores and concentrates)	100.00	1.93

a. Standard International Trade Classification, Revision 4.
b. Indexes for some lower weighted sections/divisions are not available for publication.
c. Components may not sum to totals, due to rounding.

Export price index grouped by SITC revision 4(a)(b)(c)

		Percentage contribution
SITC Code		Divisions to Sections 2019	Divisions and Sections to All Groups 2019
0	Food and live animals	100.00	10.50
00	Live animals other than animals of Division 03	4.84	0.51
01	Meat and meat preparations	36.71	3.85
02	Dairy products and birds' eggs	6.69	0.70
03	Fish (not marine mammals), crustaceans, molluscs and aquatic invertebrates, and preparations thereof	4.06	0.43
04	Cereals and cereal preparations	19.89	2.09
05	Vegetables and fruit	10.54	1.11
06	Sugars, sugar preparations and honey	4.53	0.48
07	Coffee, tea, cocoa, spices, and manufactures thereof	1.02	0.11
08	Feeding stuff for animals (not including unmilled cereals)	3.48	0.37
09	Miscellaneous edible products and preparations	8.24	0.86
1	Beverages and tobacco	100.00	0.93
11	Beverages	98.00	0.91
12	Tobacco and tobacco manufactures	2.00	0.02
2	Crude materials, inedible, except fuels	100.00	34.71
21	Hides, skins and furskins, raw	0.55	0.19
22	Oil-seeds and oleaginous fruits	0.95	0.33
23	Crude rubber (including synthetic and reclaimed)	0.01	0.00
24	Cork and wood	1.85	0.64
25	Pulp and waste paper	0.19	0.07
26	Textile fibres (other than wool tops and other combed wool) and their wastes (not manufactured into yarn or fabric)	5.25	1.82
27	Crude fertilisers, other than those of Division 56, and crude minerals (excluding coal, petroleum and precious stones)	2.19	0.76
28	Metalliferous ores and metal scrap	88.53	30.73
29	Crude animal and vegetable materials, n.e.s.	0.48	0.17
3	Mineral fuels, lubricants and related materials	100.00	32.99
32	Coal, coke and briquettes	54.93	18.12
33	Petroleum, petroleum products and related materials	7.66	2.53
34	Gas, natural and manufactured	37.42	12.34
4	Animal and vegetable oils, fats and waxes	100.00	0.19
41	Animal oils and fats	56.27	0.01
42	Fixed vegetable fats and oils, crude, refined or fractionated	35.87	0.11
43	Animal or vegetable fats and oils, processed; waxes of animal or vegetable origin; inedible mixtures or preparations of animal or vegetable fats or oils, n.e.s.	7.86	0.07
5	Chemicals and related products, n.e.s.	100.00	3.01
51	Organic chemicals	1.80	0.05
52	Inorganic chemicals	8.23	0.25
53	Dyeing, tanning and colouring materials	9.49	0.29
54	Medicinal and pharmaceutical products	46.08	1.39
55	Essential oils and resinoids and perfume materials; toilet, polishing and cleansing preparations	12.64	0.38
56	Fertilisers (other than those of Group 272)	2.81	0.08
57	Plastics in primary forms	3.68	0.11
58	Plastics in non-primary forms	4.11	0.12
59	Chemical materials and products, n.e.s	11.16	0.34
6	Manufactured goods classified chiefly by material	100.00	5.22
61	Leather, leather manufactures, n.e.s., and dressed furskins	0.83	0.04
62	Rubber manufactures, n.e.s.	1.65	0.09
63	Cork and wood manufactures (excluding furniture)	0.57	0.03
64	Paper, paperboard and articles of paper pulp, of paper or of paperboard	5.67	0.30
65	Textile yarn, fabrics, made-up articles, n.e.s., and related products	1.49	0.08
66	Non-metallic mineral manufactures, n.e.s.	5.30	0.28
67	Iron and steel	7.49	0.39
68	Non-ferrous metals	70.98	3.70
69	Manufactures of metals, n.e.s.	6.03	0.31
7	Machinery and transport equipment	100.00	4.31
71-75	Power-generating, general industrial and other specialised machinery and equipment	42.08	1.81
76-77	Telecommunications equipment, sound-recording apparatus and electrical machinery, n.e.s.	27.13	1.17
78	Road vehicles (including air-cushion vehicles)	11.76	0.51
79	Other transport equipment	19.04	0.82
8	Miscellaneous manufactured articles	100.00	2.07
81-82	Prefabricated buildings, building fittings and furniture	4.41	0.09
83	Travel goods, handbags and similar containers	1.03	0.02
84	Articles of apparel and clothing accessories	4.25	0.09
85	Footwear	1.63	0.03
87	Professional, scientific and controlling instruments and apparatus, n.e.s.	40.42	0.84
88	Photographic apparatus, equipment and supplies and optical goods, n.e.s.; watches and clocks	6.15	0.13
89	Miscellaneous manufactured articles, n.e.s.	42.11	0.87
9	Commodities and transactions not classified elsewhere in the SITC	100.00	6.08
93	Special transactions and commodities not classified according to kind	6.36	0.39
96	Coin (other than gold coin), not being legal tender	3.42	0.21
97	Gold, non-monetary (excluding gold ores and concentrates)	90.22	5.49

Quality declaration

Institutional environment

Relevance

Timeliness

Accuracy

The ITPI measure price changes, over time, in commodities imported to, and exported from, Australia. The main source of ongoing price data is samples of businesses; prices of individual shipments are obtained from a large number of importers and exporters. The sheer volume and complexity of these transactions mean that a non-probability sampling method is more practicable and efficient than probability sampling methods. A non-probability sampling method involves choosing producers based on the relative importance of the products they sell for exports or buy for imports, who they sell to, or buy from, and the nature of their pricing policies.

There are two principal sources of error in surveys: non-sampling error and sampling error. Non-sampling error arises from inaccuracies in collecting, recording and processing the data. Every effort has been made to reduce non-sampling error in the ITPI, by:

careful design of questionnaires and processing systems, and by providing instructions to businesses on how to price a relevant sample of import and export transactions;
detailed checking of completed survey forms; and
instituting a range of procedures to ensure that transactions are priced to constant quality and quantity.

Sampling error occurs when a sample or subset of the population is surveyed, rather than the entire population. One measure of the likely difference resulting from not including all of the population in the survey is given by the standard error. While the selection of import and export transactions are based on sampling techniques, standard errors are not available for the ITPI. While it is reasonably straightforward to calculate sampling errors for a level estimate, it is not so straightforward to determine standard errors for the ITPI which uses both sampling and index methodologies.

Prices for most items are collected once a month or once a quarter, with the collection spread across that period. As far as possible the prices used in the indexes are actual transaction prices. All prices used in the ITPI are expressed in Australian currency. As a result, changes in the relative value of the Australian dollar and overseas currencies can have a direct impact on price movements of commodities transacted in foreign currencies.

The ITPI rely heavily on specification pricing; however, for items that are homogeneous and where quality change is minimal, e.g. basic commodities from the mining and agricultural sectors, it can be more efficient to selectively use average unit values as price estimators. Where index accuracy is not compromised, the use of average unit values reduces cost and respondent burden and, in some cases, provide increased robustness and coverage to price estimation. The ABS has access to a rich source of international merchandise trade data, and selectively uses average unit values in the Export Price Index to augment specification pricing. Imported commodities are typically more stable in price but non-homogenous in character, and generally do not lend themselves to measurement by average unit value.

Index numbers are released as final figures at the time they are first published. Revisions will occur only in exceptional circumstances.

APA

Citation

International Trade Price Indexes, Australia methodology

APA

Citation

Explanatory notes

Introduction

Scope

Classifications

Items and weights

Price measurement

Differences between export price index and export IPD

Index numbers

Rounding

Analysis of index changes

Further information

Related publications

Appendix - index structures and weighting patterns

Show all

Composition

Import price index grouped by SITC revision 4(a)(b)(c)

Export price index grouped by SITC revision 4(a)(b)(c)

Quality declaration

Institutional environment

Relevance

Timeliness

Accuracy

Coherence

Interpretability

Accessibility

Abbreviations

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ABS	Australian Bureau of Statistics
ADP	automatic data processing
AHECC	Australian Harmonized Export Commodity Classification
ANZSIC	Australian and New Zealand Standard Industrial Classification
BEC	Classification by Broad Economic Categories
f.o.b.	free on board
HTISC	Harmonized Tariff Item Statistical Classification
IMF	International Monetary Fund
IPD	Implicit Price Deflator
ITPI	International Trade Price Indexes
n.e.c.	not elsewhere classified
n.e.s.	not elsewhere specified
OECD	Organisation for Economic Co-operation and Development
SITC	Standard International Trade Classification