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Household Expenditure Surveys and the CPI ___________________________________________________________________________ The
ABS conducts household expenditure surveys every five years or so, principally
to update the 'representative basket' of
goods and services that underlies the Consumer Price Index (CPI), including
updating the weights for individual items (see below). Its most recent survey
was run in 1998-99, following on previous ones undertaken in 1975-76, 1984, 1988-89
and 1993-94. Other uses to which HES
data are put include standard-of-living studies, evaluating government policies
affecting households and – as in this case – for market research. The 1998-99 HES collected detailed information
about the expenditure, income and household characteristics of a sample of
6,893 households[1] resident in private dwellings throughout Australia, including for two
items of particular relevance to the present study: Ø
11010501, Photographic equipment (excluding film and chemicals) Ø
11010502, Photographic film and chemicals (including developing). The
household expenditure classification (of which the above two items are at the
most detailed level) has a 4-level hierarchy in the published series: Ø
major group, comprising 17 expenditure classifications, each
represented by a two-digit code (eg 11, Recreation – the highest in the hierarchy relevant to the
items of interest) Ø
sub-major
group, comprising 43 classifications, each represented by a four-digit code (eg
1101, Recreational and educational equipment) Ø
minor
group, comprising 123 classifications, each represented by a six-digit code (eg
110105, Other recreational and educational equipment) Ø
detailed
group, comprising 463 expenditure classifications, each represented by an eight-digit
code (of which the two listed above are the most relevant). In the 12 months to June 1999, Australian households
spent an average of $699 each week on goods and services, representing an
increase of 16 percent since the previous survey in 1993-94. Part of this increase can be attributed to
inflation – over the intervening five years between the two surveys, the price
of goods and services – as
measured by the consumer price index (CPI) – rose by 10 percent, while average weekly household
income increased by 22 percent. During
this period the average household size was unchanged at 2.6 people. In 1998–99, the largest broad categories of household
expenditure were: Ø
Food and non-alcoholic beverages, with average household expenditure of
$127 per week (representing 18% of total spending on goods and services) Ø
Transport, $118 per week (17% of the total) Ø
Housing, $97 per week (14%). The next highest category was Recreation (the category
of interest to this study), with average weekly household expenditure of $89
per week (or 13% of the total). As
the ABS points out, the level and pattern
of spending varies among households, reflecting differing characteristics – such as income, composition, size and location. Household Income In 1998–99, households in the lowest income quintile
(the lowest 20% of households when ranked according to income) spent on average
$343 per week on goods and services, compared with $1,171 by households in the
highest income quintile. Household income also
affects the composition of a household’s weekly expenditure. For example Ø
food and
non-alcoholic drinks accounted for 20 percent of the expenditure on goods and
services of households in the lowest income quintile Ø
compared with 17
percent for households in the highest income quintile Ø
while the
proportion spent on housing, household services, and domestic fuel & power
declines as household income rises Ø
and the
proportion spent on transport, recreation, clothing & footwear, and
alcohol, increases. Social
and Demographic Characteristics The level and composition of household income and
expenditure is also highly correlated with the social and demographic
characteristics of household members. For example Ø
households in the lowest income quintile were
more likely to be lone person households and to rely on government pensions and
allowances as their principal source of income Ø
while households in the highest income quintile
were more likely to be couple, one family households and to have employee
income as their principal source of income. Location The level of household spending varied among the states
and territories Ø
with households in New South Wales recording the
highest average weekly expenditure at $740 Ø
followed by those in Victoria at $718 Ø
while the lowest expenditure was in Tasmania at
$593 per week. Expenditure also varied between capital cities and rural
areas Ø
with the average weekly expenditure of households
located in capital cities being $747 (where spending on housing, food, clothing
& footwear, and recreation was considerably higher than in rural areas) Ø
noting that the highest average weekly household
expenditure was Darwin at $906 per week Ø
followed by Canberra at $860 Ø
compared with an average weekly expenditure of
$616 in rural areas. Table
D1 presents summary results from the latest HES, highlighting the relative
importance of Recreation spending (which includes spending on items of
interest). The table also shows the
upper boundaries of the lowest four income quintile groups, average weekly
household income, the average number of employed persons in households falling
to the 5 quintile groups, and the composition of households (in terms of the
proportions of couple, one parent, and other families, lone person and group
households). Table
D1 Relative importance of Recreation spending, by Household Income Quintile
Group, Australia, 1998-99
The
table records that Ø
households falling into the lowest income quintile (income up to $300
per week) spent an estimated 10.85 percent ($37.19) of their total spending on
goods and services on items classified as Recreation (the major group
containing photography and related items of interest) Ø
households in the next quintile (with incomes between $300 and $552 per week) spent 11.96 percent ($57.74) Ø
those in the third quintile ($552 to $884) spent 12.15 percent ($78.72) Ø
those in the fourth quintile ($884 to $1373) spent 12.35 ($105.07) Ø
while the estimated recreational spending of households in the highest
quintile (more than $1373 per week) was an estimated 14.13 percent ($165.50 per
week) Ø
and the average for all households was 12.71 percent (or an estimated
$88.81 per week) Ø
thus, the wealthier the household, on average, the more of its
disposable income it spends on recreational goods and services (including
cameras, film and processing). Detailed
Results Rounded to the nearest dollar, household spending on
recreation averaged $89 per week Ø
holidays within Australia ($16) and overseas
($12) together accounted for 31 percent of spending on recreation Ø
books, newspapers and magazines ($8) Ø audiovisual
equipment ($7) – including
photography and related items of interest Ø
animal expenses ($6) Ø
gambling ($6) Ø
sports fees and charges ($5) Ø
and cultural fees and charges ($5). Table
D2 puts these figures in the larger context – estimated expenditure, by
income quintile group, at the major (2-digit code) group, of which Recreation
is one of 13 such major groups. Not
unexpectedly, it is consistently the case that the more income a household
enjoys the more money it spends on recreational goods and services. This applies in a relative sense as well: as
household incomes rise, relatively more is spent on recreation as a proportion
of spending on all goods and services (Table D1). Indeed, while spending on Recreation ranks consistently fourth in
terms of its share of spending for the first four income quintile groups (and
in respect of all households), it ranks third in the case of households in the
highest quintile group (ie the highest income earners
not only spend more on recreation than do other households, but they spend
relatively more of their income on recreation as well). Table
D2 Household Expenditure on Goods and Services, by Household Income Quintile Group, Australia, 1998-99
Table
D3 details household characteristics of each quintile group in terms of Ø
average weekly household income Ø
sources of income (employee, business, government transfer payments and
other) Ø
the average age of the reference person[2] Ø
average number of employed persons per
house Ø
average number of persons in the household
(by age grouping) Ø
tenure type (eg owner with a mortgage) Ø
household composition (eg households consisting of a one family couple
with dependent children) Ø
a geographic breakdown of household types and estimated number of
persons.
Table D4 looks at the market for recreational goods and services (of which photography and related items form a part). Multiplying weekly HES estimates by 52 to arrive at annual figures for 1998-99, the Recreation market was worth nearly $33 million: Ø
of which households in the lowest 20% income quintile group accounted
for some $2.8m (or around 8.4% of the total) Ø
households in the second quintile spent some $4.2m (12.9%) Ø
in the third quintile $5.8m (17.7%) Ø
in the fourth quintile $7.8m (23.6%) Ø
while those in the highest 20% of income earners spent $12.3m and
accounted for 37.3% of total recreational spending. Turning
to a geographic split of the market (capital cities, other urban and rural)[3] Ø
the recreation market split 58/30/13 in respect of the lowest income
quintile group Ø
56/31/13 in the case of the second quintile group Ø
62/29/10 for the third quintile group Ø
while the market was most skewed in the case of those in the highest
quintile group ·
where 76% of the market was in capital cities ·
19% in other urban ·
and only 6% in rural areas. With such a skewed market, it is little wonder
that marketing efforts tend to target high income earners in capital cities:
such households account for some 28% of the market in spite of only comprising
some 15% of all households. Table D4 Relative importance of Recreation spending, by Household Income Quintile Group, Australia, 1998-99
Finally,
Table D5 presents a disaggregation of the recreation market at the 6 digit
level (but also at the 8 digit level for items with 110105, Other recreational
and educational equipment). Table D5 Household Expenditure on Goods and Services, by Household Income Quintile Group, Australia, 1998-99
The
salient features of this table are discussed below. Spending
on equipment as a proportion of the overall photographic market[4] (not surprisingly) rises
with income Ø
accounting for an estimated 4.3% in the case of the lowest income
quintile group Ø
some 7.2% for households in the second quintile group Ø
jumping to 26.8% for the third quintile Ø
falling to 24.9% for the fourth quintile group Ø
and rising to 29.2% in the case of the highest quintile group. Ø
that the poorest fifth of households tend to buy disposable cameras Ø
some households in the next poorest fifth buy relatively cheap cameras Ø
and then there is a step function to the middle income earners who buy mid-to-upper
range cameras Ø
with the wealthy tending to buy top-of-the range equipment. Nevertheless, in spite of this apparent market segmentation when it comes to equipment, most the market comprises film and processing. Photography as a proportion of the 6-digit group of which it is a part (Other recreational and educational equipment) Ø
is highest in the case of the lowest income quintile group (24.3%) Ø
falling to 16.0% for households in the second quintile group Ø
(slightly) down to 15.9% for the third quintile, up to 18.1% for the
fourth quintile group Ø
and least (14.5%) the case of the highest quintile group. Thus, other items in the group (here listed) which compete more successfully for a share of the recreational equipment dollar of the more wealthy households are Ø
sunglasses Ø
studio and other professional photography Ø
musical instruments and accessories Ø
boat purchase, parts and operation Ø
toys Ø
camping equipment Ø
sports equipment Ø
and recreational and education equipment not elsewhere classified. Photography as a proportion of recreational spending as a whole tends to vary by income quintile group Ø
being an estimated 1.9% in the case of the lowest income quintile group Ø
1.7% for the second quintile group Ø
1.8% for the third quintile Ø
2.2% for the fourth quintile group Ø
and 1.6% for the highest quintile group ·
with
the only stand-out group here being the upper-income earners, who tend to spend
relatively more on photography and related items than do other households. This phenomenon also translates into the data on photography as a proportion of total spending on goods and services where Ø
households in the fourth income quintile group spend 0.27% on these
items Ø
with the lowest and second income quintile group at 0.20% Ø
the third at (an insignificantly different 0.21% Ø
and with the highest quintile group at 0.25%. The CPI Used
to index many income streams (eg pensions), this important economic indicator
measures the rate of change in prices paid by household consumers for the goods
and services they buy. The CPI measures the change in the cost of purchasing a constant basket of goods and services over time, with the 'basket' reflecting the pattern of purchases made by a given population group in some 'base period'. The price of the CPI basket in the base period is assigned a value of 100, with prices in subsequent periods expressed as percentages of the price in the base period (so that the CPI is a measure of how prices have moved since the base period and not a measure of actual prices). Periodically, the basket of goods and services which the CPI measures price movements in is revised to reflect changing purchasing patterns (usually every five years based on household expenditure surveys conducted by the ABS). Thus photographic and related goods and services would be accorded an increased weighting in the CPI basket if, over time, consumers spent progressively more of their income on such items. Changing
Composition of the CPI Basket Over Time The
representative basket of goods and services which the CPI tracks movements in
comprises a hierarchy of groups; sub-groups and expenditure classes. The composition of the basket and weights
accorded groups, sub-groups and expenditure classes comprising the basket
change over time to reflect the changing composition of consumer spending based
on periodic surveys of household spending.
This updating and reweighting of the CPI basket occurs at 5-yearly
intervals (when the ABS conducts its household expenditure surveys). The basket is currently in its 14th
revision. For
the purpose of analysing consumer spending on photography and related items
this Appendix compares the 11th and 14th series whose
baskets were introduced in 1986 and 2000 respectively – spanning a period of
nearly a decade and a half. In
1986 photographic and related items were represented in expenditure classes Sports and photographic equipment and toys
(in respect of which sports equipment, cameras, toys, games and bicycles were
priced) and which was part of the Recreational
goods sub-group – and Photographic
services (in respect of which film processing and printing was prices) and
which was part of the Recreational
services sub-group (see Table D6). By
2000, the relevant expenditure classes were Audio,
visual and computing equipment (in respect of which equipment including
televisions, videos, computer hardware and stereo were nominated as the types
of goods and services which were prices , including cameras) and Audio, visual and computing media and services (in respect of which
media including blank and pre-recorded cassettes, CDs, computer software,
photographic film, all forms of stationery, and services such as film
developing and pay TV were nominated as the types of goods and services which
were priced) – with both these revised expenditure classes now part of the Audio, visual and computing sub-group
(Table D7). Table
D6 Photography and the 1986 CPI basket
Table
D7 Photography and the 2000 CPI basket
Thus,
in the space of less than 15 years three extra groups had been added – with
communications being split out of Household equipment and operation to form a
group in its own right, ditto education (which in 1986 had been combined with
Recreation), while a new Miscellaneous group had been created. The relevant sub-group had also been reorganised (compare Table D6 with D7) – with the growing importance of home computers triggering a reorganisation of the former Recreational goods versus Recreational services split transforming itself into Audio, visual and computing (goods and services) versus Sports and other recreation. At
the expenditure class level things got even more complex – with computer
hardware and software, CDs, all forms of stationery and pay TV coming into the
picture to compete for the recreational dollar. Table
D8 shows the effects of updating, reorganising and reweighting of the CPI
basket over the 1986-2000 period at the group level, while Tables D9 and D10
present similar information at the sub-group and expenditure class level in
respect of those sub-groups and expenditure classes relevant to photography and
related items. Table
D8 Changing composition of the CPI basket, 1986-2000: Groups
What
is clear from Table D8 is that the group relevant to photography and related
items has grown in importance to account for a significantly higher proportion
of the consumer dollar over the last 15 years or so (with Recreation and
Education combined going from 10.8 cents in the dollar to just shy of 15 cents
in the dollar – almost a 39% increase). Table D9 Changing composition of the CPI basket,
1986-2000: Relevant sub-groups
The scope of the 1986 and 2000 subgroups (which include photography and related items of interest) does not seem to have changed much over the 15-year period and it could be argued that all included items in both sub-groups are basically vying with one another for the consumers recreational dollar – which we know from Table D8 has grown strongly over the period (namely by roughly 40%, including education). Books, newspapers and magazines have become a relatively less important recreational expenditure class over the period (down 12%), while Holiday travel and accommodation has gained in importance (up 39%). Arguably, this has been good for photography since people like to record their travel experiences. It is hard to say too much about photography itself from Table D9 since camera sales were in Recreational goods in 1986 while film developing and processing was included in Recreational services; and both were included in Audio, visual and computing in 2000. Table D10 Changing composition of the CPI basket,
1986-2000: Relevant expenditure classes
Again, there is not enough detail in Table D10 to say a lot about photography and related items other than these items were in expenditure classes which accounted for 1.77 cents of the consumer's dollar in 1986, and 2.7 cents per dollar in 2000 (representing a 53% increase over the 15 year period). Unfortunately, they were aggregated in with other like goods and services in both years – and this at least provides a guide to what the ABS considers to be like goods and services (which are therefore competing for the consumer's recreational spending). [1] The household is the basic unit for collection of spending
information: it consists of a person or group of people living together and
having common provision for food and other essentials of living. [2] The reference person for
each household is chosen by applying the selection criteria below to all usual
residents aged 15 years and over, from the top down, until a single appropriate
reference person is identified: one of the partners in a registered or de facto
marriage; a lone parent; the person with the highest income; and the eldest
person. For example, in a couple, one family household the partner with the
highest income is generally the reference person. However if both partners have
the same income, the reference person is the eldest. In households containing
more than one family, the reference person is selected from the primary family.
The primary family is the family which contains dependent children. If there is
more than one family with dependent children, or there are no dependent
children present in the household, then the primary family is the first family
identified during the interview. [3] Capital cities comprise Australia’s six state capital city
statistical divisions plus Darwin and the Canberra statistical divisions; other
urban areas include those which had a population of 1000 people or more at the
1996 Census (excluding the capital cities), while rural areas comprised the
rest. [4] Calculated as the sum of spending on Photographic equipment
(excluding film and chemicals) and Photographic film and chemicals (including
developing). |
