The Reserve Bank has called for the Australian Bureau of Statistics to move the Consumer Price Index to a more frequent publication schedule, urging that it be published monthly, rather than quarterly, as now happens.
In its submission to the ABS’s 16th review of the CPI and the way it is collected, and published (and what is covered), the central bank also said that the way price changes are measured and weighted in the CPI for deposit and loan facilities (basically interest rate movements).
“If improvements to the methodology are not feasible, this item should be removed from the CPI,” the bank urged in its submission, which was released this morning.
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The big call was for the more frequent publication of the CPI.
“There is a strong argument for the CPI to be produced on a monthly, rather than quarterly, basis, in line with other advanced economies.
“The bank is strongly of the view that a monthly CPI constitutes best practice, and that more frequent data on prices would assist in the assessment of inflation trends in the economy.
“Australia and New Zealand are the only countries in the Organisation for Economic Co-operation and Development without an official monthly consumer price series. Furthermore, Australia is the only economy in the G-20 without an official monthly consumer price series.
“More timely data would help provide an earlier indication of the trend in inflation, which is particularly important around turning points. It could also be helpful in distinguishing between signal and noise. In recent years there have been a couple of instances of quarterly readings for inflation that subsequently proved not to be representative of the general trend.”
Cost is likely to be a problem. The Rudd government sliced $20 million from the ABS’s budget in its first Budget in a mistaken belief that a public service efficiency dividend should apply across the board. The ABS responded by cutting some surveys and cutting the size of samples, especially in the unemployment series. After seven months of at times questioned reports, the ABS was forced to go back to the old survey sample size.
The RBA said it supported the ABS “continuing to publish the existing range of analytical price indices, and sees a strong case for expanding the range of measures and adding a seasonally adjusted CPI.
“Expenditure weights in the CPI should be updated more frequently to reduce potential bias in the CPI, consistent with the practice in other advanced economies.”