2.  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.

3.  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.

7. 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)

8.  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.

9.  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 1989- 90 and this is given a value equal to 100 index points.  For instance, in June 2010 the CPI was measured at 172.1 points as against 167.0 in June 2009. On this basis, there was a 3.1 percent inflation rate(figure rounded) between June 2009 and June 2010. This annual rate was calculated as follows:

10.  Annual CPI rise(percent inflation) for 2009- 10=  Number of points increase in CPI ×100 Value of CPI in the first year =(172.1-167.0)×100 167.0 =5.1×100 167.0 =3.05%

12. Classroom Activity  Calculating inflation rates % increase in CPI on previous quarter Year(June on June) CPI IndexInflation rate (%) 2005-2006102.0N.A. 2006-2007106.34.2% 2007-2008112.55.8% 2008-2009113.71.06% 2009-2010114.80.97% 2010-2011113.6-1.05