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Review of the Australian CPI
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Introduction• Minor review
– 6 yearly– update weights using household expenditure survey
(HES)
• Major review– longer intervals– update weights– topical issues
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Major issues• i. Principal purpose of the CPI
• ii. Compilation frequency of the CPI
• iii. Evaluation of the deposit and loan facilities index
• iv. Maintaining the relevance of the CPI
• v. Commodity classification
• vi. Analytical series
• vii. Other issues
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User engagementAdvisory group
15 Members representing
•Reserve Bank•Government departments•Academics•Statistics New Zealand•State governments
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User engagementInformation paper
www.abs.gov.au
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User engagement“Road” show Advertised in
major newspapers
Mail out to 150 users
Eight capital cities
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User engagement
Modern methods
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User engagementSubmissions
• 52 written submissions
• 25 from organisations
• 27 from individuals
Public forums
• 80 attendees
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Principal purpose of the CPI• Current principal purpose - measurement of household
inflation• Acquisitions approach (CPI 1998 – present)• Outlays approach (CPI 1960 – 1998) • Additional series such as the Analytical living cost index
(ALCI) and the Pensioner and beneficiary living cost index (PBLCI).
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Analytical living cost indexes for selected household types
Employee households Age pensioner households
Self-funded retiree householdsOther government transfer
recipients households
Pensioner and beneficiary living cost index
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Principal purpose of the CPI• Users agreed that the principal purpose
(household inflation) should remain unchanged
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Compilation frequency• Currently quarterly• Calls for a monthly CPI • Arguments for a monthly CPI
– All OECD countries except Australia and New Zealand compile monthly
– IMF specifies CPIs should be monthly– More timely economic feedback and greater ability to pick
turning points
• Arguments against a monthly CPI– Complexity, quality and cost.
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Compilation frequency
Monthly CPI• full replication of current quarterly
methodology• use of existing data
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Compilation frequency
• strong but mixed views• financial and economic circles - strongly in
favour of monthly CPI provided current quality was maintained
• other users - no compelling need to change from quarterly
• concern about how move would be funded
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Financial services
• indirect fees via interest rate margins– users agree that these should be included
• affected by volatility in interest rates• volatility during the global financial crisis• weight questioned• methodology not well understood
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Maintaining the relevance of the CPI• 6-yearly weight updates
– users supported more frequent HES to enable CPI weights to be updated more often
– use of scanner data, for more frequent weight updates
• quality adjustment– users bothered by computers/cars
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Commodity classification
• Australian CPI Commodity Classification (CPICC) only loosely based on COICOP but not strictly
• Should the CPICC concord with industry classifications such as the Input-Output Product Classification (IOPC)?
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Analytical seriesExclusion-based measures• all groups excluding Housing & Financial and insurance
services• all groups excluding 'volatile items'
Consumer price measures & seasonal adjustment• trimmed mean• weighted median
Tradeable and non-tradeable components
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Analytical series• user consensus on the value and
importance of current analytical series • most comments requested additional data• several requests for seasonally adjusted
CPI. However, universal preference for an unadjusted/ unrevised headline CPI
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Other issuesSpatial index:•Between capital cities•Between capital cities and regional zones
Geographic coverage of CPI:Interest in expanded coverage outside capital cities