Were Age Pensioners unfairly denied a pay rise?

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Payment rates for the Age Pension have been frozen, although the prime minister has hinted that there may be a sweetener for pensioners before the next indexation review in March. But should the September indexation have been put on hold?

The Department of Social Services (DSS) confirmed on Tuesday that there would be no increase to the pension until March 2021, at the earliest, because Australia was experiencing deflation for the first time since 1998.

DSS deputy secretary Nathan Williamson said payments would essentially be frozen at their current rate. “Based on the calculation for indexation, if it’s negative, we don’t reduce the pension, but we also don’t increase it,” he said.

But … what were the key elements that took inflation to -0.3 per cent?

Australian Bureau of Statistics chief economist Bruce Hockman said that a 95 per cent drop in the cost of childcare during the June quarter (due to the pandemic), a big fall in the price of petrol and a drop in the price of preschool and primary education were to blame for the consumer price index (CPI) fall.

“Excluding these three components, the CPI would have risen 0.1 per cent in the June quarter,” he said.

Two of those components – childcare and preschool and primary education – would not have aided older Australians and who exactly is benefitting from cheaper fuel costs given lockdowns, border closures and restricted travel opportunities?

Movements in Age Pension payments are driven by indexation. That is calculated according to the greater of the movement in the CPI or the Pensioner and Beneficiary Living Cost Index (PBLCI), the Australian government website explains. It is then ‘benchmarked’ against a percentage of Male Total Average Weekly Earnings (MTAWE).

Indexing pension rates to CPI, says the website, maintains their real value over time.

“The PBLCI is designed to check whether pensioners’ disposable incomes have kept pace with price changes. The MTAWE benchmark is not intended to maintain the value of the pension relative to costs; it is seen as ensuring pensioners maintain a certain standard of living, relative to the rest of the population.”

Some YourLifeChoices members would argue that their standard of living has not been maintained.

Members’ response to news that the pension would not be increased next month was divided. Some reflected that the $750 stimulus payments were a valuable alternative, others decried the missing money.

This comment from CoogeeGuy was a common refrain: “It has been suggested that this year our CPI has gone backward only because the government introduced free childcare, and the fact that petrol prices have come down. Two things our elderly probably don’t use. But from my observations, grocery and meat prices have increased, and they are the two commodities the elderly definitely use …”

DaveR wrote: “If there was really no inflation, then I suppose no increase would be fair. But there is inflation. For example, my council rates just increased by 2 per cent and food keeps rising …”

And Arvo said: “Some food products in supermarkets have increased by 100 per cent. Domestic consumer electricity cost has increased. Council water charges have increased.”

And that’s not to mention supermarket delivery charges. Orietta said she now had to spend $200 in one purchase to qualify for free delivery – up from $150.

Council on the Ageing (COTA) chief executive Ian Yates says the indices used to determine movement in the Age Pension do not tell the whole story. He has written to Social Services Minister Anne Ruston asking for a third $750 stimulus payment for pensioners.

“While the two previous $750 payments have been very welcome, pensioners have ended up with less than people on the increased level of JobSeeker,” he wrote in a letter seen by the Sydney Morning Herald and The Age.

Combined Pensioners and Superannuants Association (CPSA) policy manager Paul Versteege defended the indexation system, saying it worked well. But he said there should be a permanent lift or supplement to the base payment for full-pension singles who were struggling to make ends meet.

So, what to expect come the next indexation date on 20 March 2021?

The Australia Institute senior economist Matt Grudnoff looked into his crystal ball for YourLifeChoices.

“What I’m predicting is that in the next quarter, the CPI will see a massive rise.

“For a period of time, the government made childcare free. So, the cost of childcare fell by 95 per cent but, of course, that’s now ended. So childcare fees then jumped back up.

“The other thing that forced it [CPI] down is the fact that because nobody’s driving – across the world, not just in Australia – oil prices are falling because there’s less demand. And not just driving, also flying. So when oil prices go down, petrol prices have fallen, but as the economy starts to open up, we would expect that to reverse. Demand will pick up and petrol prices will increase.

“The interesting thing about this is that people aren’t necessarily getting the advantage, particularly retirees, of lower petrol prices. Retirees are probably staying at home more and travelling less. In fact, everybody’s doing that.

“So … retirees are unlikely to benefit from childcare costs and they’re also not driving as much and not likely to benefit from the lower petrol prices.

“So, these sorts of big falls in the CPI are a bit illusionary. These people aren’t necessarily getting the benefit of it.”

And therein lies the problem for Age Pensioners.

Should there be a review of how the CPI affects the Age Pension to make it more relevant to older Australians? 

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Written by Janelle Ward

89 Comments

Total Comments: 89
  1. 0
    0

    The Talk about of OAP Increase, No Increase even some Suggestion of Decrease as so called negative CPI. This doesn’t take in Account the Low OAP payment, as at this Payment Rate just survivable, some with Health Issues way below “Poverty Level for Australian Standards”
    This $3 to $5 normal increases was not Enough to bring OAP to a More Survivable Amount as the every day commodities are increasing.

    • 0
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      Totally agree with you Chris B T as I am entirely dependent on the OAP and struggle each fortnight as have a great amount of Medication that I need just to keep me going and even though it may only be $5 or $6 each CPI increase it does not go to help me in the least !
      As never having Super during my working life till the last 4 years there was nothing to collect and was gone on Meds right away so now the OAP is all I have to depend on and even that when I get it 25% of it goes on my Rental as I am in a government Unit so I don’t end up with much after they take that before I even get it !
      So there are more like me in the same position that only have the OAP and nothing else so we all have to end up limiting our food consumption to pay the Bill like Water that has gone up and food like meat ect also and I don’t smoke drink or go out and its still the survival of the fittest with the OAP ! Dotty

  2. 0
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    WHAT ABOUT THE PARASITES THAT MAKE THESE DECISIONS ARE THEY HAVING A REDUCTION TO THEIR OVER THE TOP SALARYS??? HA HA I BET NOT…..

    • 0
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      And their retired MP mates, Lenny Jac, many of whom accessed their lifelong pensions 20 years ago whilst still in their thirties and will be a taxpayers’ burden for another 20 or 30 years.

    • 0
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      You are joking they are living on easy street but still take a huge increase when they get it and go buy expensive homes etc and live like Kings and Queens !
      They dont give a thought to the likes of us OAP as they dont really care about us at all as long as they are putting their hand out and getting that huge rise they dont give a figs !
      Dotty

    • 0
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      Our government should look at New Zealand their PM has ruled a 20% pay cut to all government workers. Most people employed in Australia have opted for the 20% pay cut also so I ask why are our pollies not doing the same. FAT CATS SO GREEDY.

    • 0
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      Exactly LenyJac. Our council land rates have increased by about 15% in Newcastle ( a Labor stronghold), but there’s no reprieve for pensioners from either the local council or government. What a bunch of mongrels.

    • 0
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      There has been no word from anyone about this 15% rate increase, but every whinges when private health fees goes up 4%.

    • 0
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      everything has gone up except pensions. About %9 and i would like to see what baby care has to do with pensioners .Child care and birth is a parents responsibility and the govt should not use it as an excuse to deny pensioners a pay rise.If the cost of living has gone down then why do newstart, jobseeke,r single parents, getting 3 times more for the cost of living concession than pensioners Over$700 for everyone except pensioners who get$215. WHY?Once again more lies from mr MORRISON and his cronies Pensioners are so far $7000 less than newsstart in increases who received a %100 increase PENSIONERS 00000000

  3. 0
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    As mentioned previously, the calculation of the CPI (particularly in 2020) does not truely reflect ‘true’ inflation. In answer to your question, yes! Given the most obvious rise in the cost of groceries, meat, and services, the Federal Government should review their decision regarding not passing on an increase in the OAP. But can I also pass on the fact, that the ‘Covid19’ CPI figure will also impact some self-funded retiree’s whose fortnightly pensions are also governed by CPI each year. They will see their pensions take a hit this year, and I doubt there will be any consideration given to their predicament.

    • 0
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      No CoogeeGuy. They will just continue to get nasty responses and insults from pensioners, telling them to spend their savings. Well, sure, they can do that. And then they will be pensioners and the cost to taxpayers will skyrocket and the government will seek to cut pensions and all the pensioners who said ‘just spend your savings’ will scream and belly ache. Why do the self-funded have savings? Because they planned have more in retirement. But a stupid system doesn’t allow that. Apparently everyone should be equally poor in old age.

    • 0
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      Should there be a review of how the CPI affects the Age Pension to make it more relevant to older Australians?

      CoogeeGuy-I agree with you with regard to…” the calculation of the CPI (particularly in 2020) does not truly reflect ‘true’ inflation”

      I have suggested several times in my previous comments in the past that, CPI outcomes are “massaged” / ” manipulated” by the government to produce the lowest CPI figure possible.

      Quote-“Australian Bureau of Statistics chief economist Bruce Hockman said that a 95 per cent drop in the cost of childcare during the June quarter (due to the pandemic), a big fall in the price of petrol and a drop in the price of preschool and primary education were to blame for the consumer price index (CPI) fall.

      “Excluding these three components, the CPI would have risen 0.1 per cent in the June quarter,” he said.

      Two of those components – childcare and preschool and primary education – would not have aided older Australians and who exactly is benefitting from cheaper fuel costs given lockdowns, border closures and restricted travel opportunities?

      This evidence proves that there is the need to review the method of CPI calculation with regard to the Ageing Sector and that it should be treated separately, in order to reflect reality and not “smoke and mirrors” of cost of prices relative to age pensioner consumer spending.

    • 0
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      Arvo, the Pensioner and Beneficiary Living Cost Index (PBLCI) provides quarterly information about the combined price change on out-of-pocket living expenses for two population sub-groups; age pensioner households and other government transfer recipient households.

      https://www.abs.gov.au/Ausstats/[email protected]
      sf/0/5BAE2590BF1D06A9CA257834000DFB05

  4. 0
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    i still pay the same rent , I just paid $69 for a rubber insert for my cpap mask, i still pay the same price for petrol /food etc where have prices dropped??

    • 0
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      I recently found out that you can apply for a one off payment each year towards the cost of cpap needs. Go on the centrelink website, you will need your doctor to fill in the downloaded form. The amount is $163.00 Good luck

  5. 0
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    This is obviously a major talking point with us oldies on the pension.
    The CPI calculation does include many things that OAPs simply don’t use so fairness does come into it the criticism.
    My major complaint is that OAPS are not getting an increase but the wealthy are still getting their tax cut. The OAPS will put any increase back into the everyday economy but it is highly unlikely that the wealthy will. The trickle down effect is a fallacy.

  6. 0
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    The solution to fair old age pensioner payments is to tie increases to MP salaries, and also to their perks…. wouldn’t mind another house in the ACT…

    • 0
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      What a good idea!

      I could handle that.

    • 0
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      Now that IS fair Leigh! Lets see how they’d go for that one!

    • 0
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      why? comparing apples and oranges – age pensioner payments are indexed to their expenses, the MP salaries are set by Remuneration Tribunal and reflect the market.

    • 0
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      tax cuts are not included in the cpi so the rich get richer while the poor get nothing.Another loophole to keep the cpi down and pensions down .If the pension was based on politicians pay rises then everyone would be %30 better off In the last 8 years politicians pay has gone up %46 plus a few tax cuts which would bring up there pay over %50 compared to pensions %18 . FAT PIGS who have ruined this country but you do not hear how much money was given to the companies although i have read that a lot of companies are still profiting even if shut down due to handouts by this GOVT ONE company bragged it had $16 million profit of which $12 million of the profit was given them by the govt;;If everyone is doing it hard why is the GOVT handing out money to companies who are making profits on there own

  7. 0
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    This is the third time in a week that this topic has been raised, surely there are more subjects that can be discussed?

    • 0
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      Agree! I thought I heard that something will be done anyway? Maybe another one off payment was suggested. There are many others suffering like the ones who lost jobs which is not only about money but emotional effect. Not all those are getting any payments. I know of several.

    • 0
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      There Started Another One!!!!!!!!!!!!!!!!!!!!!

  8. 0
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    It seems that brains and ability to plan has been sucked out of our Federal public service, and the government does nothing until a crisis bites them on the bum – and then they say “not my responsibility”, and throw rocks at a convenient premier.

    I would like to go back to the days when rich people and corportions were not exempt from contributing to the country they are sucking dry, and we could afford a non-political public service that served the public instead of a political party and Rupert Murdoch et al – oh, and a few billionaire miners and bankers.

    All this was foreseeable, indeed was foreseen by the Rudd government who made a pandemic plan, and presumably took account of the economic fallout. After all, they dealt pretty well with the GFC.

    Perhaps waiting on the “End of Times” requires passivity rom believers.

  9. 0
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    Sorry all, but age and possibly greed have fogged your minds – I seem to recollect that the Government gave married couples $1500.00 a couple X 2, not sure what singles got but I think it was $750.00 X 2, so get out your calculators and work out how much that equates to a fortnight, you will be surprised, it is a bit more than the $4 – $5.00 per fortnight you are quibbling about. Still, some are happy and some are, as usual, whinging.

    • 0
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      Tommo, if thinking people didn’t put forward their views we’d still have children forced up chimneys.

    • 0
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      irrelevant Triss. It is what it is, that is it it is tied to CPI and we hear the moans when CPI is flat or negative.

    • 0
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      That’s right Triss – everyone is entitled to a view and I get yours. Didn’t think it was irrelevant.

    • 0
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      Tommo, well I got my calculator out like you said and I found that 2x$750 payments at say- $5/fortnight is equal to 11.5 years. So a retiree will be in deficit 11.5 years from July 2020. How much will the government save, because this saving doesn’t stop, it keeps going to infinity. What you lose now is not calculated on a one year term. Also when retirees pass away, there will be other retirees taking their place, so the $5/ fortnight that the retirees didn’t receive just Keeps on growing, it never stops. Government can have my $1500 which I have not spent,in return for a $5/fortnight raise.

    • 0
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      Thanks BoroBoy – unfortunately, my machine is not set up like yours. $5.00/fortnight amounts to $125.00 per annum that is 10 years for $1250.00. The government has given you $750.00 – which equates to $28.85 per fortnight, so If you are frugal, I believe you will be in front – if I and my calculator are wrong, I apologise.

    • 0
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      Am I missing something in $5 a fortnight discussion. $1,500 divided by 5 = 300. 300 fortnights
      (300/26) = 11.5 years.so surely the deficit of the $5 which is this year only and has already been paid does not start for 11.5 years. It is only while the CPI increase is zero that there is not increase, and that will not last for 11.5 years.

  10. 0
    0

    first, let me say I live overseas because I have too second because I live overseas I only receive half the pension take any more off and I will starve to death as will many others the government has not helped us in any way if you want to help these young people make all politicians take a large pay cut and make big business pay tax end of the problem

    • 0
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      Maybe you tell us why you have to live overseas, Andy, and we would have possibly more sympathies. Come back here and you’ll be looked after like everyone else here. OK, most people are moaning because they always want more. I live with a lot less than I did working but I make do.

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