Why does the price of goods fluctuate so much?
The price of everything has been rising and falling since the introduction of the Australian Bureau of Statistics’ price index, known as the CPI.
But how did that happen?
The price of groceries, clothes, petrol and other essentials have all been increasing since the start of the century, when the first CPI was published.
However, the price index is based on a basket of goods, rather than an index of prices, and it only measures the prices of certain items, such as food and energy, which can vary widely depending on a range of factors such as weather, time of year and geographical location.
But when the Australian economy was hit by the 2008 global financial crisis, the Australian Government made changes to the CPI, so that it now uses a basket that includes only those goods and services that are not directly related to the economy.
The basket of items in this basket are known as commodities.
The most commonly cited reason for the price fluctuation is the supply of labour in the economy, particularly people in the manufacturing sector, but it can also be related to a number of other factors.
For example, food prices can fluctuate depending on the availability of fresh produce.
In addition, there have been several other factors that can affect the price, such a lack of fuel and energy for cars and boats, as well as inflationary trends in the global economy.
Why does the CPI fluctuate?
According to the Bureau of Trade and Industry, there is a wide range of prices across the economy that can fluctate.
These range from a “fair” price for a good or service to a price that is below the market price.
A fair price is defined as a price where the consumer is receiving a fair value for their goods or services.
For example, a supermarket may charge a “price that is reasonable” or “reasonable for a product”.
A “fair price” for a commodity is one that is more than what consumers can afford to pay for the same item.
For some goods, a fair price will be the price that the consumer would pay if they could buy the same goods for the market.
This is called a “market price”.
For example a supermarket that charges $3.80 for a basket is more expensive than a supermarket where the basket price is $3, so the consumer has to pay $3 more for the basket.
The price difference between the two retailers is called the “fair market price”.
However if the price difference is less than $3 per basket, the consumer can expect a price difference of less than 0.2 per cent.
This is referred to as a “cost to supply”.
What is the CPI?
As well as using the basket as a way of measuring the prices in the supply and demand for a given good or services, the CPI also measures the level of inflation in the Australian dollar.
Since the introduction, the average rate of inflation has been consistently below 2 per cent per annum.
While this is well below the 2 per in the CPI basket, it is still far above the rate of 3 per cent that economists traditionally use as the benchmark for inflation.
When the Australian CPI was introduced in 2012, it was also included in the ABS national inflation index.
What can be done about the CPI inflation?
If you or anyone you know has questions or concerns about the prices that you see in your local market, you can call the Consumer Price Index (CPI) helpline on 1300 788 528 or visit the Bureau’s website.
You can also get more information on the CPI on the Bureau website.