Australia Yearbook - 2001

946 Year Book Australia 2001
of goods and services. This involves evaluating
changes in the quality of goods and services
included in the index and removing the effects of
such changes from the prices used to construct
the index.
The CPI is also a measure of changes in the prices
actually paid by consumers for the goods and
services they buy. It is not concerned with
nominal, recommended or list prices (unless they
are the prices consumers actually pay).
The CPI basket includes goods and services
ranging from steak to motor cars and from dental
fillings to restaurant meals. The items are chosen
not only because they represent the spending
habits of the CPI population group, but also
because the items are those for which the prices
can be associated with identifiable and specific
commodities and services. While government
taxes and charges which are associated with the
use of specific goods and services (such as excise
and customs duty, goods and services taxes, local
government rates, etc.) are included, income
taxes and the income-related Medicare levy are
excluded because they cannot be clearly
associated with the purchase or use of a specific
quantity of any good or service.
Items are not excluded from the CPI basket on
the basis of moral or social judgements. For
example, some people may regard the use of
tobacco and alcohol as socially undesirable, but
these commodities are included in the CPI basket
because they are significant items of household
expenditure and their prices can be accurately
measured. However, to assist in understanding
the effect that major item groups have on the
CPI, the ABS publishes a range of supplementary
indexes which exclude, in turn, each of the
eleven major commodity groups. These
supplementary indexes can also be used in their
own right for evaluating price changes or for
indexation purposes.
Periodic reviews of the CPI
Like any other long-standing and important
statistical series, the CPI is reviewed from time to
time to ensure that it continues to be relevant to
current conditions. Over time, household
spending habits change, as does the range of
available goods and services. The CPI needs to be
updated to take account of these changes. These
reviews also provide an opportunity to reassess
the scope and coverage of the index and other
methodological issues.
Since its inception in its current form in 1960,
reviews of the CPI have usually been carried out
at about five-yearly intervals. Following each
review, which involves revising the list of items
and their weights, the new series are linked to the
old to form continuous series. This linking is
carried out in such a way that the resulting
continuous series reflects only price changes and
not differences in the prices of the old and new
baskets.
The current (14th series) CPI reflects expenditure
patterns derived mainly from the 1998–99
Household Expenditure Survey and has a
reference base of 1989–90. It was introduced in
the September quarter 2000.
In addition to revising weights to reflect new
expenditure patterns, the 14th Series CPI
introduced a new utility-based commodity
classification to better address possible consumer
substitution between commodities in response to
relative price changes arising from The New Tax
System. For more information see Information
Paper: Price Indexes and The New Tax System
(6425.0) and Information Paper: Introduction of
the 14th Series Australian Consumer Price Index
(6456.0).
Weighting pattern
The composition of the CPI basket is based on
the pattern of household expenditure in the
‘weighting base period’, which is 1998–99 for the
14th series CPI. Measures of expenditure are
obtained primarily from the ABS’s Household
Expenditure Survey (HES). The HES data,
modified for known instances of under-reporting
(the most notable being for alcohol and tobacco),
are then used to derive a weight for each of the
89 expenditure classes. The weights for the
14th series groups and subgroups as at June
quarter 2000 prices are shown in table 28.1.