The Australian Bureau of Statistics (ABS) maintains a program of periodic reviews of the Consumer Price Index (CPI) to ensure it continues to meet community needs. The 16th Series CPI Review (ABS 2010) was the last comprehensive review which examined CPI concepts, methodologies and data sources. A number of topics and strategies were considered to maintain the relevance of the CPI in a dynamic environment, particularly given recent developments in methods and data sources. These developments present new opportunities to enhance the CPI.
The ABS has primarily used the Household Expenditure Survey (HES) to derive CPI weights at the published level (expenditure class level and above) and have updated these weights in line with the release of the HES data, currently every six years. The International Labour Organization (ILO) Resolution on CPIs recommends published level CPI weights are updated at least every five years. Conducting a more frequent HES would deliver benefits to the measurement of household inflation and to other users. However, a more frequent HES requires additional funding. The use of alternative data sources relating to household expenditure has been investigated by the ABS to enable the more frequent update of CPI expenditure weights, irrespective of the frequency of the HES.
In July 2016, the ABS released the information paper Increasing the Frequency of CPI Expenditure Class Weight Updates (cat. no. 6401.0.60.002), which investigated the feasibility of using Household Final Consumption Expenditure (HFCE) data from the National Accounts to more frequently update Australia's CPI expenditure class (EC) weights. This paper discusses the consultation undertaken by the ABS as part of this investigation, and outlines an implementation plan to annually re-weight the CPI.
The authors of this paper are staff from the Consumer Price Index Section of the ABS.