What is the CPI?
The Consumer Price Index (CPI) provides the official measure of inflation in Australia. The CPI is calculated by the Australian Bureau of Statistics. Movement in the CPI is measured quarterly for the three-month periods ending 31 March, 30 June, 30 September and 31 December each year.
The CPI figures are normally published around four weeks after the end of the quarter. The CPI is not a percentage but an index number. Any two numbers from the index can be compared to calculate a percentage change.
CPI indexation factor
The CPI indexation factor is determined by comparing two quarters of CPI figures. The more recent of these quarters is known as the ‘reference quarter’ and the older is known as the ‘base quarter’.
The CPI number for the reference quarter is divided by the CPI number for the base quarter, rounding the answer to three decimal places.
Reference and base quarters for CPI
Legislation describes which CPI figures are used as the base and reference quarters. The reference and base quarters vary between different payments, allowances and limits. [See paragraph 11.1.3 Indexation timetable.
Effect of Negative CPI
Indexation is only applied if the CPI indexation factor is greater than one. This ensures that in periods of negative CPI growth, payments are not reduced through indexation. An indexation factor of less than one will result where the CPI number for the reference quarter is less than the CPI number for the base quarter.
Positive CPI growth after a period of negative growth
Following a period of negative CPI growth, indexation will only start to increase rates again once the CPI figure for the reference quarter is higher than the CPI figure for the previous highest base quarter.
How Certain Pensions and Allowances are Indexed
How permanent impairment payment is indexed
The rate of permanent impairment payment is indexed using CPI only, on 1 July each year.
How the Special Rate Disability Pension is indexed
The weekly Special Rate Disability Pension is not indexed but is set as equal to 50% of the fortnightly Special Rate (T&PI) of Disability Compensation Payment under the Veterans' Entitlements Act 1986. The Special Rate (T&PI) is indexed each 20 March and 20 September.
How the Wholly Dependent Partner payment is indexed
The weekly Wholly Dependent Partner payment is not indexed but is set as equal to 50% of the fortnightly war widow(er) pension under the Veterans' Entitlements Act 1986. The war widow(er) pension is indexed each 20 March and 20 September.
How the maximum Attendant Allowance and Household Services Allowance is indexed
The rate of permanent impairment payment is indexed using CPI only, on 1 July each year.
How the maximum weekly Permanent Impairment payment is indexed
The maximum weekly rate of permanent impairment payment is indexed using CPI only, on 1 July each year.
How education allowance is indexed
Many rates are equal to rates of Youth Allowance under the Social Security Act 1991, which are indexed on 1 January each year using CPI only. The rest are indexed using CPI only on 1 January each year.
How the MRCA supplement is indexed
The MRCA supplement is not indexed but is set as equal to the veterans supplement under the Veterans' Entitlements Act 1986.