RDP 2005-11: A Small Model of the Australian Macroeconomy: An Update Appendix D: Glossary and Data
December 2005
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Glossary
Tables D1 and D2 provide a complete list of the variables used in the model. All levels variables are expressed in logs except: interest rates, bond market inflation expectations and the tariff rate series trf (which are expressed as decimals); together with the Southern Oscillation Index.
| Variable | Description |
|---|---|
| Domestic variables | |
| y* | Potential real non-farm output |
| tot | Merchandise goods terms of trade |
| s | De-trended real share accumulation index |
| i | Nominal cash rate |
 |
Neutral real cash rate |
| pcom | Index of commodity prices in foreign currency terms |
| πe,bm | Bond market inflation expectations, expressed on an annualised basis |
| soi | Southern Oscillation Index |
| trf | Average tariff rate on Australian imports |
| DyGST | Dummy for output shifts associated with the introduction of the Goods and Services Tax (GST) |
| DpGST | Dummy to allow for a step up in the level of consumer prices in September quarter 2000 associated with the introduction of the GST |
| Drer | Real exchange rate dummy |
| trendpm | Time trend used in the import price equation |
| Foreign variables | |
| gapUS | US real output gap |
| rf | Foreign (G3) real interest rate |
| sUS | De-trended US real share accumulation index |
| pc,f | Trade-weighted foreign consumer prices |
| px,f | Trade-weighted foreign export prices |
| pusoil | Oil price per barrel in US dollars |
| Variable | Description |
|---|---|
| Behaviourally determined endogenous variables | |
| gap | Real non-farm output gap (y−y*) |
| rer | Real trade-weighted exchange rate |
| Pm | Import prices across the docks, measured in Australian dollars |
| ulc* | Smoothed economy-wide nominal unit labour costs |
| Pc,h | Australian consumer prices – headline measure |
| Pc,u | Australian consumer prices – underlying (weighted median) measure |
| Non-behaviourally determined endogenous variables | |
| y | Real non-farm output |
| r | Real cash rate |
| pm,trf | Tariff-adjusted import prices, measured in Australian dollars |
| ulc*,bs | Balassa-Samuelson adjusted, smoothed nominal unit labour costs |
| pc,h,exGST | Headline Australian consumer prices, adjusted to exclude the one-off impact of the GST in September quarter 2000 |
| pc ,u ,exGST | Underlying Australian consumer prices, adjusted to exclude the one-off impact of the GST in September quarter 2000 |
| e | Nominal trade-weighted exchange rate |
| poil | Oil price per barrel in Australian dollars |
Data Sources and Definitions
The data used in estimation were those available on 19 July 2005.
Real non-farm output
Definition: Seasonally adjusted chain volume non-farm gross domestic product at 2002–03 reference prices.
Source: National Income, Expenditure and Product, December Quarter 2004, ABS Cat No 5206.0.
Real US output
Definition: Seasonally adjusted chain volume gross domestic product (GDP) in US dollars at 2,000 reference prices.
Source: Datastream, USGDP…D
Real US potential output
Definition: Real US potential GDP in US dollars at 2,000 reference prices.
Source: Congressional Budget Office, US Congress.
Nominal exchange rate
Definition: Australian dollar against a trade-weighted basket of major-trading-partner currencies, indexed to March quarter 1995 = 100.
Source: Reserve Bank of Australia, <http://www.rba.gov.au/statistics/>.
Real exchange rate
Definition: Australian dollar against a trade-weighted basket of major-trading-partner currencies, adjusted for domestic and foreign consumer prices, indexed to March quarter 1995 = 100.
Source: Reserve Bank of Australia, <http://www.rba.gov.au/statistics/>.
Nominal cash rate
Definition: From July 1998 onwards, quarterly average of monthly data for the official interbank overnight rate. Up to June 1998, quarterly average of monthly data for the unofficial 11 am call rate.
Source: Reserve Bank of Australia Bulletin, Table F.1.
De-trended real share accumulation index
Definition: Accumulated index for nominal share market returns in Australia (including both capital gains and the re-investment of dividends), deflated by the weighted median consumer price index, and de-trended using a Hodrick-Prescott (H-P) filter with smoothness parameter λHP = 1,600.
Sources: From 1992:Q3 onwards, the nominal share accumulation index used is the quarterly average of the daily close of the Standard and Poor's (S&P)/Australian Stock Exchange (ASX) 200 accumulation index available from Datastream (code: ASX200(RI)). From 1990:Q1 to 1992:Q2, this index is back-cast using changes in the quarterly average of the daily closing values of the old ASX All Ordinaries Index (since renamed the ASX Share Price Index) available from Datastream (code: AORDASX(RI)). From 1980:Q1 to 1989:Q4, this back-casting procedure is repeated using the quarterly average of the end-month values of the ASX Share Price Index available from Reserve Bank of Australia Bulletin, Table F.7.
De-trended US real share accumulation index
Definition: S&P500 Composite Price Index, deflated by the chain type price index for personal consumption less food and energy, and de-trended using a Hodrick-Prescott (H-P) filter with smoothness parameter λHP = 1,600.
Sources: Data used for the period from January 1988 onwards are from Datastream (code: S&PCOMP(RI)). Data prior to January 1988 are from Global Financial Data (SPXD.csv), available at <http://www.globalfindata.com/>.
Goods terms of trade
Definition: Implicit price deflator for goods credits divided by implicit price deflator for goods debits (both seasonally adjusted), indexed to 2002–03 = 100.
Source: Balance of Payments and International Investment Position, ABS Cat No 5302.0.
Commodity prices
Definition: RBA Index of Commodity Prices, converted to foreign currency terms by multiplying by the nominal trade-weighted exchange rate. The resultant series is indexed to 2001–02 = 100.
Source: Reserve Bank of Australia, <http://www.rba.gov.au/statistics/>.
Headline consumer price index
Definition: From 1986:Q4 to 1998:Q2, this is the all-groups consumer price index (CPI) excluding mortgage interest and consumer credit charges, indexed to 1989–90 = 100. Prior to 1986:Q4, the series is back-cast using quarterly growth in the all groups CPI. Beyond 1998:Q2 it is extended using the same method.
Source: Consumer Price Index, ABS Cat No 6401.0.
Underlying (weighted median) consumer price index
Definition: Weighted median consumer price index calculated using quarterly price change distributions for items in the CPI basket, indexed to 1989–90 = 100.[48]
Source: Reserve Bank of Australia, <http://www.rba.gov.au/statistics/>.
Unit labour costs
Definition: Non-farm unit labour costs per hour for wage and salary earners. Computed as total non-farm labour costs (wage and salary earners) per hour divided by productivity per hour in the non-farm sector. The resultant series is indexed to 2002–03 = 100 and then smoothed as described in Section 2.4.
Source: Reserve Bank of Australia Bulletin, Table G.6 (based on ABS Cat No 5206.0 data).
Bond market inflation expectations
Definition: From 1993:Q1 onwards, difference in the yield between a 10-year government bond and an indexed bond of comparable maturity, where both yields are calculated as the quarterly average of the daily values. Before 1993:Q1, difference between the yield on a 10-year government bond and an estimated equilibrium 10-year real interest rate. Details of the calculation of this equilibrium real interest rate are provided in Gruen et al (2002).
Sources: Australian 10-year government bond yield available from Reserve Bank of Australia Bulletin, Table F.2; Australian Treasury capital-indexed bond yields available from Bloomberg (screen: ILB).
Import prices
Definition: From 1986:Q2 onwards, implicit price deflator (IPD) for underlying imports of goods and services indexed to June quarter 1986 = 100.[49] Prior to 1986:Q2 the series is back-cast using the IPD for imports of goods and services.
Source: National Income, Expenditure and Product, ABS Cat No 5206.0; Reserve Bank of Australia imports of gold data not publicly available.
Tariff rate
Definition: Customs duty receipts divided by the value of merchandise imports (excluding fuels and lubricants, civil aircraft and Reserve Bank of Australia imports of gold). Seasonally adjusted.
Source: Australian Customs Service.
Foreign consumer prices
Definition: Geometric trade-weighted index of major-trading-partner core consumer price indices, indexed to March quarter 1995 = 100. In those cases where core consumer price measures are not available, the headline CPI is either used for the whole sample or spliced onto the core consumer price series.
Source: Consumer price indices from Datastream.
Foreign export prices
Definition: Geometric trade-weighted index of major-trading-partner export price indices, indexed to March quarter 1995 = 100. For Saudi Arabia and the United Arab Emirates (whose exports are overwhelmingly dominated by oil) we replace their export price indices with consumer price indices.
Source: Export price indices and consumer price indices from Datastream.
World real interest rate
Definition: Nominal GDP-weighted average of short-term policy interest rates of the euro area, Japan and the US (G3), where these interest rates are the quarterly average of monthly data, less four-quarter-ended core inflation in each country. Prior to January 1999 the German repo rate is used as a proxy for the euro area.
Sources: For interest rates, Reserve Bank of Australia Bulletin, Table F. 13; for the German repo rate prior to January 1999, Datastream, BDI60B..; for core inflation, Datastream, BDUSFB76E, JPCPXFFDF, USCPXFDEF.
US dollar oil prices
Definition: US dollar price of West Texas Intermediate crude oil per barrel.
Source: Bloomberg (code: USCRWTIC).
Australian dollar oil prices
Definition: Australian dollar price of West Texas Intermediate crude oil per barrel, calculated using the US dollar oil price and the A$/US$ nominal exchange rate.
Source: A$/US$ exchange rate data from Reserve Bank of Australia, <http://www.rba.gov.au/statistics/>.
Southern Oscillation Index
Definition: Quarterly average of monthly data for this index, which is calculated as the standardised anomaly of the Mean Sea Level Pressure difference between Tahiti and Darwin. (Lower values are associated with an increased probability that rainfall over eastern and northern Australia will be below average.)
Source: Available from the Commonwealth Bureau of Meteorology at <http://www.bom.gov.au/climate/current/soihtm1.shtm1>.
Footnotes
Since this underlying inflation measure was selected, further research has been undertaken at the Reserve Bank on the properties and relative merits of alternative underlying inflation measures for Australia (Roberts 2005). While too late to be taken into account here, these alternative measures will be monitored, with a view to changing the measure used in the model if warranted. [48]
This measure excludes imports of fuels and lubricants, civil aircraft, ferries, major military equipment, oil rigs, an LPG tanker, goods for processing, repairs on goods, goods procured in ports and RBA imports of gold. [49]