consumer price indices

ALL GROUPS INDEX NUMBERS Base of each index year 1989-90 =100. 00

*Weighted average of 8 capital cities
"Includes GST spike. Approximate adjustment

ABS: 6401.0

BRIEF DESCRIPTION OF THE CPI

1 The Consumer Price Index (CPI) measures quarterly changes in the price of a ‘basket’ of goods and services which account for a high proportion of expenditure by the CPI population group (i.e. metropolitan households). This ‘basket’ covers a wide range of goods and services, arranged in the following eleven groups:

food
alcohol and tobacco
clothing and footwear
housing
household furnishings, supplies and services
health
transportation
communication
recreation
education
miscellaneous.

2 The capital city indexes measure price movements over time in each city individually. They do not measure differences in retail price levels between cities.

PRICES

4 The frequency of price collection by item varies as necessary to obtain reliable price measures. Prices of some items are volatile (i.e. their prices may vary many times each quarter) and for these items frequent price observations are necessary to obtain a reliable measure of the average price for the quarter. Each month prices are collected at regular intervals for goods such as milk, bread, fresh meat and seafood, fresh fruit and vegetables, alcohol, tobacco, women's outerwear, project homes, motor vehicles, petrol and holiday travel and accommodation. For most other items, price volatility is not a problem and prices are collected once a quarter. There are a few items where prices are changed at infrequent intervals, for example education fees where prices are set once a year. In these cases, the frequency of price collection is modified accordingly.

5 In order to facilitate a more even spread of field collection workload, the number of items for which prices are collected quarterly is distributed roughly equally across each month of each quarter. In all cases, however, individual items are priced in the same month of each quarter. For example, items for which prices are collected in the first month of the September quarter, July, are also priced in the first month of subsequent quarters, namely October, January and April.

WEIGHTING PATTERN

6 There are 89 expenditure classes (that is, groupings of like items) in the fourteenth series CPI and each expenditure class has its own weight, or measure of relative importance. In calculating the index, price changes for the various expenditure classes are combined using these weights.

7 Changes in the weighting pattern have been made at approximately five-yearly intervals to take account of changes in household spending patterns. The CPI now comprises fourteen series of price indexes which have been linked to form a continuous series. The current weighting pattern for the CPI is given in A Guide to the Consumer Price Index, 14th Series (cat. no. 6440.0) and Australian Consumer Price Index: Concepts, Sources and Methods (cat. no. 6461.0) which are available on this site.

ANALYSIS OF CPI CHANGES

8 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 changes in index points and percentage changes between any two periods:
All groups CPI: Weighted average of eight capital cities. Index numbers:

June Quarter 2005 148.4 (see table 1)
less March Quarter 2004 147.5 (see table 1)
Change in index points 0.9
Percentage change 0.9/147.5 X 100 = 0.6%

9 Percentage changes are calculated to illustrate three different kinds of movements in index numbers:

• movements between consecutive financial years (where the index numbers for financial years are simple averages of the quarterly index numbers)

• movements between corresponding quarters of consecutive years

• movements between consecutive quarters.

10 Table 7 provides a detailed analysis, for the weighted average of eight capital cities, of movements in the CPI since the previous quarter, including information on movements for groups, sub-groups and expenditure classes. It also shows the contribution which each makes to the total CPI. For instance, the dairy and related products sub-group contributed 2.21 index points to the total All groups index number of 148.4 for June Quarter 2005. The final column shows contributions to the change in All Groups index points by each group, sub-group and expenditure class.

SPECIAL SERIES

11 Various series are presented in tables 8, 9 and 10 in this publication which are helpful for analytical purposes. These series are compiled by taking subsets of the CPI basket. (A complete list of CPI groups, subgroups and expenditure classes is contained in tables 6 and 7.)

12 Some of the compiled series are self explanatory, such as ‘All groups excluding Food’. Other series and their composition are described below:

• All groups, goods component: comprises the Food group (except Restaurant meals), Alcohol and tobacco group, Clothing and footwear group (except Clothing services and shoe repair) and Household furnishings, supplies and services group (except Household services); the Utilities, Audio, visual and computing and Books, newspapers and magazines sub-groups; and the House purchase, Pharmaceuticals, Motor vehicles, Automotive fuel, Motor vehicle parts and accessories, Sports and recreational equipment, Toys, games and hobbies, Pets, pet foods and supplies and Toiletries and personal care products expenditure classes.

• All groups, services component: comprises all items not included in the ‘All groups, goods component’.

• All groups, tradables component: comprises all items whose prices are largely determined on the world market.

• All groups, non-tradables component: comprises all items not included in the 'All groups, tradables component'.

• All groups excluding ‘volatile items’: comprises the All groups CPI excluding Fruit and vegetables and Automotive fuel.

• Market goods and services excluding ‘volatile items’: in addition to the items excluded from the series 'All groups excluding ‘volatile items’', also excludes: Utilities, Property rates and charges, Health, Other motoring charges, Urban transport fares, Postal, Education and Child care.

13 A detailed description of the special and analytical series was published in Appendix 1 to the September quarter 2000 issue of Consumer Price Index, Australia (cat. no. 6401.0). The ABS is grateful for the assistance of the Reserve Bank of Australia for specifying the items included in the 'All groups excluding 'volatile items'' and 'Market goods and services excluding 'volatile items''. The Reserve Bank of Australia does not accord any special policy status to these series.