³ÉÈË´óƬ

The Local Government Price Index (LGPI) measures price movements faced by Local Government in South Australia in respect of their purchases of goods and services.

As the mix of goods and services purchased by Local Councils is quite different from that typically consumed by households, overall price movements faced by Local Councils may differ markedly from those faced by households. Overall price movements indicated by the Consumer Price Index (CPI) - which measures changes in the price of a 'basket' of goods and services which account for a high proportion of expenditure by metropolitan households - may therefore not accurately reflect price movements faced by Local Councils.

In order to improve the information available to Councils, the public and other interested parties, the to develop the LGPI as an independent and reliable measure of price movements faced by Local Government in South Australia. The South Australian Centre for Economic Studies took over responsibility for preparing the LGPI from the September quarter 2009. ÌýPrior to this it was prepared by the ABS.

In technical terms, the LGPI is a chained Laspeyres price index which represents an arithmetic average of the pure price change of items based on expenditure patterns on the Previous Year. Annual council expenditure data provided by the Local Government Grants Commission (LGGC) is used to produce expenditure weights. These weights are then combined with select ABS price indexes (i.e. select Consumer Price Indexes and Producer Price Indexes for Adelaide and Australia) to determine the indexes contribution to a total recurrent expenditure LGPI, a total capital expenditure LGPI, and a total expenditure LGPI.

Is it important to note that the ABS price indexes used in the model are estimates, based on a sample of goods and services from a sample of retailers, wholesalers and employing organisations. Therefore, the Local Government Price Indexes which are calculated using ABS price indexes are also estimates.