ABS responds to "ABS and Prices" Letter to the Editor (The Canberra Times, 31 July 2012, pg.8)

Manson MacGregor's letter of 31 July states that the Australian Bureau of Statistics makes routine and arbitrary adjustments to the prices of goods in the Consumer Price Index (CPI). A small number of adjustments for quality change in goods is a routine part of the compilation of the CPI. They are not arbitrary. If the ABS did not adjust for quality change, the CPI would be a less reliable measure of inflation. For example, a current model car with ABS, multiple air bags, air conditioning and stability control cannot be compared directly to an earlier model car without these features. If no adjustment is made for these improvements, the CPI is not comparing like with like to calculate price movements over time.

This issue was covered in the extensive review of the CPI conducted in 2010. The outcomes of this review are on the ABS website.

Michael Davies
First Australian Statistician
Australian Bureau of Statistics