Following the Australian Bureau of Statistics’ (ABS) admission that its unemployment data was dodgy, The AFR is this afternoon reporting that the ABS’ consumer price inflation (CPI) figures are no longer a reliable indicator of general price increases across the economy:
Top economists say the ABS waits too long to change the items and base weightings it uses to measure the rate of inflation in the economy – a key that helps decide interest rates, wages and some social security benefits.
Items that are increasingly irrelevant to Australian life such as answering machines, CDs, DVD rentals and camera film are still in the official published “basket” of goods the ABS looks at every three months to calculate the closely watched Consumer Price Index.
The last comprehensive review of the list was in 2011 and is not due for another review until 2017…
Before he resigned in May, former ABS chief Brian Pink had voiced concern about the organisation’s “difficult capital position, which is barely adequate to ‘keep the lights on’ ”.
Before everyone starts slamming the ABS over its data collection processes, we should all recognise that the organisation has suffered through ongoing budget cuts, which have significantly weakened its capability.
As part of the Federal Budget, the ABS was forced to cut its expenditure by $50 million over three years, which led to 100 staff being cut from the organisation. This followed a $20 million reduction in funding by the former Labor Government.
Ultimately, it is unrealistic to expect the ABS to deliver champagne statistics on a beer budget, and it is the Government that is to blame for the ABS’ diminished capacity and increasingly unreliable data.
As noted by Callam Pickering earlier this year, “we are one of the few developed countries that does not have a monthly measure of inflation. The ABS also releases its first read on gross domestic product over a month later than the likes of the United States. The RBA would certainly benefit from having more timely data.”
Timely and accurate data are vital to good decision making, and because of these short-sighted budget cuts, Australia risks becoming less informed during what is likely to be the greatest structural adjustment affecting the economy since the early-1990s recession.
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