'Calculation method of inflation needs revision'

'Calculation method of inflation needs revision'

JAKARTA (JP): The method in calculating the consumer price
index should be reviewed in order to give a more objective
inflation figure, analysts suggested.

Rijanto, a noted monetary expert, said that the inflation
figures provided by the government do not really imply actual
price fluctuation.

Such biased inflation figures, he charged, take place because
most of the components in calculating the consumer price index no
longer reflect the real patterns of household consumption.

He said the consumption patterns of Indonesian households are
now different from those several years ago due to the difference
in the living standards, he said.

"We, therefore, have to adjust the components of the consumer
price index to the existing consumption pattern if we want to
provide more objective figures on inflation rates," he told the
Antara news agency.

The consumer price index for Indonesia is actually the
weighted average of indices in all the 27 provincial capital
cities, using the total number of households in each city as the
weights.

The consumer price index for each city is the price index of
224 types of goods and services consumed by most households.

The government has successfully checked the inflation rate
below 10 percent in the last four years despite a sharp increase
in the price of cement and other building materials.

Engineering

Despite the success, the government is often charged of having
"engineered" the inflation rates, which according to analysts,
should be higher than 10 percent.

The inflation rate was recorded at 9.53 percent in both 1990
and 1991, 9.77 percent in 1993 and 9.24 percent in 1994. The
inflation rate, which reached 6.09 percent in the January-July
period of this year, is also expected to achieve a similar level.

Rijanto said if the price basis in calculating inflation is
adjusted to the existing consumption pattern, the inflation
figures in those four years may have surpassed 10 percent.

He said that the high growth of inflation rates, which
according to both local and overseas economists will remain a
major economic woe in the coming years, resulted from the
inconsistency in the government's policies in developing monetary
sectors and other sectors.

"This is one of the reasons why the inflation rate nearly
reached a double digit, far higher than the government's
indicative figure of five percent per annum," Rijanto explained.

He said that Bank Indonesia, as the monetary authority, has
been able to effectively fight the impact of the rise in the
demand -- which may cause demand-pulled inflation -- through its
monetary instruments in recent months.

However, the government has often lost control in dealing with
the impact of the increase in prices, which may cause cost-pushed
inflation, he said, citing the rises in electricity tariffs and
fuel prices as main factors in the rise in consumer prices in the
last few years. (hen)