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Price Index News: July 2009

1. Short stories

We're paying more for milk but less for eggs

Food prices have attracted a lot of attention over the past year or two, with annual food price inflation hitting a high of 10.8 percent in September 2008. Although the rate of increase in food prices has started to slow – with food prices increasing 6.8 percent in the year to May 2009 – food prices are still a hot topic of conversation. We're paying more for milk but less for eggs examines how food prices have changed over the past 50 years compared with overall inflation, and takes a close look at how specific food items have fared.

ANZ's experimental monthly inflation gauge

ANZ bank is compiling an inflation gauge, which tracks non-tradable (or domestic) inflation on a monthly basis. The gauge is still in the experimental stage and is subject to further refinement.

The monthly time series currently runs for just over a year. When aggregated to a quarterly level, quarter on quarter percentage changes to date have been within 0.1 of a percentage point of the consumers price index non-tradable series.

For May 2009 results of the monthly inflation gauge, see page 7 of the 15 June issue of ANZ's Market Focus.


2. Working with others

Prices paper and poster for New Zealand Association of Economists conference

Frances Krsinich, a senior research statistician in Statistics NZ's Prices business unit, is presenting her paper Using Hedonic Regression to Assess the Housing Rentals Component of the New Zealand Consumers Price Index on 1 July at the New Zealand Association of Economists conference in Wellington. The estimation of non-Housing New Zealand rents is based on data from an area-based sample survey, updated with Department of Building and Housing data on new bonds lodged. A 'matched sample' approach is used to remove the effect of changing sample composition, and therefore changing quality characteristics, from the measurement of price change. Although matched sample approaches for price change measurement are common across official statistics agencies, there is a potential risk that some pure price change implied by the changing population is removed.

As part of a more general review of the housing rentals index estimation, Frances used hedonic regression models to examine whether there is any residual pure price change being smoothed out of the index due to the matched sample approach. In the process, she explored different approaches to the specification of the hedonic regression models and the corresponding index calculation from the model parameters. The paper, which will be included in the October issue of Price Index News, presents the results, and gives initial conclusions.

Katrina Lindsay, a statistical analyst in the Prices business unit, has prepared a poster for the conference that looks back over 50 years at the consumer price index's food basket and price changes. The poster will be included in the October issue of Price Index News.

Prices meeting with the Australian Bureau of Statistics

Statistics NZ Prices staff will be joined by their Prices colleagues at the Australian Bureau of Statistics (ABS) for a three-day bilateral meeting in November this year.

The discussion is the first for three years and is an opportunity to reflect on recent developments, and to discuss progress on current projects and possible future initiatives. The meeting will also provide an opportunity to report back on five projects which are being jointly worked on by Statistics NZ and ABS staff in the lead-up to the meeting.

Purchasing power parities meeting in April

In April, Daniel Griffiths from Statistics New Zealand's Prices unit attended a purchasing power parities (PPP) meeting for non-European countries. In attendance were representatives from the relevant statistical agencies of the non-European countries: the United States of America, Canada, Mexico, Japan, Korea, Australia, and New Zealand. There were also representatives from Eurostat (the Statistical Office of the European Communities), the Organisation for Economic Co-operation and Development (OECD), Russia, and Israel.

The meeting discussed the main results from surveys completed to date for the 2008 round, with a view to finalising overall results for publication next year. There were also agenda items for the 2011 International Comparison Programme (ICP) by Michel Mouyelo-Katoula, the new ICP Global Manager, specific country practices in collecting prices for the PPP programme, and discussion of methodology improvements for measuring health and education.

In addition to the PPP discussion, representatives from Australia and New Zealand held initial discussions concerning a comparison of respective methods and results that will be undertaken in the lead-up to the upcoming Prices bilateral between the Australian Bureau of Statistics and Statistics NZ in November 2009.


3. Virtual papers

Ottawa Group meeting in May

The 11th meeting of the Ottawa Group, an international research forum for consumer price index (CPI) specialists, was held 27–29 May in Neuchatel, Switzerland. The group's meetings provide a forum for specialists and practitioners (who work for, or are advisors to, national statistical agencies or international organisations) to exchange their experiences and thoughts on key topics relating to the measurement of price change.

Statistics NZ prepared three papers for the conference. One, which outlines core inflation measures produced in New Zealand, was presented at the meeting. The other two were available as room documents. The first of these is an analysis of the retrospective superlative CPI calculated between the June 2002 quarter and the June 2008 quarter. The second investigates the impact of various weighting and price updating options for the basket of goods and services in the New Zealand CPI. The results of both these papers were discussed during the meeting.

Other papers presented at the meeting are available on the Ottawa Group Meeting 2009 website.

Statistics NZ will host the 12th meeting in Wellington in May 2011.


4. On the horizon

Minimum wage increase

From 1 April 2009, the minimum wage rate increased by 4.2 percent, from $12.00 to $12.50 for all workers aged 16 years or over who are not new entrants or trainees. At the same time, the new entrants' minimum wage (for workers aged 16 and 17 years except for those: who have completed 200 hours or three months employment, whichever is shorter; or who are supervising or training other workers; or who are trainees) and the training minimum wage (for workers aged 16 and over who are doing recognised industry training involving at least 60 credits a year) also increased 4.2 percent, from $9.60 to $10.00 an hour.

The labour cost index (salary and wage rates) measures changes in salary and wage rates over time. It is expected that the June 2009 quarter release will include increases due to the latest minimum wage increase.

Increase in childcare subsidy

On 1 April 2009, there were increases to the maximum hourly rates and income abatement thresholds for the childcare subsidy administered by Work and Income. The increased subsidy rates and higher income abatement thresholds will have a downward influence on the early childhood education index for the June 2009 quarter CPI.

Domestic air travel

The initial impact of a recent new entrant, offering passenger air transport services on several routes within New Zealand, including the main trunk routes between Auckland, Wellington and Christchurch, will be mostly reflected in the CPI for the June 2009 quarter. Domestic air transport prices are collected monthly, for travel the following month. For example, prices collected in mid-May for travel to be taken in mid-June are included in the May month for CPI purposes. As such, approximately two-thirds of the impact of the introduction will be shown in the June 2009 quarter, with the remainder in the September 2009 quarter. Of the domestic routes tracked for the CPI, flights between the three main centres carry between 50 and 60 percent of the expenditure weight of the domestic air transport index.


5. 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 to be used include Statistics NZ's Business Frame (a register of New Zealand businesses), the Labour Cost Survey and the Quarterly Employment Survey.

The new expenditure weights are being assigned at the sector of ownership (based on whether the organisation is owned privately, by central government, or 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 will be released in October 2009.

These reweights are 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), and occupation (Australian and New Zealand Standard Classification of Occupations) classifications will be implemented in the LCI. These new industry and occupation classifications have a different structure from existing classifications used in the LCI. The LCI sample has been refreshed to ensure it adequately represents the new classification structures. The first LCI results using the new classifications are expected to be included in the September 2009 quarter salary and wage rates information release.

Recent work on the review has focused on finalising the sample refresh and reweighting the non-wage labour costs.

If you would like to be kept informed of progress on the LCI review, please contact:
Claudia Schroeder
Wellington 04 931 4600

Update on the business price index redevelopment

The redevelopment of the producers price index and other business price indexes is progressing, with most of the indexes due to be reviewed by 30 June 2009, ready for testing. An update on progress with the project can be found here.


6. 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 of each Hot Off The Press information release. In addition, you can contact:

  • Chris Pike (Acting manager – Prices)
  • Litia Tapu (Project manager – Business, Labour and Overseas Trade Price Index outputs)
  • Patricia Jennings (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

7. Release dates

Price index release dates for the next three months

M = Media conference

July 2009

Thu 16 M Consumers Price Index: June 2009 quarter
Food Price Index: June 2009

August 2009

Tue 4 M Labour Cost Index (Salary and Wage Rates): June 2009 quarter
Thu 13 Food Price Index: July 2009
Wed 19 M Producers Price Index: June 2009 quarter
Wed 19 Capital Goods Price Index: June 2009 quarter

September 2009

Thu 10 M Overseas Trade Indexes (Prices): June 2009 quarter (provisional)
Overseas Trade Indexes (Volumes): June 2009 quarter (provisional)
Fri 11 Food Price Index: August 2009
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