Australia: CPI Index to be re-set from September quarter 2012

Key Points:

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.

From the September quarter 2012, all CPI index numbers will be calculated on a new index reference period of 2011-12, as announced by the Australian Bureau of Statistics. This will result in the index numbers for each index series being reset to 100.0 for the financial year 2011-12. Period-to-period percentage changes may differ slightly to those previously published due to rounding and the re-referencing. These differences do not constitute a revision.

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 Capital Cities).

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 re-reference.

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. Persons listed may not be admitted in all states and territories.