Price Index News: April 2010

1. Short stories

The ups and the downs of the CPI

The commentary section of each consumers price index (CPI) information release gives additional information on the distribution of price movements for the latest quarter. With data gathered from these releases, The ups and the downs of the CPI shows the impact over recent years of items that increased and decreased on the overall CPI.

Dealing with size changes in the CPI

There has been recent media attention about reductions in the package sizes of some grocery products. Readers have raised questions about how Statistics New Zealand deals with these changes when compiling the consumers price index. Dealing with size changes in the CPI examines how changes in product sizes are dealt with in the CPI.

Retail fish prices and the fish monetary stock account

Retail fish prices tracks the prices of fresh fish sold in supermarkets and fish shops over the past five years. In 2009, hoki ($13.72/kg) and red cod ($15.85/kg) prices might have caught the eye of budget-conscious shoppers, while buyers of snapper and blue cod had to dig a little deeper, paying on average $37.40 and $34.36 per kilogram, respectively.

The value of New Zealand’s commercial fish stocks passed the $4 billion mark in 2009. The asset value of New Zealand’s commercial fish stocks, as managed under the Quota Management System (QMS), has grown 47 percent since 1996. The number of species managed under the system, introduced in 1986 to manage New Zealand’s fisheries, rose from 26 in 1996 to 96 in 2009.

In 2009 the top 20 species, including hoki, rock lobster, pāua, and blue cod, comprised 91 percent of the fish stocks’ total value. Hoki contributed the highest value at $815 million, or 20 percent of the total asset value.

These statistics are from the Fish Monetary Stock Account: 1996–2009. The report, which is based on information from the fishing industry, measures the asset value of New Zealand’s commercial fisheries (excluding aquaculture, recreational and customary catch, and commercial species not currently managed under the QMS).

Of the species covered in the story on retail fish prices, only salmon is excluded from the fish monetary stock account, as it is farmed. Of the remaining species referred to in the story on retail prices, seven have the same names in the fish monetary stock account. Sole is included under flats in the fish monetary stock account, lemon fish is included under rig, and monk fish under stargazer.

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2. Working with others

UNECE/ILO CPI meeting in May 2010

The Joint UNECE/ILO Meeting on Consumer Price Indices serves as a forum for discussion of methodological and practical aspects of the compilation of price indexes. Through the presentation and discussion of papers and the exchange of experiences, the meeting supports the development of internationally accepted standards and methods and their implementation in practice. The meeting in May 2010 will discuss a number of substantive topics in areas suggested by the previous CPI meeting and recommended in the programme of work adopted by the Bureau of the Conference of European Statisticians.

The first day of the meeting consists of workshops on the following topics:

  • the use of transaction, or scanner, data
  • financial services in the CPI
  • quality adjustment and seasonal products, clothing, and food
  • the harmonised consumer price index (ie CPIs constructed in Euro area countries to compare inflation rates).

On the second and third days of the meeting, session topics include:

  • house price indexes, including the presentation of the first draft of the planned international Handbook on Residential Property Price Indices
  • CPI user relations and meeting user needs
  • quality adjustment for services, such as telecommunications, health or transport services, or financial and legal services
  • CPIs and globalisation
  • the system of price indexes (CPI, producer price index, purchasing power parity).

Statistics New Zealand is preparing two papers for the conference. The first paper provides a stocktake of the different house price measures available in New Zealand and Australia. This builds on the paper House price measurement in New Zealand. The second details Statistics NZ's efforts to engage with users and meet their needs, including the alternative dissemination channel provided by Price Index News.

CPI adjustment to New Zealand superannuation and benefit payments

The consumers price index (CPI) is used to adjust a host of Work and Income New Zealand payments, including New Zealand Superannuation and Veteran’s Pension; benefits for unemployment, sickness, and domestic purposes; student allowances; and working for families tax credits for each child. In addition, a CPI adjustment is also made to income thresholds for eligibility for childcare assistance and the accommodation supplement; income limits for the disability allowance; and income cut-off points for the Community Services Card.

On 1 April 2010, New Zealand superannuation and benefit payments increased by 1.96 percent, according to the annual increase in the CPI from the December 2008 quarter to the December 2009 quarter. In addition to the CPI adjustment, New Zealand Superannuation and Veteran’s Pension rates were further adjusted to bring them up to 66 percent of the net average weekly wage, giving a total increase of 2.31 percent. For more details, see the Work and Income website.

The indexation of New Zealand Superannuation is set out in the New Zealand Superannuation and Retirement Income Act 2001, and veterans' pensions in the War Pensions Act 1954. It has been announced that adjusting welfare benefits each year by changes in the CPI will be enshrined in legislation.

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3. Virtual papers

Statistics NZ clarifies impact of GST on CPI

The Tax Working Group issued its report in January 2010. The report, A Tax System for New Zealand's Future, recommended that consideration be given to increasing the rate of GST. To help inform discussion about any change to GST, Statistics NZ issued a media release: Statistics NZ clarifies impact of GST on CPI.

Lifting GST to 15 percent could increase retail prices of goods and services that are subject to GST by 2.22 percent. Housing rentals, school donations, and credit services are not subject to GST. Those items make up about 9 percent of the CPI, so about 91 percent of the cost of the CPI basket would be affected by a change in GST. This means an increase in GST to 15 percent would lead to a CPI increase of about 2.0 percent, all other factors remaining equal.

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4. Nuts and bolts

Property maintenance in the consumers price index

Property maintenance materials and services had a combined expenditure weight of 2.64 percent in the consumers price index (CPI) at the June 2008 quarter. The concepts, sources, and methods used to compile the property maintenance materials class and the property maintenance services class are explained in Property maintenance in the CPI.

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5. On the horizon

Excise duty increase for cigarettes and tobacco

The annual indexation adjustment of the excise duty on cigarettes and tobacco occurred on 1 January 2010. The adjustment was a 1.58 percent increase in the excise duty, based on the movement in the 'CPI less credit services' index from the September 2008 quarter to the September 2009 quarter.

The impact on retail prices should be fully shown in the CPI for the March 2010 quarter, depending on the timing of price increases in stores, and the timing of price collection by Statistics NZ staff.

The new excise rate for cigarettes is now 31.443 cents per cigarette, up from 30.955 cents per cigarette. In the December 2009 quarter, a packet of 25 cigarettes cost around $13.28, of which $7.74 – around 65 percent of the packet price before GST is added – was the excise duty.

 

Education fees in the CPI

In the March quarter of each year, the CPI shows changes in:

  • tertiary education fees
  • adult and community education fees
  • school fees, donations, and uniform prices.

A reduction in government subsidies for adult and community education courses within the ‘other education’ class of the CPI will be reflected in the March 2010 quarter. An adjustment will be made to reflect lower participation in these courses, relative to other education, resulting from higher fees and fewer courses being offered by fewer providers.

Alternative way to access Price Index News articles 

There are four new links available on the Price Index News home page:

These links will take you to an archive of articles from past issues of the newsletter. To find previous CPI nuts and bolts articles, click on the ‘Nuts and bolts’ link, then click ‘CPI sources and methods’. The articles are divided according to the 11 CPI groups.

 

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6. Development updates

Labour cost index review

Statistics NZ is undertaking a labour cost index (LCI) review project. The LCI measures changes in wage rates and non-wage labour costs.

The reweight will ensure the LCI continues to reflect the current labour market. The 2006 Census is a key data source for the reweight, as was the 2001 Census for the previous reweight in 2002. Other important data sources being used include: Statistics NZ's Business Frame (a register of New Zealand businesses), the Labour Cost Survey, and the Quarterly Employment Survey (QES).

The new expenditure weights are being assigned at the sector of ownership (based on whether the organisation is owned privately, by central government, or by local government), by industry group, and occupation level. The expenditure weights will reflect both the number of jobs filled by paid employees, and the pay rates for those jobs.

The reweighted salary and wage rates indexes for the September 2008 quarter were released in November 2008. The reweighted indexes of non-wage labour costs for the June 2009 quarter were published on 22 October 2009. These reweights were based on the existing LCI sample, and the existing industry and occupation groups.

Following the reweight using the existing classifications, more up-to-date industry (Australian and New Zealand Standard Industrial Classification 2006 (ANZSIC06)), and occupation (Australian and New Zealand Standard Classification of Occupations (ANZSCO)) classifications have been implemented in the LCI. These new industry and occupation classifications have different structures from the existing classifications used in the LCI. First LCI results using the new classifications were included in the September 2009 quarter salary and wage rates information release, published on 3 November 2009.

The LCI has been re-expressed on a base of the June 2009 quarter (=1000). The sample of surveyed job descriptions has been refreshed to better reflect the structure of the ANZSIC06 classification. The ANZSIC06-based industry and ANZSCO-based occupation indexes have not been backcast before the June 2009 quarter. However, the LCI (salary and wage rates) series on the old industry and occupation classifications will continue to be published until the June 2010 quarter, providing a year-long overlap.

For more information see the technical notes section of the September 2009 quarter salary and wage rates information release.

Recent work on the review has focused on the reweight of the non-wage labour costs under ANZSIC06 which will be published in October 2010.

If you would like to be kept informed of progress on the LCI review, please contact:

Claudia Schroeder
Wellington
04 931 4600
Email: info@stats.govt.nz 

Update on the business price index redevelopment 

The redevelopment of the producers price index (PPI) and other business price indexes is nearly complete. The remaining outputs indexes are ready for testing and will be implemented in the PPI for the March 2010 quarter to be released in May 2010. An update on the project's progress can be found on the Business Price Index Redevelopment Project web page

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7. Making contact

In future issues of Price Index News, we will use this section to let you know about:

  • plans to consult users of price index statistics
  • the availability of consultation papers
  • how users of price index statistics can participate in the consultation process
  • decisions made after users have been consulted. 

If you would like to discuss any aspect of price index statistics, we would like to hear from you. Contact names are at the end of the commentary in each information release. In addition, you can contact:

  • Chris Pike (Acting manager – Prices)
  • Litia Tapu (Project manager – Business, Labour and Overseas Trade Price Index outputs)
  • Vannessa Turner (Acting project manager – Business Price Index development)
  • Daniel Griffiths (Project manager – Consumers Price Index outputs)
  • Ludeth Mariposa (Acting project manager – Consumers Price Index/Labour Cost Index development). 

Wellington 04 931 4600
Email: info@stats.govt.nz

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8. Release dates

Price index release calendar for the next three months

M = Media conference

April 2010

Tue 20 M Consumers Price Index: March 2010 quarter
Food Price Index: March 2010

May 2010

Tue 4 M Labour Cost Index (Salary and Wage Rates): March 2010 quarter
Thu 13 Food Price Index: April 2010
Tue 18 M Producers Price Index: March 2010 quarter
Capital Goods Price Index: March 2010 quarter

June 2010

Thu 10 M Overseas Trade Indexes (Prices): March 2010 quarter (provisional)
Overseas Trade Indexes (Volumes): March 2010 quarter (provisional)
Fri 11 Food Price Index: May 2010