Statistics New Zealand's Guide for Business
Statistics New Zealand’s price indexes are commonly used by New Zealand businesses in contract indexation clauses (also known as contract escalation clauses). This special release provides information on the price indexes produced by Statistics New Zealand and issues relating to their use in such clauses. The guide also outlines some points to consider when preparing an indexation clause and includes an example of the mechanics of a simple indexation formula.
The contract indexation document, first published in 1998, was updated in July 2005 to incorporate subsequent changes in the price indexes, including calculation methodologies, weightings and coverage.
Introduction
Parties that engage in commercial contracts use the range of price indexes produced by Statistics New Zealand in their indexation clauses. This document provides general guidelines for such parties relating to the use of each index in their commercial contracts, including information on index quality, revisions, discontinuities and rebasing. In the process of contract indexation, it is important to understand the merits and limitations of each index based on the specific nature, characteristics and methodology of indexes.
The role of Statistics New Zealand in relation to indexation clauses is limited to explaining methodologies and the limitations of specific series, and to providing the data requested by users in a timely and efficient manner. Statistics New Zealand aims to provide general advice on the application of indexes in particular situations, but does not give advice on contractors’ obligations in private commercial contracts or provide advice on disputes arising from contract interpretation.
Some of the points to consider when using a price index for contract indexation are explained in this document under each index. This information is based on Statistics New Zealand's experience as a provider of price index data. It is not an exhaustive list of all the possible risks or pitfalls associated with indexation. For more comprehensive information, legal advice should be obtained. The guide concludes with an example of cost indexation using a simple representative formula. There are several methods of constructing an indexation clause and Statistics New Zealand does not recommend any particular method. The example provided is for illustrative purposes only.
All statistics and information produced by Statistics New Zealand carry the following disclaimer:
While care has been used in processing, analysing and extracting information, Statistics New Zealand gives no warranty that the information supplied is free from error. Statistics New Zealand shall not be liable for any loss suffered through the use, directly or indirectly, of any information, product or service.
Government Statistician
For the full commentary on indexation clauses please refer to Price index statistics 2005.
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