consumer price index

[ninwa]

I know nothing about economics, please help

http://www.abs.gov.au/ausstats/[email protected]/mf/6401.0?OpenDocument

I'm trying to write a story on the "Financial and insurance services" bit. How would I put it?

Does this make sense: "The consumer price index for financial and insurance services has increased by 2% from December quarter 2009 to March quarter 2010, and March quarter 2009 to March quarter 2010".

[ReVeL]

The Consumer Price Index is the average price of a bundle of goods and services within a region, state, or country. For Austalia, I think around 100,000 products in total are surveyed. Weights are assigned according to the products importance to households (eg. Milk prices will have more of an effect on the CPI than some luxury product only purchased by a select few) . It compares current prices of those goods and services to their prices in a base year, and the change in the CPI represents inflation.

Because the CPI includes a bundle of goods and services, I don't think it would be correct to put it as you have. I would just say "The average price of financial and insurance services has increased by 2% from December quarter 2009 to March quarter 2010, and March quarter 2009 to March quarter 2010" Because the CPI incorporates the whole bundle.

Been a while since I've done this stuff so someone correct me if I'm wrong.

[ninwa]

Thank you! I've just copy/pasted what you wrote

[Fyrefly]

Consumer Price Index is the ABS' way of trying to track the "cost of living".
Each year, the ABS will go about collecting a 'basket of goods and services' that reflects the average consumer's purchases.
The contents of the basket can change from year to year - for instance, in the 1960s mobile phones weren't in the basket, but they are now in 2010.
When the CPI rises, this indicates that the cost of living has increased.
An increase in the cost of living means that the price of the basket is more expensive than it was last year.

This is done, as Revel said, by factoring in the importance/reliance people have on everyday essentials compared to luxury goods. Many other factors are also taken into account - for instance, if the price of computers goes up by $1000, but computer now have double the memory capacity and three times the speed of old computers, the ABS will do its best to discern how much of the price increase is due to the increase in the cost of living, and how much of it is for the improvement in the performance and functionality of the computer. Similarly, if the price of a packet of sultanas increases by $2, but that packet of sultanas now contains 120g instead of 100g, the ABS will go about accounting for this. They also go about factoring in the price difference between the brands of a particular good - such as the price of a Heinz can of baked beans and a Homebrand can of baked beans. You get the idea - they do a whole heap of this evil voodoo shit before they spit out the final figures.