Cost of living 'to have a greater influence on interest rates'

The cost of essentials such as food and power look set to have an even greater influence on the calculation of interest rates in light of a change to the consumer price index (CPI).

It is hoped that the adjustments in the proportions of the CPI will enable the Australian Bureau of Statistics (ABS) to create a more accurate reflection of household expenses, reports the Australian.

Lewis Conn, director of the CPI for the ABS, explained: "The CPI is based on a fixed basket of goods and services … if electricity prices rise faster than other prices, they're going to have a proportionally greater share of the basket.''

However, the survey by the ABS showing how much the average household spends will not reflect recent events such as the floods and cyclones that hit the country because it was carried out last year.

This comes after the Commonwealth Bank of Australia's Business Sales Indicator revealed that in February, transactions using credit and debit cards at point-of-sale terminals rose 0.5 per cent.

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