Measurement of inflation

• Inflation is
  ?

• the percentage change in the general level of prices, measured by the Consumer Price Index (CPI).

  • 
  • Inflation must be maintained to achieve the objective of price stability.

• Consumer Price Index (CPI) is
  ?

• the average level of prices of the goods/services that a ‘typical household’ buys.

  • It measures changes in the prices of selected household items, weighted according to significance, monitored by the ABS.
  • The CPI figure for inflation is ==released every 3 months==.

Headline inflation

• Headline inflation is
  ?
• the actual raw inflation rate (quarterly rate of change in CPI), but it may include one-off events that distort the figures. (e.g. GST in year 2000)
  • The CPI figure for inflation is ==released every 3 months==.

Underlying inflation

• Underlying inflation (or ‘core inflation’) is
  ?
• a calculation of inflation that removes ‘one off’ and seasonal or volatile factors
  • (e.g. higher food prices due to droughts, floods)
    • (or government induced tax changes)
  • Underlying inflation is a better indicator of trend or core inflation than CPI inflation.