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Report of the Consumers Price Index Revision Advisory committee 2004

Executive Summary

The committee met in June this year to undertake an independent review of the practices and methods used to compile the CPI, taking into account the wide-ranging uses of the index.

Most of the committee's 20 recommendations call for refinement of, rather than fundamental changes to, current practices. The recommendations will play a major part in shaping the revised CPI, which is scheduled for introduction in 2006.

The committee recommended that the CPI should remain an acquisitions-based price index that measures inflation in the goods and services purchased by resident private households. It concluded that the CPI is well suited for use in the management of New Zealand monetary policy.

The committee noted that the CPI is also put to other important uses, such as by government, employers and employees seeking adjustments to benefit payments and wages to maintain living standards in the face of changing costs. As a result, the committee recommended that Statistics New Zealand develop an additional index or indexes more suited to measuring changes in the cost of living.

Another recommendation was to review the existing number of 15 regional centres from which prices are collected, in consultation with users. The review would form part of an integrated sample review of items, regions, field outlets and brands, undertaken in the lead-up to the 2006 revision.

Currently, fresh fruit and vegetable prices used in the CPI are seasonally adjusted. Other goods and services in the CPI basket that are known to show seasonality in their prices, such as international airfares, are not seasonally adjusted. To ensure the CPI better reflects actual short-term movements in prices, the committee recommended that the current partial seasonal adjustment be removed.

The committee also recommended adopting a standard international classification, which would enable greater comparability of price change across countries and could potentially harmonise the classification systems used in the CPI, Household Economic Survey and Household Consumption Expenditure estimates in the National Accounts. This would enhance integration of the statistics from all three sources.

See the file: Report of the Consumers Price Index Revision Advisory Committee 2004.

The downloadable file is in Adobe Acrobat format. If you do not have the Adobe Acrobat Reader you may download the reader to view or print the contents of this file.

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