Local authority rates in the CPI

With an expenditure weight of 2.16 percent of the Consumers Price Index (CPI), the local authority rates and payments index is one of the more important of the goods and services in the CPI basket. Rates are surveyed once a year because local authorities usually strike their rates annually. Newly set rates normally come into effect on 1 July, with changes shown in the CPI in the September and December quarters. This article outlines how the CPI local authority rates and payments index is compiled.

Position in CPI structure

The local authority rates and payments class falls under the property rates and related services subgroup, which in turn is part of the housing and household utilities group. Within the property rates and related services subgroup, there are also classes for water supply and for refuse disposal and recycling.

Price collection

The CPI local authority rates survey is an annual postal survey, with respondents being sent survey questionnaires and electronic spreadsheets. Information is collected from a representative sample of 38 local authorities and from six regional councils. The 38 out of 74 local authorities cover about 80 percent of the population. Information is usually collected in the September and December quarters of each year (depending on when rates are struck). If necessary, late returns are included in the March quarter.

The information collected from local authorities through a postal survey includes:

• the local authority’s levied total rate take (including any regional rate take) on residential assessments for the rating year
• the number of separately rateable residential assessments
• the different assessment groups included in residential assessments
• uniform annual general charges, separate uniform annual charges and fixed charges for residential assessments
• whether the local authority collects rates for one or more regional councils
• variable charges based on property value
• charges and associated information for watered meter, if any (used for the water supply class index).

For surveyed local authorities that do not collect regional rates, the information collected from the corresponding regional authorities via a postal questionnaire includes:

• the region’s levied total rate on residential assessments for the rating year, for the whole region and for each of the local authorities
• the number of separately rateable residential assessments for the whole region and for each of the local authorities
• the different assessment groups included in residential assessments
• uniform annual general charges, separate uniform annual charges and fixed charges for residential assessments, for the whole region and each of the local authorities
• variable charges based on property value.

Estimation

The information collected from each surveyed local authority (and, where applicable, regional council) is used to calculate an average residential rate for that authority. The average residential rates for the 38 surveyed local authorities are then used to calculate weighted average rates for the 15 CPI regions (that is, Whangarei, Auckland, Hamilton, Tauranga, Rotorua, Napier-Hastings, New Plymouth, Wanganui, Palmerston North, Wellington, Nelson, Christchurch, Timaru, Dunedin and Invercargill). When aggregating to the 15 CPI regions, the local authority average rates are weighted by the numbers of owner-occupied dwellings in the local authorities.

Movements in the regional average rates are then combined using expenditure weights based on regional population shares to derive the national index for local authority rates and payments.

Back to Price Index News: October 2007