The Australian Bureau of Statistics (ABS) has transitioned to publishing the Consumer Price Index (CPI) on a monthly basis as Australia’s primary headline inflation measure, replacing the previous reliance on quarterly‑only CPI reporting. While this change is intended to deliver more timely insight into inflationary trends, it does not change how CPI‑based rent reviews operate under existing commercial and retail leases.
The source of uncertainty is not the introduction of monthly CPI itself, but how that change interacts with contractual rent review provisions that were drafted on the assumption of quarterly CPI publication.
CPI and Lease Indexation
CPI is Australia’s principal measure of inflation. It measures the changing cost of a representative “basket” of goods and services purchased by households, weighted to reflect typical expenditure patterns across categories such as housing, utilities, food, transport, health and education.
In leasing, CPI is commonly adopted as an indexation mechanism to preserve the real value of rent over time. Leases typically prescribe:
- the specific CPI series to be used (for example, All Groups CPI – Adelaide);
- the reference period (often the quarter immediately preceding the review date); and
- the calculation methodology for the adjusted rent.
These elements operate together as a contractual mechanism and, unless varied by agreement, they must be applied in accordance with the lease wording.
What has changed?
From November 2025, the ABS introduced monthly CPI as Australia’s primary headline inflation measure. The purpose of the change is to provide more frequent and current information about price movements.
Importantly, the shift is administrative and statistical, rather than contractual. It does not override or amend the rent review provisions contained in existing leases. CPI continues to exist as a concept; only the frequency of publication has changed. Existing leases continue to operate by reference to their own defined CPI mechanics.
Continued Publication of Quarterly CPI (For Now)
The ABS continues to publish quarterly CPI indexes, calculated as the average of the three monthly CPI figures for each quarter. These quarterly series are still released for the March, June, September and December quarters and remain valid for indexation and contractual purposes.
The ABS has confirmed that quarterly CPI will continue to be published for at least an 18‑month transition period while robust monthly seasonal adjustment patterns are established. During this period, quarterly CPI remains a recognised and reliable statistical series for contractual use.
For leasing, this is critical. Many leases refer expressly to quarterly CPI – for example, “the CPI number for the quarter immediately preceding the rent review date”. Those provisions remain workable for so long as quarterly CPI continues to be published, and the correct reference remains the quarterly CPI index, not monthly CPI.
Monthly vs Quarterly CPI: Timing and Volatility
The practical distinction between monthly and quarterly CPI lies in timing and volatility.
- Monthly CPI reflects price movements as they occur and can fluctuate from month to month. It may produce sharper or earlier indexation outcomes.
- Quarterly CPI smooths those movements by averaging prices over three months, producing more stable and predictable results.
Applying the “wrong” CPI series or reference period can materially change an indexation outcome. Selecting a CPI measure based on perceived commercial advantage, rather than lease wording, creates a real risk of dispute.
Existing Leases: What Should Be Done Now?
For existing leases, the position is straightforward:
- Rent reviews must be conducted strictly in accordance with the lease.
- If the lease specifies quarterly CPI, landlords and property managers should:
- continue to use the quarterly CPI published by the ABS;
- apply the lease’s nominated comparison periods; and
- follow the contractual calculation formula.
Unilaterally switching to monthly CPI where quarterly CPI is specified may expose parties to claims that the rent review is invalid or incorrectly calculated. Importantly, an incorrect CPI adjustment may not be limited to a single review period. Because CPI‑based rent reviews are typically cumulative, an error in one review can compound over time, affecting all future rent determinations and potentially requiring retrospective correction.
That said, leases extending beyond the period during which quarterly CPI continues to be published may eventually face a practical risk if the specified index ceases. Early identification of that issue allows parties to manage it proactively – for example, through agreed variations or substitute index provisions – rather than confronting uncertainty at a future review date.
New Leases
The introduction of monthly CPI has a much greater impact on new leases than on existing ones.
Although quarterly CPI will continue during the transition period, there is a real risk that long‑term reliance on quarterly CPI in new leases could embed an index that may not be published for the entire lease term. Unless the lease includes a clear substitute index mechanism, that risk may render rent review clauses difficult to operate.
For new leases, landlords and tenants should:
- expressly adopt monthly CPI as the indexation measure;
- specify the relevant comparison months and calculation methodology; and
- consider how increased month‑to‑month variability may affect budgeting and cash flow expectations.
Forward‑looking drafting is essential to ensure CPI clauses remain workable, enforceable and aligned with ABS publication practices over the full lease term.
Practical Takeaways
The move to monthly CPI does not automatically alter CPI‑based rent reviews. Leases must be enforced according to their terms. Where quarterly CPI is specified, it should continue to be applied for as long as that series is published. Monthly CPI should only be used where permitted by the lease or following amendment. Accurate interpretation of lease provisions and selection of the correct ABS CPI data are critical to avoiding incorrect rent calculations and downstream disputes.
Mellor Olsson’s Property team regularly advises landlords, tenants and property managers on CPI interpretation, rent review mechanics and lease drafting. We can assist with reviewing existing leasing arrangements and advising on CPI‑linked rent reviews in light of recent ABS changes. For further information, please contact Michael Stannard directly, email us at [email protected], or call (08) 8414 3400.