You all know how I love an acronym…but what is the CPI?
CPI is the acronym for Consumer Price Index, which is a measure of changes in the price level of a basket of goods and services consumed or purchased by households.
Basically, the Australian Bureau of Statistics (ABS) collects data each quarter on prices in each of the eight State or Territory Capital Cities. This data consists of prices on a fixed set of items and determines if their cost has increased or decreased. The result is the CPI.
CPI should not be confused with the term “Inflation” – while many use these interchangeably, inflation refers to the increase in overall prices as opposed to the select basket that is used for CPI.
The CPI is often applied to lease agreements, franchise arrangements and other contracts or set fees, as a way for the vendor (or seller) to protect the dollar value of their services. The CPI is also used by the Government when considering changes to welfare payments.