RBA Weighted Median CPI YoY

What is RBA Weighted Median CPI YoY?

The Weighted Median CPI (Consumer Price Index) YoY tracks Australian underlying inflation at the 50th percentile of expenditure-class changes. The Australian Bureau of Statistics has published it since the June quarter of 2002 in analytical series alongside the CPI. It covers metropolitan households in the eight capital cities as a weighted national average and began as a Reserve Bank of Australia measure.

It reduces the effect of large moves to show medium-term pressure for monetary policy within the 2-3% target band. The Reserve Bank of Australia calls the year-ended trimmed mean its preferred underlying gauge and policy aims at the midpoint. It is not headline CPI, the inflation households feel, a cost-of-living index or economy-wide inflation.

When is it released and what happens each release?

Prices are collected across each week of the month, with each item always priced in the same week month to month. The Bureau releases it monthly on the last Wednesday for the previous reference month, with the December edition in early January.

New quarterly tables arrive in every third monthly publication for March, June, September and December at 11:30am AEST/AEDT. Dates appear in the release calendar alongside headline CPI, trimmed mean, components, commentary and spreadsheets.

Original indexes change only for significant errors, while seasonally adjusted series are revised as extra months extend the series. Re-referencing the index base shifts all index levels.

What moves RBA Weighted Median CPI YoY?

The indicator holds 87 expenditure classes in 11 groups, re-ranked each period so a different class sits at the median. The middle reflects the broad mass of classes rather than one extreme move.

• Goods, 53%: 60 expenditure classes.
• Services, 47%: 27 expenditure classes.
• Tradables, 35%: 49 expenditure classes.
• Non-tradables, 65%: 38 expenditure classes.

In the December quarter of 2023 the weighted median rose 0.9% for the quarter and 4.4% over the year. Headline CPI rose 0.6% and 4.1%, with trimmed mean at 0.8% and 4.2%. Tobacco (+2.8%), insurance and financial services (+1.7%) and housing (+1.0%) led gains, while furnishings (-1.0%) and transport (-0.2%) fell. The median sat above the headline because it discarded both tails and kept the firm middle.

In the March quarter of 2023 headline was 1.4% and 7.0%, with trimmed mean at 1.2% and 6.6% and median at 1.2% and 5.8%. Large jumps were stripped out, so underlying sat below the headline peak.

How is RBA Weighted Median CPI YoY calculated?

1. Rank: Rank the 87 expenditure classes from lowest to highest by seasonally adjusted change, adjusting only seasonal classes and using a factor of one elsewhere.
2. Weight: Compute each class share from its previous-period contribution to all-groups CPI, with weights reviewed yearly using the Household Expenditure Survey.
3. Find the median: Cumulate weights along the ranking and take the change at the 50th percentile.

For example, with weights 10/20/40/20/10% and moves -0.5/0.0/+0.2/+0.4/+1.5%, cumulative weight reaches 50% inside the +0.2% class, so the median is +0.2%. Trimmed-mean contrast: The trimmed mean instead averages the middle 70% after removing the bottom and top 15% of weight. Chain and annualise: Chain monthly or quarterly moves into an index to 4 decimal places, with YoY versus 12 months or 4 quarters earlier.

Key point: It is not the price change of a typical item or the inflation households feel. It is the middle of weighted class changes, and skew can leave it above or below headline as in December 2023.