- The ABS has announced plans to prepare CPI inflation data on a monthly basis.
- The roll-out of monthly CPI data is still two years away from completion.
- The ABS said advances in technology mean it can now produce the report more frequently at lower cost.
The Australian Bureau of Statistics (ABS) today announced plans to produce CPI inflation data on a monthly basis, rather than quarterly.
Implementation of monthly CPI is still two years from completion. The ABS said it has begun a development phase which will take around 12 months, after which data will be collected monthly for another 12 months but not released.
“This enables sufficient time to imbed the monthly collection and conduct a parallel run with the quarterly CPI,” the ABS said.
“It will then ensure that when the monthly CPI is first published, an annual movement will also be available.”
The ABS said that following a 2010 review of CPI, annual costs for a transition to monthly reports were deemed to be in the vicinity of $5 million.
However, a reduction in the costs associated with data collection that weren’t available in 2010 means that figure has now been significantly reduced.
“In particular, the use of transactions data and web-scraping data collection techniques provides high frequency data at a significantly reduced cost to the ABS,” the bureau said.
Web-scraping is a technology that allows for the collection of large amounts of price data from merchant websites.
The development is most likely welcome news for economists and market analysts, given the central role that CPI plays in the setting of interest rates.
As the ABS pointed out in its statement today, Australia is the only country in the G-20 that doesn’t produce monthly CPI data.
“A monthly CPI would provide a more frequent and earlier insight of turning points in the Australian economy. This will assist in the formation of monetary policy,” the ABS said.
While the RBA doesn’t have a sole inflation mandate like the US Federal Reserve, inflation data is absolutely central to decision-making around its three stated policy aims: stability in the Australian dollar, maintaining full employment and delivering economic prosperity and welfare to the Australian people.
The RBA holds a monthly meeting on monetary policy, which means only one in three decisions on interest rates can be made with the latest inflation data at hand.
The most recent inflation figures were released in late April, so inflation data for the June quarter isn’t due until Wednesday, July 25.
The ABS cited the example of CPI data for the March quarter in 2016, when quarterly inflation unexpectedly went negative which saw the Australia dollar plunge.
“A monthly CPI would have given users an earlier insight into the trend of inflation leading up to and following the March quarter 2016 result,” the ABS said.
“The ABS has committed to development work to produce a monthly CPI. Feedback is being sought as part of a consultation process with stakeholders and users to determine their requirements.”