Credit fees suspended from CPI
Australia's chief inflation measure will exclude bank fees hidden in interest charges for several years, from September 2011, the Australian Bureau of Statistics said yesterday.Fees for superannuation services will also remain missing from the CPI for the next few years.The ABS yesterday published its review of debates over how best, and how frequently, to measure inflation.There is plenty of demand from financial intermediaries for a monthly inflation measure and the ABS is willing to oblige, in a few years time, if properly funded.The review is otherwise a technical document and addresses itself, in part, to the dilemmas around capturing the "fee" income for services rendered by banks but wrapped up in the interest margin that banks earn.The consumer price index allowed for this component of a household's spending for most of the 2000s. It accounts for around four per cent of all household spending, as the ABS currently measures the price basket.However, the methodology has become too problematic since the global financial crisis changed the relative cost of funds for banks.The ABS had used a reference interest rate that was related to the cost of the banking sector's retail funding. Now, the steep increase in the cost of wholesale funding is messing up the results.So now, this common form of financial services consumption won't be captured in the inflation measure for a few years while the ABS works out a better method - and receives a better data-flow from the banks.The ABS will continue to include the cost of direct bank fees in the CPI.Adding superannuation to the basket of consumption goods is also on the radar for the bureau.