It is a measure of the periodic change in the price of a constant basket of basic goods and services. The goods and services are representative of the consumption by residents in a household of a specific area. The basket can’t include all the items households consume but it does include the important one’s under the following segments: housing, transportation, medical, food, clothing, education, insurance, financial Services to name a few.
As prices in the basket vary so will that measure indicating a positive or negative change in CPI. It is a very important Economic indicator and provides a general measure of price inflation changes so that the Reserve bank of Australia can evaluate future monetary policy.