The drought is starting to have an impact on the daily living costs of retirees and the twice-yearly increases in the Age Pension are less than what is needed to support even a modest standard of living in retirement.
That’s the view of Dr Martin Fahy, chief executive of the Association of Superannuation Funds of Australia (ASFA) after reviewing recent Consumer Price Index (CPI) movements.
The CPI in the September quarter rose 0.5 per cent, according to the latest Australian Bureau of Statistics (ABS) figures, after a 0.6 per cent rise in the June quarter.
The most significant increases were international holidays, travel and accommodation (+6.1 per cent), tobacco (+3.4 per cent), property rates and charges (+2.5 per cent) and childcare (+2.5 per cent).
The most significant falls were automotive fuel (-2.0 per cent), fruit (-3.1 per cent) and vegetables (-2.5 per cent).
Dr Fahy said that while the increase in the headline rate of the CPI might not look large, the drought was starting to have an impact on the prices paid by retirees.
“Even with inflation running at a low rate, many retirees will be in retirement for 25 years or more and need to take into account future price increases and spending needs,” he said.
“With the low rate of overall inflation, the Age Pension is only increasing at a modest rate, with the maximum Age Pension increasing by 1.9 per cent over the last 12 months to September to reach $24,335 a year for a single person (including allowances).
“The Age Pension is less than what is needed to support even a modest standard of living in retirement.
“Having sufficient savings in superannuation to support the lifestyle Australians want and deserve in retirement is an imperative.”
Dr Fahy said that moving to a 12 per cent Superannuation Guarantee was a necessity for those not yet retired given that many Australians still did not have substantial superannuation balances.
“The median account balance for those in the 60-to-64 age group is $154,450 for males and only $122,850 for women,” he said.
The costs for retirees that increased substantially over the past 12 months largely as a result of the drought are:
- beef up by 7.1 per cent and lamb up by 14.3
- milk up by 6.7 per cent
- breakfast cereals by 6.4 per cent
- poultry prices by 5.3 per cent
- eggs up by 4.5 per cent
- bread up by 3.6 per cent
- cheese up by 3.4 per cent.
The lower Australian dollar exchange rate has also had an impact on certain costs, according to ASFA, although other factors have also been at work in the past 12 months, including:
- international holiday travel and accommodation costs up by 5.8 per cent
- domestic holiday costs up by a very modest 0.7 per cent and a 1.6 per cent increase in the cost for camping and open-air recreation
- price of motor vehicles up by 3.2 per cent.
Do you concur with Dr Fahy’s statement that the Age Pension is “less than what is needed to support even a modest standard of living in retirement?”
If you enjoy our content, don’t keep it to yourself. Share our free eNews with your friends and encourage them to sign up.