Is a March increase in the Age Pension doomed?

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The Age Pension is indexed twice a year – in March and September. As we all know, there was no movement in the rates last September due to the impact on the economy of the pandemic. It was the first time in more than 20 years that pension rates did not increase and was a result of a decline in “some of the indices used to adjust these payments”, not because of a government policy decision.

So, does that mean rates are sure to be changed in March?

Payment rates are indexed to maintain their real value, so they keep pace with the Consumer Price Index (CPI) – a measure of changes in the price of a fixed basket of goods and services – and maintain their purchasing power as the CPI rises.

The Parliament of Australia website explains that for most payments this is done by adjusting payments in line with movements in the CPI. However, since 2009, pension rates have also been adjusted using a different measure – the Pensioner and Beneficiary Living Cost Index (PBLCI).

The 2009 Harmer Pension Review found the CPI, as a general measure of price changes, did not reflect cost of living changes for certain households and recommended the use of an index that measured changes for pensioner households.

The PBLCI measures the effect of price changes on the out-of-pocket living expenses experienced by households whose main source of income is government payments.

Any change in pension payment rates in March will depend in part on the CPI from the December quarter, which is set to be released on 27 January.

The Combined Pensioners and Superannuants Association (CPSA) explains how the pension would be affected if the September quarter figures were used to index the pension.

“The CPI went up from 114.7 in the June quarter to 116.8 in the September quarter,” CPSA policy manager Paul Versteege wrote in The Voice.

“Based on that, you would think that the pension would go up, but would it?

“No.

“This is because the December 2019 CPI number was 117.1. For the pension to go up, the new CPI would need to be higher than 117.1.

“Until the CPI goes above 117.1, there will be no pension increase.”

So, what happened to the PBLCI?

“The PBLCI went up from 115.6 in the June quarter to 116.5 in the September quarter,” said Mr Versteege. “In the December 2019 quarter, the PBLCI was 116.3.

“116.5 is greater than 116.3. Therefore, the pension would go up.

“But, again, the September 2020 quarter will not be used. We have to wait to see what happens in the December quarter.

“In the December 2020 quarter, either the CPI will have to be greater than 117.1 or the PBLCI will have to be greater than 116.3 for the pension to be increased.”

Addressing the issue of the base rate of the Age Pension, Mr Versteege said: “Pension indexation is designed to maintain pensioners’ purchasing power. This means if the pension doesn’t go up, purchasing power is maintained without a rise.

“Arguably, the pension isn’t much to live on, but that can only be addressed by a real increase, such as occurred in 2009.”

So, what is the likelihood that the CPI or the PBLCI will deliver the numbers necessary for an increase in the Age Pension? We asked The Australia Institute senior economist Matt Grudnoff to check his crystal ball. This is what he told YourLifeChoices.

“I don’t expect the CPI in the December quarter will increase by much. Most of the economy has opened up and the unusual factors that caused the big fall in the June quarter reversed themselves with a big increase in the September quarter.

“Recessions are usually times of weak inflation. Businesses that are worried about selling their products are very reluctant to increase prices.

“There are also two other factors that are likely to keep the CPI low. The first is weak oil prices. As countries around the world are being hit hard by COVID, people are travelling less and so demand for oil has been weak and oil prices have been low. This has meant petrol prices have also been low.

“The second factor is the strength of the Australian dollar. The chaos in the US and other countries has meant that our economy has been stronger than most and it has meant our dollar has remained relatively strong. A stronger dollar means consumers can buy imports cheaper, which puts downward pressure on prices and inflation.”

You can check the current Age Pension rates on the YourLifeChoices website here and the eligibility criteria here.

Are you banking on an increase in the Age Pension payment rates in March? Do you believe your living costs have increased?

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Written by Janelle Ward

20 Comments

Total Comments: 20
  1. 1
    2

    Of course living costs have increased, and the rate concession for pensioners isn’t keeping up, so that’s no help either!

    • 1
      2

      Everything has definitely increased. We need a decent rise in PENSIONS also rent assistance. The last decent increase was 2009 by Labour. LNP don’t give a damn about Aged people only there large increases and payments.

    • 0
      1

      Agree with Joy Anne. The pollies, top level bureaucrats, managements, CEOs, boards etc etc drain away all so there is nothing left for those in need that are living week to week. The aforementioned save significant proportion whilst those on bottom level pump all get back into the economy !! So those are the ones really keeping economy going !!
      Just one small example
      https://www.warwickdailynews.com.au/news/revealed-littleproud-spends-168000-in-three-months/3348334/
      The total work expenses for the Member for Maranoa came in at $168,291.74.
      The costs cover all expenses between October and December last year.
      The most hefty single expense on Mr Littleproud’s list was a chartered trip from Birdsville to Brisbane last November, which cost $10,780.

  2. 0
    2

    I can almost guarantee there will be no in March and that is why the government are giving pensioners an extra $250 in March.

  3. 0
    3

    I doubt there will be a pension increase in march,as a supplement payment will be paid in march.As for increases after that who knows the cpi index maybe lower or higher….if lower another supplement payment from the Federal Govt should happen for people on a pension like myself and others….but there’s no certainty of that.I can’t see the pension getting any increase during 2021.

  4. 4
    0

    We have had two lots of $750 and one of $250 and another due in March which would be more than our increase I suspect, so maybe next September we might get an increase, it’s always hard but we need to budget and live within our means, I know it’s not always possible as every little bit helps

    • 0
      5

      We need decent increases. Everything has gone up. If u compare our 2x $750 and 2x $250 nothing like the people who had been on the dole for ages which received $550 per fortnight extra for 6 mths which is equivalent to over $14,000 extra. That should not have happened only people who had lost their jobs. Rental assistance should have increased as rents have increased. I went from $320pw to $350 a week.

    • 2
      2

      While it seems a lot of money and far greater than what pensioners received, bear in mind that ,Jobseeker and Jobkeeper extra payments are subhect to income tax, pensions are not.

    • 4
      1

      some pensioners seem not to realise they were receiving much more than those on Newstart prior to the Covid stimulus allowance. It was appropriate to increase the amount paid to unemployed given the difficulty they faced to improve their circumstances during the pandemic.

    • 1
      1

      Arvo, pensions ARE subject to income tax. The tax department already has this information from centrelink each year & includes this amount on your tax return even before you fill it out.

    • 0
      0

      Karl Marx – no need to be alarmist. Aged Pension is NOT subject to tax, nor do you need to lodge a tax return, if it is your only form of retirement income. Should have explained that. As stated on web site –

      “You don’t need to lodge a tax return if:
      Centrelink is not withholding tax from your pension payment and you have no other income. If your aged pension payment is your only source of income, then you do not need to lodge a tax return”.

  5. 4
    1

    I agree Helene. The next age pension adjustment is due March 2021, if the base rate is not increased then the $250 economic stimulus paymnet of $250 will compensate. The $250 represents an extra $19.23 per fortnight over next 13 fortnightly payments to September 2021, which is far better than the usual indexed amount per fortnight of $6-$10. A total of $2,000 in economic stimulus payments will have been received by March 2021 because of the virus pandemic crisis. This represents and increase to the pension of $76.92 per fortnight for a period of 12 months. Not sure what the government will do for September 2021 but in the meantime pensioners should be grateful for the extra payments they received in form of economic stimulus payments.

    • 3
      2

      Fantastic comment Arvo. I’m a pensioner and very grateful for the 2000 dollars we would have received by March. I don’t expect any increase in March, and rightly so.

  6. 1
    2

    Our rates, our insurances, our medical costs, our travel costs and our sanitizing and COVID protection costs have all gone up. Grocery items may not have visibly gone up, but the packets have shrunk, which means we have to buy more. Many of our regular medications have become difficult to obtain and replacements have often been dearer. So looking at our spending, which we accurately track, the amount we are having to pay just to live a basic life as before has gone up much more than the amounts paid as COVID top-ups. On top of this, we both lost our jobs due to COVID, but when we went to apply for the Job Seeker were pushed into the OAP, which was all about minimizing the amount the government was paying. The only bright point is that with us not working, we are no longer saving, so the amount in the bank that is ‘deemed’ to be ‘earning a return’ is coming down.

    At the same time, politicians got an increase and those with $1.5M in super got a generous tax hand-out. Just shows how out of contact the government is with we older Australians. When the NSW Government forced amalgamations they promised no rate increases, but under cover of COVID have allowed Councils to push them through.

    If you look at the ways of measuring whether there should be an increase, they take the one that best suits them i.e. the measure that says no increase. At the same time they justify payments for JobKeeper which gives their business mates more profits and JobSeeker, for many who are happy not to work.

    • 2
      3

      James, just be grateful that you’re receiving the OAP. I’ve 2 years to wait, and I haven’t had a decent job since 2006, and have been on the DSP since 1999. How do you think that I’ve been surviving on the DSP? Very frugally. It helps that I don’t drink alcohol, smoke, nor gamble, have very few trips away from home – only once a year to visit elderly family. I’d love to get down there more often, but the cost of travel and accommodation is prohibitive. I still consume food & other household goods, which haven’t gone down in price, and our toilet paper for a pack of 24 has risen by 50 cents and Coles have boasted that they haven’t increased many staple goods since the pandemic hit us. They and all the supermarkets are lying when they can increase ‘basic’ goods and we’re still struggling to make ends meet.

      No increase below $100 per fortnight for the Pension and rent assistance should be tolerated. I really don’t car which political party is in power, we just need a ‘livable’ Pension.

      Like many people, I don’t have any super, savings, or own a home.

  7. 2
    0

    It seems most pensioners misunderstand the maths. If CPI increases, their pension increases by the same percentage and the buying power is the same. If CPI decreases, their pension stays the same until CPI catches up again, during which period their buying power increases.

  8. 2
    1

    Keep your stimulus payments, just give me back the money I’ve had stolen by the 2017 changes to the Pensioner Assets Test.

    • 2
      0

      Good luck with that one Sinic….that money is gone like the wind mate….i know what your saying as i know a few people that copped the same thing as yourself.

  9. 1
    0

    Of course, the cost of living has gone up HEAPPs it costs me more each week for groceries in fact about $20 more, also house insurance/car insurance/PBS was dearer too/it is costing a LOT more than it was —

    How come these bludger politicians get huge pay rises every darn year


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