The Globe and Mail reports, “(Statistics Canada) is refining the consumer price index, a key economic yardstick for matching pensions and salaries to the rising cost of living – and the result could mean sizable savings for governments and corporations that hike payments annually to keep pace with inflation.”
“(The) consumer price index, known as CPI, is a widely followed gauge of inflation that has an enormous impact on Canadians’ lives. It’s used to determine cost-of-living increases in people’s pay and pensions, as well as government benefits, such as old age security. …Statistics Canada acknowledges that one kind of bias that creeps into consumer price tracking can add as much as 0.2 percentage points to the consumer-price-index measure of inflation – meaning that when inflation is measured at 2 per cent, the true rate would be 1.8 per cent.”
The agency is seeking “to improve the precision of its work…as the Harper Conservatives (tries) to squeeze savings out of government and trim expenses in order to balance the budget by 2015-16.”
“If Statscan is successful in reducing overestimation of consumer price inflation, then annual increases in public or private wages and pensions indexed to the CPI will end up smaller than they would have been. …For instance, the federal government spends about $36-billion annually on old-age-security benefit payments and increases in the program are linked to the CPI index. If Statistics Canada removes 0.2 percentage points of over-estimation in the inflation rate, then the annual cost-of-living rate increase for old-age security will be that much lower. It would mean more than $72-million in savings the first year, and the benefits of the freed-up cash would accumulate annually – meaning its value would grow to $144-million in the second year and $216-million in the third.”
“Statistics Canada says it’s not concerned with how their fine-tuning might affect cost-of-living increases in wages or benefits or pensions. ‘We’re just trying to produce the most accurate statistic,’ Richard Evans, director of Statscan’s consumer-prices division, said in an interview.”