Some escalation clauses will have provision for
appropriate adjustments to be made to escalation calculations to
deal with index re-sets. These clauses in contracts spanning the
index re-set will need to be activated.
The CPI (All Groups, Average of 8 Capital Cities) for 30 June
212 was 180.4. So was the CPI (All Groups, Perth). The Sydney CPI
was 179.9, Melbourne 177.7 and Brisbane 185.8. In the remainder of
this note, "CPI" means CPI (All Groups, Average of 8
The index re-set means that, for all escalation calculations
undertaken on the basis of the September 2012 CPI (and following
quarterly index numbers), the index number for 30 June 2012 will be
100 rather than 180.4.
This re-referencing will impact on CPI calculations where the
CPI published for the 30 June 2012 quarter (or an earlier
quarter's CPI) is used with the re-referenced CPI to calculate
a change in CPI.
In these cases the affected parties may need to adjust the
calculation by using a conversion factor to reflect the correct CPI
increase (as if the re-referencing had not occurred). We understand
that the ABS will give a conversion factor for each CPI group which
will be used to calculate the true differences in the CPI from
quarter to quarter, when it publishes the September quarter
Some escalation clauses will have provision for appropriate
adjustments to be made to escalation calculations to deal with
index re-sets. These clauses in contracts spanning the index re-set
will need to be activated.
Clayton Utz communications are intended to provide
commentary and general information. They should not be relied upon
as legal advice. Formal legal advice should be sought in particular
transactions or on matters of interest arising from this bulletin.
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We discuss whether certain clauses commonly found in ordinary commercial contracts could be considered to be penalties.
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