The latest Consumer Price Index (CPI) figures for the June quarter indicate the Age Pension rate should increase by at least 2.2 per cent in the September indexation.
The CPI recorded a drop this quarter, with the nation’s headline inflation rate dropping from 7 to 6 per cent. This is good news for consumer prices and cost of living. However, it implies the 20 September 2023 Age Pension increase may be smaller than anticipated.
For a single pensioner, a 2.2 per cent increase denotes a rise of $23 per fortnight for a total of $1087. For couples, the increase would be $35, totalling $1639 per fortnight.
This would be a considerable drop in the rate of increase, down from 3.7 per cent in March – a rate deemed inadequate by advocates and economists.
The Combined Pensioners and Superannuants Association (CPSA) says the likely increase reflects an ongoing downward trend.
“The rate of inflation is now trending down. This will inevitably mean that pension increases after the September 2023 indexation will be smaller,” the CPSA says.
“While that may seem like bad news, it also means that prices will not have been increasing as much as they have been.”
The Age Pension, along with other government payments, are indexed twice per year on 20 March and 20 September.
The final rate of indexation for the Age Pension is not yet finalised, but will be announced in the next month.
Minister for social services Amanda Rishworth, told the ABC’s Insiders program the September increase would likely be the final cost-of-living relief measure implemented this year.
“The changes we’re making – whether it’s to Rent Assistance, JobSeeker – are structural changes,” she said.
“They’re ongoing increases that will be applied. So when you talk about the surplus from last year, that’s a very different circumstance to the reforms that we’ve made which are ongoing and structural.
“We have calibrated these to be responsible to help people who are doing it tough.”
How is Age Pension indexation calculated?
The Age Pension is adjusted in line with inflation twice each year, in March and September.
The rate of increase is based on three figures: the CPI, the Pensioner and Beneficiary Living Cost Increase (PBLCI) and the Male Total Average Weekly Earnings (MTAWE).
The CPI is a measure of the increase in price of a general ‘basket’ of goods and services that the average household regularly purchases.
The PBLCI works in a similar way, but the basket of goods has been selected to be more representative of what somebody living on the pension would be buying.
At indexation time, Centrelink compares the CPI and the PBLCI, then applies whichever yields the highest pension increase.
The rate is then compared to the MTAWE and adjusted to ensure that rates don’t fall behind community living standards.
Do you think a 2.2 per cent increase is enough? Or should the government be doing more to help older Aussies doing it tough? Let us know what you think in the comments section below.