Counting /the real costs.(News)

On the face of it, news that Statistics South Africa is revamping its consumer price index may not seem very important. Yet, as the official measure of inflation, movements in the consumer price index affect us all.

It is the annual change in this index - stripped of mortgage bond costs - which the Reserve Bank's monetary policy committee examines every two months in order to decide on interest rates, and determine the fate of borrowers and lenders all over the country.

In another context, employers and trade unions use the consumer price index as a key tool in collective bargaining over wages.

Because of its importance in the economy, it is vital that the index reflects movements in prices as accurately as possible.

In this respect, the decision by Stats SA to update the basket of goods and services it monitors each month in order to construct the index is to be welcomed.

Stats SA intends to cut the number of items in the basket from 1 124 to 386, so as better to reflect spending patterns of households. Items to be discarded include luxury goods which are expensive and bought exclusively by a minority of households.

The new list will reflect not only total spending on an item, but also the number of households which bought the product or service.

At the same time, in order to keep pace with changing technology, DVDs and CDs will replace video recorders and tapes, and Internet charges will be introduced to the basket; lottery tickets will be added once the lottery is up and running again; and minibus taxi fares, funeral and funeral insurance costs will also be added.