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Appendix 2: International compatibility

Internationally, the scope and coverage of measuring household inflation varies across countries in two important ways:

  1. The treatment of owner-occupied housing
  2. Availability of measures of consumer price change for groups of households.

In both these aspects the New Zealand approach is most similar to Australia. We use the same ‘acquisitions’ approach to owner-occupied housing in our CPIs. This tracks the cost of purchasing new dwellings (excluding land), and is aligned with a principle use of the CPI for monetary policy purposes.

The HLPIs are conceptually very similar to the Selected Living Cost Indexes (SLCIs) produced in Australia (Australian Bureau of Statistics, 2016). Both sets of living-costs price indexes use the ‘payment’ approach, which uses interest payments to capture owner-occupied housing costs. This makes the indexes conceptually suited to indexation of monetary payments.

The household-groupings used in Australia, for SLCIs, are:

  1. Employee
  2. Self-funded retiree
  3. Age pensioner
  4. Other government transfer recipient
  5. Pensioner and beneficiary (combining groups 3 and 4).

The aggregation method we use for the HLPIs is a notable difference from the Australian SLCIs. The HLPIs use an unweighted average of the expenditure proportions for each household (‘democratic weighting’). This approach, chosen following public consultation (Statistics NZ, 2016), better reflects the inflation experienced by a ‘typical’ household within each household-group. The use of this approach, and analysis of the impact, was tabled at the joint United Nations Economic Commission for Europe/International Labour Organisation 2016 Meeting of the Group of Experts on Consumer Price Indices. The paper Household-group inflation: methods to combine expenditure patterns (Bentley, 2016) includes details on the approaches used in several other countries.

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