26 Jul New Feature: Adjusting Values for Inflation

As most of us are acutely aware $100 today generally doesn’t buy as much as it did 5 or 10 years ago.  This is due to inflation, which occurs when there is a sustained increase in the prices for goods and services. It is measured as an annual percentage change. Where inflation occurs the prices of things rise over time, and every dollar you own buys a smaller percentage of a good or service over time.

The Australia Bureau of Statistics (ABS) publishes quarterly and annual estimates of inflation in the form of the Consumer Price Index (CPI).  This measures quarterly changes in the price of a ‘basket’ of goods and services which account for a high proportion of expenditure by Australian Households.

In its most recent release, the ABS reports significant price rises for automotive fuel (+6.9 per cent), medical and hospital services (+3.1 per cent), and tobacco (+2.8 per cent). These rises are partially offset by falls in domestic holiday travel and accommodation (-2.7 per cent), motor vehicles (-2.0 per cent) and vegetables (-2.9 per cent).

For many years the ABS’ CPI has been applied to REMPLAN’s Gross Regional Product (GRP) estimates in our public-access profiles to present trends in nominal (basic prices) as well as real prices (adjusted for inflation).

The application of the CPI has now been extend to REMPLAN Economy software to allow real-price comparisons between the latest data for your region, and the datasets we delivered in previous years.   This new functionality also allows more nuanced comparisons between the latest economic data for your regions, and reports and other material external to REMPLAN that may have been published in previous years.

Below is a comparison of output by industry for Ararat Rural City in Victoria between data published in June 2018 and June 2013.  Over this period total output in basic prices is estimated to have increased from $1.246 billion to $1.453 billion.

When the data is adjusted to ‘real’ 2016 prices, is is estimated to have increased from $1.347 billion to $1.426 billion.   An increase of $79 million in real terms, compared to an increase of $207 million in nominal terms.

The option to show CPI adjusted values applies across REMPLAN Economy, including output, wages and salaries, regional exports, gap analysis and tourism.  The aim of this new feature to increase the usefulness of the REMPLAN datasets delivered in previous years, as well as improve the capacity to present REMPLAN data alongside information from a range of industry and economic reports which may have been published in previous years.

If you would like to enquire further about this post or REMPLAN’s resources, or if you are a current user and would like some support, please contact us on:  (+61) 07 5689 1498