Consumer Price Index

The Consumer Price Index (CPI) measures price change over time for goods and services bought by metropolitan households in Australia's 8 capital cities. It is published by the Australian Bureau of Statistics (ABS).

First compiled in 1960 with index numbers back to mid 1948, it is now monthly with quarterly results inside each third monthly release. The national figure is a weighted average of the 8 cities, and each city index tracks only its own moves over time. It covers household consumption only, so it is neither economy wide inflation nor a cost of living index.

Monthly data arrives on the last Wednesday of the month after the reference month at 11.30 am Canberra time, after a morning lock-up for officials. Prices are gathered through the reference month with each item priced in the same week every month. About 87 in 100 by weight is priced monthly, about 9 in 100 annually and about 4 in 100 quarterly.

Each release publishes the All groups CPI in original and seasonally adjusted terms, plus Trimmed mean and Weighted median trend gauges. Tradables track world prices and Non tradables track domestic prices, with extra cuts excluding volatile items and excluding food and energy. Original indexes change only to fix rare big errors, while adjusted series update monthly and weights refresh yearly.

11 spending groups drive the index, and trend cuts split Tradables from Non tradables and goods from services.

• Housing, 21.39%: It covers rents, new dwellings bought by owner occupiers, repairs, property rates, water, electricity and gas.
• Food and non-alcoholic beverages, 17.44%: It covers bread, meat, dairy, fruit, vegetables, snacks, drinks, restaurants and takeaway.
• Recreation and culture, 12.74%: It covers holiday travel and stays, audio visual and computing goods, books, sport and hobbies.
• Transport, 11.45%: It covers cars, spare parts, fuel, urban transport fares and airfares.
• Furnishings, household equipment and services, 8.02%: It covers furniture, appliances, tools, child care, personal care and hairdressing.
• Health, 6.73%: It covers medicines, medical and hospital care and dental services.
• Smaller groups: Alcohol and tobacco is 6.58, insurance and financial services 5.58, education 4.69, clothing and footwear 3.25 and communication 2.13. They cover tobacco and alcohol lines, financial services, education fees, clothing and communication services.

The December quarter 2022 release of 25 January 2023 rose 1.9 in the quarter and 7.8 over the year. It was the strongest annual gain since 1990. Domestic holiday travel rose 13.3, electricity 8.6, international travel 7.6 and new dwellings 1.7. Housing rose 10.7 over the year with food at 9.2, recreation and culture at 9.0, furnishings at 8.4 and transport at 8.0.

Services inflation reached 5.5, its highest since 2008, while goods hit 9.5. The Trimmed mean reached 6.9, its highest since 2003, showing core pressure close behind the 7.8 headline. Markets read the result against the 2 to 3 target range, which the central bank sets.

1. Split spending: Total outlay is divided into 87 classes using household surveys and national accounts, with just under 8000 city households behind the weights.
2. Collect prices: Each item is priced in the same week monthly through shop visits, online prices, web scraping and supermarket scanner data. About 800 item groups per city feed 6400 samples nationally.
3. Price relatives: A relative divides current price by past price, using a geometric mean where items substitute.
4. Update the basket: Bread spending of 600 rises 1.0 to 606, and milk of 400 falls 0.5 to 398. The basket moves from 1000 to 1004, a rise of 0.4.
5. Combine cities: City totals form a weighted average of the 8 capitals, with weights shifting on relative moves.
6. Index numbers: The index scales the September quarter 2017 link value of the 17th series by current over past spending. Base value 100.00 is a base, not a threshold: 120.0 on past spending of 900 with current spending of 1004 gives 133.9.
7. Points contribution: Bread points are 133.9 times 606 over 1004, which is 80.8.
8. Seasonal adjustment: 57 of 87 classes use seasonal factors that are revised each month. Trend gauges: the Trimmed mean takes the middle 70 in 100 and the Weighted median the 50th percentile, both published since the June quarter 2002.
9. Read the change: Yearly change comes from the two index numbers directly, never by adding months. Twelve monthly rises of 1 compound to 12.68, not 12. Index numbers round to two decimals and changes to one, with four decimals for trend gauges.