 Price rises are generally measured quarterly, but inflation rates are quoted as an average annual figure. The main measure is the Consumer Price Index.  Consumer Price Index (CPI): a measure of the variations in the retail prices of a basket of goods and services representing a high proportion of the expenditure of most metropolitan households.

 This basket of goods and services has been selected to represent purchases by all metropolitan private households and covers expenditure on the following broad items: ◦ Food ◦ alcohol and tobacco ◦ clothing and footwear ◦ housing ◦ household furnishings ◦ Financial and Insurance services ◦ health ◦ transportation ◦ communication ◦ recreation ◦ education  To ensure the basket remains representative of current spending habits, it is revised about every five years.

Located in Australia’s eight capital cities.  The ABS surveys the prices for the items included in the regimen. It does this at a representative range of retail outlets. ( e.g. Supermarkets, department stores, takeaway food outlets, chemists and providers of services including power, water and gas)

 Items are included in the CPI regimen are weighted according to their relative importance in typical household budgets.  The weights reflect the cost of the item and its frequency of purchase.  Things that are expensive or frequently purchased have a greater bearing on index trends( food, housing) than items of less significance( education).  Weights are reviewed every five years.

 Price changes over a period of time are compared against the price or cost of the regimen in a base year. Currently, the base year for our CPI is and this is given a value equal to 100 index points.  For instance, in June 2010 the CPI was measured at points as against in June On this basis, there was a 3.1 percent inflation rate(figure rounded) between June 2009 and June This annual rate was calculated as follows:

 Annual CPI rise(percent inflation) for =  Number of points increase in CPI ×100 Value of CPI in the first year =( )× =5.1× =3.05%

Classroom Activity  Calculating inflation rates % increase in CPI on previous quarter Year(June on June) CPI IndexInflation rate (%) N.A % % % %