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The Australian Bureau of Statistics (ABS) has confirmed that it will soon begin publishing a monthly consumer price index (CPI) indicator to provide a “timelier guide” to inflation in Australia.
The ABS intends to publish the first stand-alone monthly CPI indicator in October alongside its regular quarterly CPI release.
While noting that the quarterly CPI figures would remain Australia’s key measure of inflation, Australian statistician Dr David Gruen said the indicator would become an important tool for policymakers, academics and businesses.
“The monthly CPI Indicator has been made feasible by using new data sources to reduce data collection costs, particularly scanner data and web-scraping techniques to provide high-frequency data at lower cost,” Dr Gruen stated.
“The use of new data sources has seen the ABS generate a range of timely new insights across the economy without asking more of Australian businesses and households.”
An information paper outlining the new monthly indicator will be released next week, and the ABS will be accepting feedback on it until 13 September.
“The information paper will show how the monthly CPI Indicator can provide an earlier guide to inflation developments, particularly in times of significant change,” Dr Gruen said.
“One important point of distinction with the monthly Indicator is that, while it will include prices for all the items in the CPI basket, not all these prices will be updated each month.”
Monthly data hopes to help produce more accurate forecasts
CPA Australia, which has previously urged for the adoption of monthly CPI reporting, welcomed the announcement from the ABS.
“This change will deliver more timely information into the hands of businesses and others who rely on economic data,” CPA Australia general manager media and content Dr Jane Rennie said.
“Access to a monthly CPI indicator will close the information gap and help organisations make better financial decisions.”
Dr Rennie stated that quarterly CPI reporting put Australian governments, regulators and businesses at a distinct disadvantage, particularly in economically uncertain times.
“A monthly CPI indicator will enable a clearer understanding of the effects of monetary policy, geopolitical tensions, supply chain disruptions and local interventions on prices across the Australian economy. Australia’s economy will benefit as a result,” she said.
“In a high inflation environment, we need our institutions to be agile and innovative. With this announcement, the ABS has demonstrated its willingness to be responsive to the needs of the community and embrace new lower-cost data sources to deliver monthly updates.”
RBA inflation-targeting framework under review
Australia remains one of the few advanced economies to report CPI data on a quarterly basis, with the US Federal Reserve, the European Central Bank, the Bank of Japan and the Bank of England all reporting the key inflation indicator monthly.
Indeed, the Reserve Bank of Australia relies on the quarterly CPI data (among other measures) to set interest rates, and has been criticised this past year for its shifting forecasts.
The RBA is set to undergo a review, which Treasurer Jim Chalmers MP announced last month would investigate the central bank’s “goals and objectives, tools and levers, processes and public commentary”.
Notably, this will include the continued “appropriateness” of the inflation-targeting framework.
Mr Chalmers told journalists that the RBA review “will consider the RBA’s objectives, mandate, the interaction between monetary, fiscal and macroprudential policy, its governance, culture, operations and more”.
He said it would include reviewing the “appropriateness of the inflation-targeting framework”, the make-up of “board structure, experiences and expertise, composition and the appointments process”, the conduct of the bank “during crises and when monetary policy space is limited”.
It will also consider its choice of policy tools, policy implementation, policy communication, and how trade‑offs between different objectives have been managed.
The review is expected to complete in March 2023 with a set of clear recommendations to government.
[Related: Inflation surges to highest figure since GST introduction]
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