ABS response to 'CPI basket needs topping of fresh fruit' (Australian Financial Review 28 July 2008)

Trevor Bail's comments in his letter "CPI basket needs topping of fresh fruit" (July 28), might lead some readers to conclude incorrectly, that the Australian Consumer Price Index (CPI) is fundamentally flawed, because it adopts a fixed basket approach to weighting.

Users and producers of CPI statistics around the world accept a fixed basket approach as the best means of providing an unambiguous measure of price change. That is despite the tendency to overstate effective inflation when we cannot fully account for the choices that people make, in consuming less of those things that have become relatively more expensive and more of those things that have become relatively cheaper.

The Australian Bureau of Statistics takes steps to minimise such bias, by ensuring flexibility in the items included in the index. At a detailed level, we ensure that new items are continuously introduced, to replace ones that become less relevant. In addition, we identify changes in the outlets from which items are purchased. This keeps the CPI as representative of contemporary consumer behaviour as possible.