Cost of Living is Hitting Australians Harder Than You Think

I recently succeeded in a Senate motion to bring in the Australian Bureau of Statistics (ABS) to explain how their inflation statistics (CPI) is calculated. Their answers show that the Consumer Price Index (CPI) is not a measure of how much it costs everyday Australian to live. Instead, it serves more as an indicator of where prices in the economy are heading, a useful tool for the Reserve Bank and Treasury.

The ABS also provides a set of other indicators, known as Cost of Living Indexes, which give a clearer indication of how price increases affect different groups. The largest of these is aimed at wage and salary earners, which encompasses 16 million Australians. This indicator shows that inflation for this group is running at 6.2%, rather than the official inflation rate of 3.8%.

The cost of living for most Australians is much higher under Labor than what Prime Minister Albanese and the Treasury acknowledge.   If it feels like you’re working harder and going backwards, it’s because you are.

Transcript

Senator ROBERTS: Thank you for appearing here. CPI has been discussed informally as something that is very important to a lot of people around Australia. A lot of things are based on it. So let me just check my understanding. The Australian Bureau of Statistics produces a set of indices called living cost indexes. These are designed to show the inflation facing specific demographics within the Australian population. As I understand it, your latest indexes, released on 7 August, showed the following. Pensioners and beneficiaries have a living cost index of 4.1 per cent. Employees have a living cost index of 6.2 per cent. Age pensioners have a living cost index of 2.7 per cent. Other welfare is at 4.6 per cent, Self-funded retirees are at 2.8 per cent. I don’t know if they are getting self-funded in part or wholly or whatever. Perhaps we can explore that. And the consumer price index is 2.8 per cent. Are they all correct?

Mr Goldsworthy: They are all correct, yes.

Senator ROBERTS: My concern is this, Mr Goldsworthy. Is your CPI representative of the inflation that adult working employee Australians are experiencing? The ABS dataset 6336 working arrangements as at August 2023 shows there are 14 million people working for a wage or salary in Australia, including owner-managers of their own business entity. Does that mean small businesses are included in that figure of 14 million and, if so, how many?

Mr Goldsworthy: Sorry, I might need you to repeat the question.

Senator ROBERTS: The ABS dataset 6336 working arrangements as at August 2023 shows there are 14 million people working for a wage or salary in Australia. That includes owner-managers of their own business entity. Does that mean small businesses are included in that figure of 14 million?

Mr Goldsworthy: I’m not sure off the top of my head. We don’t have those figures to hand.

Senator ROBERTS: Do you know how many small businesses there are?

Mr Goldsworthy: No. We came prepared to talk about questions in relation to the consumer price index.

Senator ROBERTS: Yes, that’s where I’m heading. I’d like to know how many people depend upon the CPI figure.

Mr Goldsworthy: We can certainly take that on notice for you.

Senator ROBERTS: Thank you. Does the employees figure include the one million contractors as listed in your characteristics of employment page?

Mr Merrington: The employee households represent wage earners.

Senator ROBERTS: Purely wage owners, no small businesses or self-employed owner-managers?

Mrs Marquardt: It’s wherever the main income of households is. If you are a household and you maybe have a wage earner and somebody who receives a pension, if the main income for the household is wages then they would be counted in the living cost indexes for employees.

Senator ROBERTS: Thank you. I will just go through the living cost indexes again. The jargon gets me, so just bear with me, please. There’s pensioner and beneficiary. So there’s no small business in that.

Mrs Marquardt: That is a household whose main source of income is government pensions.

Senator ROBERTS: Then there are employees who are adult working employees. Is that including owner-managers of their own businesses?

Mrs Marquardt: No, I think it would be employees, not business owners.

Senator ROBERTS: In the figures I’ve got—one of my staff has done the research—there are 14 million people working for a wage or salary in Australia, including owner-managers of their own business entities.

Mrs Marquardt: We can come back to you on it, but I believe it’s just whether or not they are earning a wage or a salary as an employee, not—

Senator ROBERTS: As an employee of somebody else?

Mrs Marquardt: As an employee of somebody else, yes.

Senator ROBERTS: Okay. So we may be wrong there. Then the next group is age pensioners.

Mrs Marquardt: They receive an age pension from the government. That’s the main source of income for that type of household.

Senator ROBERTS: Then there’s other welfare and self-funded retirees. As I said, I don’t know if that’s partial income or it is their main source—

Mrs Marquardt: It is their main source of income if they are a self-funded retiree—that is, they are not on the age pension.

Senator ROBERTS: So where would small businesses, owner-managers and contractors fit?

Mrs Marquardt: They don’t really fit into the consumer price index or the living cost indexes because it is about households. It’s not about businesses; it is about expenditure by households.

Senator ROBERTS: What about a small business owner that has a house? How do you capture them?

Mrs Marquardt: I’m not sure. I’d have to check.

Senator ROBERTS: I’m trying to get a feel for how many Australian people are in an employee category and then where the other working people, including small businesses, owner managers and contractors, fit. I’m trying to get a feel for how many Australians are affected by these figures, the CPI—

Mrs Marquardt: Or covered by them.

Senator ROBERTS: Yes.

Mrs Marquardt: From memory, off the top of my head, I think it’s about 24 per cent. Let me take that on notice. I’m not 100 per cent certain.

Mr Goldsworthy: We can come back to you. It’d certainly be the vast majority. My understanding of the origin of these indices is we have sought to capture the major household types dependent on their main source of income, as Mrs Marquardt went through and, indeed, you went through in asking your question. The main source of income is the pension for many people. For others it might be earning a wage or salary. Others might be retired but don’t use the pension and are self-funded. Others rely on government welfare payments. They are the main categories of income for household types. We have built the selected living cost indices around those. But we are certainly happy to take on notice if we can provide you with a detailed breakdown of the composition of Australian households.

Senator ROBERTS: Yes, if you could, please. I’d like to know about owner-managers, because they are employees but they are not in any of the other groups, and contractors and small businesses who pay themselves. I’d like to know how many people are in that employees group. How many Australians are affected? When they hear that their living cost index is 6.2 per cent, how many people does that apply to?

Mr Goldsworthy: Certainly.

Senator ROBERTS: You don’t know that offhand? I’m not necessarily expecting you to. I know you’ve got a lot—

Mr Goldsworthy: No.

Senator ROBERTS: Okay. So it doesn’t include contractors, which are listed in your characteristics of employment page, but purely employees?

Mrs Marquardt: I need to check because I haven’t looked into that for a while. I need to check where those people are classified or whether they are just not covered by any of those indexes.

Senator ROBERTS: As I said, the dataset 6336 on working arrangements shows there are 14 million people working for a wage or salary in Australia. That, I presume, is the largest group within your living cost indexes. Is that correct?

Mrs Marquardt: That would make sense.

Mr Goldsworthy: Yes, I would assume so.

Senator ROBERTS: What’s the next largest group of the ones I called out—pensioners and beneficiaries, employees, age pensioners, other welfare and self-funded retirees?

Mrs Marquardt: Again, I’d have to check because that information actually comes from the Household Expenditure Survey and the Survey of Income and Housing. In those surveys we go out and ask people what they earn from a whole bunch of different income sources. That might be superannuation or it might be wages or it might be all the different sorts of income you can have. Then, from there, we aggregate all those things together to see what the main source of income is for that household. So I’ll have to go back and have a look at those particular surveys to figure out what the actual numbers that fit into each of those categories are.

Senator ROBERTS: We’ve agreed that the employees category of the living cost index contains the largest number of Australians—that’s 14 million. What would be the second largest, roughly? Would it be pensioners and beneficiaries, age pensioners, other welfare, self-funded retirees or small businesses? There are millions of small businesses?

Mr Goldsworthy: Rather than taking a stab at that, I think it’s probably better, if you’re comfortable, for us to give you the figures on notice.

Senator ROBERTS: I value accuracy, so I’m happy with that. This is not a trap or a gotcha. So it would be around—I’m just pulling a number out of the air—14 million people plus other pretty large groups. So three-quarters or two-thirds of the Australian adult population is looking at the CPI, which is 3.8 per cent, and thinking, ‘What’s going on?’ because their inflation rate is actually 6.2 per cent.

Mr Goldsworthy: It might be useful, I think, if we take a step back and just briefly talk through the differences between the CPI and the selected living cost indices. I’ll get my colleagues to expand on the detail, but I think one point to keep in mind is that no single index will serve every purpose. Indeed, that is why we produce many different indexes of inflation. What the CPI does is measure the change in the prices of goods and services purchased by households. A lot of people use that as a proxy for change to the cost of living, but the concepts are actually a little bit different. That’s precisely why we produce these separate selected living cost indices. I think we’ve been doing that since the late 1990s.

There are two principal differences at a higher level between the selected living cost indices and the CPI. One is the weights we use to aggregate the prices of individual goods and services into an index. For the CPI, we use weights based on household spending patterns in the eight capital cities. Whereas, for the living costs indices, we use weights that reflect the spending patterns of the particular household type. We went through those different household types. The other big difference—and it gets a little bit technical—is about using an acquisitions approach for the CPI versus an outlays approach for the cost-of-living indices, but the key point of difference is the treatment of housing. I think we might have discussed this at estimates previously.

Senator ROBERTS: And I’ll come onto that again.

Mr Goldsworthy: For the CPI, we separate the cost of housing. We think about there being two components. One is land, which is an asset or an investment which isn’t included in the CPI. The other is the cost of building new structures, so a new house. That’s what we capture in the CPI. We also, of course, capture the rents for those that are renting properties. The living cost indices, as I said, follow the outlays approach. For that we include the outlay a household needs in order to acquire the house, and for many households that involves a mortgage. So we include the mortgage interest costs in compiling the—

Senator ROBERTS: But not the cost of the house, just the mortgage interest costs?

Mr Goldsworthy: That’s right, just the mortgage interest costs. I don’t know whether you want to correct the record or expand on any of that detail.

Mrs Marquardt: No, I think that’s fine. One concept is that you’ve bought it at the time. You bought the house in the first period that you’re trying to measure and comparing to the next period, and the assumption is that you’ve bought the whole house then, but obviously most people don’t pay for the house upfront. That’s the difference in the living cost indexes, because the living cost indexes are how much you are paying to continue to have that asset. People who’ve bought it using a mortgage have to pay interest charges on that mortgage. They are the big differences, as Brenton said.

Senator ROBERTS: Am I right in thinking that it’s misleading for so many people? I’m guessing two-thirds, three-quarters, 80 per cent of the Australian population is actually facing a 6.2 per cent cost increase, whereas the CPI tells them it’s 3.8. When they go to the supermarket they think, ‘This is not right,’ and when they think about their home payments they think, ‘This is not right.’

Mr Goldsworthy: I certainly wouldn’t say it’s misleading. They measure different things. So, when it comes to supermarket prices, for example, they’re measured the same because CPI and living cost indexes—

Senator ROBERTS: No, I accept that. But most people, overwhelmingly, would say that CPI tells them how much it’s going up by, but they’re saying it’s going up by way more than 3.8 per cent. Without an explanation of the CPI versus employee living cost index, most people are saying that this is not right.

Mr Goldsworthy: One way I think about it is that, when mortgage interest rates are stable, CPI and living cost indices broadly move in line with each other. But, because of the different treatment of housing, when mortgage interest rates are either going up or going down, there will be a divergence between the two indices.

Senator ROBERTS: Without explaining it to people so that they understand what’s going on, how can we justify using a measure that does not reflect the actual inflation rate for a significant proportion of the population?

Mr Goldsworthy: Like I said, it really comes down to the purpose behind the particular index. One way of thinking about the CPI is that it’s a macroeconomic measure to inform government and the Reserve Bank of Australia.

Senator ROBERTS: These are economists and people making policy decisions in the industry.

Mr Goldsworthy: That’s right. And what we try and pick up there is the pure price change. Previously, we’ve talked about how we capture things like shrinkflation and other quality adjustments.

Senator ROBERTS: I’ll come back to that one again, too.

Mr Goldsworthy: So, it’s very important that we capture the pure price change, which is what the CPI tries to do. We’ve gone through the different treatment in housing as well. Which indices you should use really comes down to what question you’re trying to answer.

Senator ROBERTS: I’m guessing most Australians would think, ‘I want to know how much it’s affecting me,’ so they’d go to the CPI, but the actual living cost index is much higher.
Can we come to something else that’s a big cost burden on people and also joy: children? Looking through your methodology, we didn’t see a lot there about children. The Australian Institute of Family Studies put out a measure in 2018 of how much it costs to raise a child, finding that it cost $340 a week to raise a six-year-old girl and a 10-year-old boy. Was that Australian Bureau of Statistics data, and is there any inflation time series around the cost of raising children?

Mr Goldsworthy: I’m not personally familiar with that data.

Senator ROBERTS: So, the ABS doesn’t—

Mrs Marquardt: I think you gave us the source, and it wasn’t the Australian Bureau of Statistics.

Senator ROBERTS: No, it was the Australian Institute of Family Studies. Did they rely upon you?

Mrs Marquardt: They may do. Again, I’m not sure without looking at their thing. I go back to the price indexes. This doesn’t have a level of spending in it; it’s obviously about the change in prices. So, to the extent that people are buying things for their children like toys, child care or anything like that, all of that is covered by the CPI and the living cost indexes.

Senator ROBERTS: But you can’t tell how much inflation is around the cost of raising a child? You can’t pull that out?

Mrs Marquardt: No. We don’t put out a separate index that’s just for things that are bought for children.

Senator ROBERTS: How does your data help a family quantify how much the inflation rate is impacting on their household?

Mrs Marquardt: If you really wanted to, you could pick out different parts of the index and combine them together. So, if you wanted to combine food, childcare expenses and toys or whatever else it is that’s related to having a child, then you could do that. But, really, the bottom line is that the CPI is not actually about individual types of households or individual people; it represents the whole household sector.

Senator ROBERTS: I’m just wondering how parents judge their spending forward plans, wage and salary demands, and decisions around having children on that measure of how much kids cost. How do parents understand their inflation rate from your data? I would think it would be a very good KPI for politicians to assess how much it costs to raise a child, but that’s not possible.

Mrs Marquardt: There are two different things. There’s how much it costs to raise a child, which is the dollar amount of things—that’s kind of a level; it’s that you pay $20 for a toy—versus the price index, which is saying how much the price for that toy has changed. So there are two different things.

Senator ROBERTS: I understand.

Mrs Marquardt: One of the things that you can do is look at your household budget. If your household is spending X per cent of its budget on food, then you could use our indexes to show how much the prices that your particular household is paying are changing.

Mr Goldsworthy: To expand on that, we have 11 groups and 87 expenditure classes in the CPI, so you can certainly look up the ABS website and look through the price change for each of those 87 expenditure classes. I think I’m right in saying that we also publish the weights for each of those classes, so you can see the weight that is used in the CPI, and people can make their own assessment as to whether how much they spend is higher or lower.

Senator ROBERTS: Let’s move on to housing. The ABS dataset entitled ‘Residential property price indexes’ has been discontinued. I can see an index called ‘Total value of dwellings’, with the emphasis on ‘value’. The summary page doesn’t provide any usable information to anyone trying to find out how much the average price has gone up. We can get that data if I download the spreadsheet 6432 and work it out for ourselves, yet that’s not reported. Is there a simple visual representation of house price inflation in each state to which the people can refer?

Mrs Marquardt: We discontinued that because there are a number of other sources that give that very similar type of information. CoreLogic is one; Domain is another.

Senator ROBERTS: They’re private companies, aren’t they?

Mrs Marquardt: That’s right, but they use the same methodology as we used to use when we did the residential property price indexes. So, effectively, they were putting out the same information a bit earlier, so we were getting all of our information from them and then republishing it.

Senator ROBERTS: Do you republish it now?

Mrs Marquardt: No. We’ve discontinued the residential property price indexes publication.

Senator ROBERTS: Why did you stop? Could they do it more quickly?

Mrs Marquardt: That’s right.

Senator ROBERTS: What are the hurdles there? I would have thought that no-one would be able to do it more quickly or better than the ABS.

Mrs Marquardt: They get information from all of the sales that are made either through the valuer generals or other data sources like realestate.com.au. They basically were able to put it together much faster than us. In fact, the source of the information in the residential property price indexes and the total value of dwelling stocks is CoreLogic.

Mr Goldsworthy: It’s also the case that we need to make prioritisation decisions, and we make a judgement as to where we can add the most value. Given the private sector sources available for residential prices, we made the judgement that we could add more value by reallocating resources.

Senator ROBERTS: I’ve got no problem with the government saying, ‘Leave it to the private sector,’ if that’s the way they see it. If the mean price of a home in Queensland in 2020 was $524,000 and that same figure in 2024 is $815,000, per your dataset 6432, column AE, line 42, has that housing price inflation been captured in the CPI? I’m guessing not.

Mr Goldsworthy: A large component of that price inflation would reflect the increase in land prices, and, as I said before, land is treated as an asset or investment, so that component isn’t captured in the CPI.

Senator ROBERTS: Can we break out land from housing construction or housing prices? You said that it’s not captured.

Mrs Marquardt: We price project homes—

Mr Goldsworthy: We price the cost of building a new home, and the change in the price of building a new home reflects changes in the cost of building either through materials or through labour.

Senator ROBERTS: I remember running an economic summit in my office. We hired a room in the Queensland parliament building in 2017. Dr Alan Moran gave us some figures. He said that the cost of building a house in Houston, Texas, at that time was the same roughly as the cost of building a house in Sydney. The huge differential in house prices was due to land. Is there some way that people can capture that? The mean price of a home in Queensland in 2020 was $524,000, and that same figure now in 2024 is $815,000. That’s a hell of an increase.

Mrs Marquardt: There’s another part that goes to this. The CPI is about the changes in prices of the household sector—for example, what the household sector is purchasing from the business sector or the government sector—so the sale of existing houses between one household and the next effectively nets out. There’s no weight. They’re not in the CPI because they’re being sold, for example, from me to Brenton.

Senator ROBERTS: So what you’re saying is that someone gets more money for selling it and someone has to pay more money for buying it?

Mr Goldsworthy: That’s right.

Mrs Marquardt: That’s right. But they’re both household—

Senator ROBERTS: But the one who’s now buying a property for the first time, compared to 2020, is now facing a 55 per cent increase compared to their peers in 2020.

Mrs Marquardt: But there’s somebody else in the household sector who sold it to them, so it nets out.

Senator ROBERTS: I get that.

Mrs Marquardt: What remains are brand-new houses, which are what we price. We price brand-new project homes and exclude land, as Brenton said, because that’s an asset. Existing houses are excluded because the sale is between one household and another household, and new households are represented by pricing project homes but not the land.

Senator ROBERTS: What about someone who bought a house in 2020 for $525,000 and sold it in 2024 for $815,000? So someone’s paid the extra money, and they’ve received the extra money for selling it, but then they have to go and buy another place. It’s going to be captured anyway. It needs to be captured anyway.

Mrs Marquardt: It just keeps netting out because it’s between households. You need to think about the CPI as representing price change for all households.

Senator ROBERTS: So it’s not really representative of the individual.

Mrs Marquardt: That’s right.

Senator ROBERTS: The CPI is not representative for an individual.

Mrs Marquardt: That’s correct.

Senator ROBERTS: I think that would be a surprise to many Australians. It’s not a criticism. If that’s the way your formula works, that’s fine. But a lot of people are relying on your CPI figure.

Mrs Marquardt: It’s not because, for example, it has rents and new homes by owner-occupiers. Conceptually, you can’t actually rent and buy a house for yourself. So, conceptually, the CPI does not represent any individuals because it represents what all households in Australia are spending.

Senator ROBERTS: But it’s in the aggregate of all Australian households.

Mrs Marquardt: It’s in the aggregate. That’s correct.

Senator ROBERTS: So some people are doing really well, or not suffering, and other people are suffering and sleeping under bridges in Queensland. That’s not your fault. I’m not trying to imply that. But you do capture mortgage cost changes. Let’s consider that. If the average mortgage in the employee living cost index in 2020 was $500,000 and in 2024 is $800,000, do you show that as an increase in interest charges?

Mrs Marquardt: Yes, to the extent that mortgages have gone up, so that would mean that you need to pay more interest. There are two things that can make your interest payments higher: one of them is the interest rate and the other one is the size of your mortgage. To the extent that people’s mortgages have gone up or the interest rates have gone up, both those things show up in the changes in the mortgage interest charge costs.

Senator ROBERTS: So both the interest rate and the higher mortgage?

Mrs Marquardt: Yes.

Senator ROBERTS: Okay, thank you. Moving on to land tax. Victoria has increased their land tax by creating a $975 surcharge—wow—and a 0.1 per cent increase in the rate. Does that increase factor into the CPI or LCI?

Mr Merrington: Yes, we include property rates and charges in the CPI and living cost indexes.

Senator ROBERTS: So not just rates but all government charges stay with the local council?

Mr Merrington: Yes.

Senator ROBERTS: Okay, let’s move on. In the June Senate estimates I asked about the change to the weighting for recreation and culture. Mr Gruen took that question on notice and I have not received an answer, so I’ll ask again. I’ll read the question as I stated it back in June. In the last change of weighting, the weighting for the category of recreation and culture increased by 16 per cent. That category happened to be one of the leading disinflationary categories dragging down the CPI figure. Is the ABS telling Australians that, in the middle of the worst cost-of-living crisis in decades, they’re spending 16 per cent more on recreation and culture than a year ago?

Mrs Marquardt: First of all, I’d say: apologies for not answering that question. I’m not quite sure how we missed it, but the main driver of that increase in the weight for recreation was people’s travel overseas. During the COVID pandemic, obviously not very many people were travelling overseas, so its weight came right down. But, if you look at the overseas arrivals and departures data that we publish, it shows that levels of overseas travel have returned to almost the same level as they were before COVID. Consequently, the weight for travel has gone back up to being similar to what it was before COVID.

Senator ROBERTS: It’s gone up off a low base because of COVID?

Mrs Marquardt: Yes, that’s correct.

Senator ROBERTS: So in that sense it is misrepresenting what’s going on. I’m not questioning your methodology, but, just for people to understand, it would be better to compare it with something just before COVID. It’s difficult what you’re doing, I take it.

Mr Goldsworthy: I don’t know whether you’ve got a copy of the submission we provided to this hearing, but we’ve—

Senator ROBERTS: No, I haven’t. My apologies.

Mr Goldsworthy: When you get a chance to have a look at it, we’ve got a table that shows the weights.

Senator ROBERTS: One of my staff is up the back; we didn’t get it.

Mr Goldsworthy: It’s on page 5.

CHAIR: While you’re comparing that, can I take the opportunity to share the call?

Senator ROBERTS: Yes. I’d like to come back on shrinkflation.

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Senator ROBERTS: I’ll come back to that in a minute, but I’d like to ask you some questions about shrinkflation. Food is an important element of how the public perceives the cost of living. Can you tell me what percentage of the CPI basket is occupied by food, and how has that weighting changed over the last five years?

Mr Merrington: Our food and non-alcoholic beverages category represents around 17 per cent of the CPI.

Senator ROBERTS: Seventeen?

Mr Merrington: Seventeen. That includes restaurants and take-away food as well.

Senator ROBERTS: I said all food, so that’s good, thank you. Food has been subject to what is commonly called shrinkflation. This is where the pack size reduces but the price remains the same. If, for example, a product in your basket reduces in size from 500 grams to 400 grams but the price remains the same, is that 20 per cent inflation recorded as 20 per cent inflation in your index? It’s actually 25.

Mr Merrington: Yes, that’s correct.

Senator ROBERTS: That’s recorded?

Mr Merrington: As a price increase, yes.

Senator ROBERTS: Clothing, I understand, is also tracked like for like—for example, a 100 per cent cotton dress, or by utility, such as an adult female dress. I’m curious how do you track clothing over time.

Mr Merrington: We do make attempts to price the same item each period. When the quality of that item changes, we make an attempt to adjust for that quality change, whether it’s an improvement or a decrease in quality. It is very challenging and something we put a lot of effort into. But, as my colleagues have said, we’re trying to capture the pure price change, which removes any change in quality.

Senator ROBERTS: If someone is buying a cotton dress regularly and the price of cotton dresses or dresses generally increase, they could change to polyester. Would that be captured?

Mr Merrington: We would look at it on a case-by-case basis, and we would make an attempt to adjust. You’ve got to try and quantify a quality change. It’s not always possible but we do make an attempt to adjust for quality changes.

Senator ROBERTS: So it would be hard to say, ‘We’ve noticed that,’ that the price of clothing is increasing—as are groceries and housing—and people are buying polyester instead of cotton. It would be hard to know that, wouldn’t it?

Mr Merrington: It would be, yes. We wouldn’t have that level of information on the type of spending at that level of detail.

Senator ROBERTS: I’ve always just accepted the CPI. It’s a per cent. That’s good. It represents things. It represents the cost increase. But it all depends upon your product—you’ve got a difficult job, so I’m not criticising you for this. Is the ABS thinking about the fact that your CPI is different things to different people? If someone is on a living cost index—for employees it’s 6.2 per cent, from memory—they’re finding a lot more inflation than someone who’s just looking at the CPI.

Mrs Marquardt: That’s correct.

Mr Goldsworthy: The CPI has always been a macroeconomic measure of inflation or an economy-wide measure of inflation, so individuals will have different experiences of inflation.
Senator ROBERTS: This is possibly a policy question. Is there any thought given within the ABS as to whether your product is suitable, as it’s evolved over the years to various different uses that it’s now being put to? It’s used by journalists, either to create headlines or to smash the government or smash the opposition or whatever. It’s used by politicians to justify or to attack. It’s used by parents who are thinking, ‘How the hell can we afford to live?’ It’s used by businesses. There are many different users and many different customers. Is there any consideration in the ABS to amend that or explain the different indexes?

Mr Goldsworthy: From time to time, we do reviews of the CPI, as you’d be aware. We are in the process of producing a full monthly CPI, which we’re on track to deliver by the end of next year. As a part of that, we had a consultation period, towards the end of last year, from memory. We engage with a wide range of stakeholders whenever we release the CPI. Certainly, the feedback we’ve had through the reviews and the informal feedback through the casual consultation we have when we release the CPI is that everybody is very supportive of the current practice.

Senator ROBERTS: How much do they know of the current practice? I appreciate what you’re saying. They like the full monthly one; it’s a good product. But if they don’t understand that it might not represent their reality, they’re just going to rubberstamp it and say it’s good.

Mr Goldsworthy: We’re extremely transparent about the methodology we use to produce not just the CPI but also the other indexes. The information is certainly on our website, and we try to make it as easy to understand as possible.

Senator ROBERTS: It’s not easy. What do you think the chances are of employees knowing that they’re facing a living cost indexes increase of 6.2 per cent when the CPI, they’re being told, is 3.8 per cent? They’re thinking, ‘No, it’s much more than 3.8 per cent.’

Mr Goldsworthy: We tell employees, through the release of the selected living cost indexes, the different rates of inflation for the different household types. All that information is released in the public domain. The CPI is measured appropriately for its primary use as a macroeconomic measure of inflation used by government, RBA and others.

Senator ROBERTS: I think most people would be surprised with what you just said. I know I am, and I’m fairly well informed. I’m told by a member of my staff that the employees category, facing a 6.2 per cent cost-of-living index, includes owner-managers. I want to know the answers to the other questions. How many people in Australia are facing 6.2 per cent in their living cost index?

Mr Goldsworthy: Yes, certainly, Senator.

Senator ROBERTS: That’s all I had. Thank you very much.