The rate of inflation continues to drop at a rapid rate. Inflation for the 12 months to December 2023 was 4.1 per cent – more than a full percentage point lower than for the 12 months to September when it was 5.4 per cent.
This marks the fourth consecutive quarter of lower annual inflation, which hit a peak of 7.8 per cent in the December 2022 quarter.
Inflation is expected to continue to fall as the supply shocks that set off the current inflationary spike wash out of the economy.
The main drivers of inflation for our retirement cohorts were housing, health, domestic travel, insurance and food.
Increasing costs of housing continued to cause financial pain, particularly for the cash-strapped cohorts who rent. While rents increased 0.9 per cent in the quarter, that was at least a lower increase than in previous quarters.
It was partially offset by a 15 per cent increase in the maximum rate for Commonwealth Rent Assistance (CRA) from 20 September 2023. Hopefully, this is the start of a slowdown in rent rises.
Private health insurance premiums were the main driver of increased health costs. They affected both the well-off and constrained cohorts the most. The pain was offset to some degree by a fall in the price of pharmaceutical products due to increased government subsidies on Pharmaceutical Benefits Scheme (PBS) medicines.
Domestic travel and accommodation increased in price by 3.9 per cent, driven by sporting events and the Christmas holiday period. That affected the well-off cohorts the most. The increases were partially offset by a 1.5 per cent fall in international travel and accommodation costs.
Insurance costs continued to increase (+3.8 per cent) across motor vehicle, house and home content insurance. Prices rose 16.2 per cent in the 12 months to the December 2023 quarter – the strongest annual rise since March 2001.
The costs are largely driven by an increasing number of climate-related disasters. All cohorts were affected and that is only likely to get worse as climate change affects more Australians. I expect this to become an increasingly difficult issue.
Food price increases continued to bite, though less so than in previous quarters. That impacted all cohorts. Bread and cereal products saw the biggest increases of 1.9 per cent.
Electricity prices rose 1.4 per cent in the December quarter, compared to a rise of 4.2 per cent in the September quarter. Over the past 12 months, electricity prices have increased 6.9 per cent, down from the increase of 14.5 per cent in the 12 months to September.
The introduction of Energy Bill Relief Fund rebates from July 2023 moderated the increase in electricity bills. Electricity prices have risen 5.7 per cent since the June 2023 quarter. Excluding the Energy Bill Relief rebates, prices would have increased 17.6 per cent over this period.
Offsetting those increases was a drop in automotive fuel prices. These continue to be volatile and, given the uncertainty in the Middle East and Russia/Ukraine, are likely to continue.
The increase in cost of living for our cohorts is also slowing. Cash-strapped couples and singles saw the biggest quarterly increase of 0.8 per cent. Half this increase is due to rising housing costs, mostly because of increasing rents. The other cohorts saw smaller quarterly increases with constrained singles increasing 0.6 per cent and constrained couples and well-off singles 0.5 per cent. The smallest increase was for well-off couples who saw quarterly prices increase 0.4 per cent.
YourLifeChoices Retirement Affordability Table February 2024
| COUPLES | SINGLES | |||||
|---|---|---|---|---|---|---|
| Constrained couples | Cash-strapped couples | Well-off singles | Constrained singles | Cash-strapped singles | ||
| Couple homeowners with private income | Couple homeowners on Age Pension | Couples who rent on Age Pension | Single homeowners with private income | Single homeowners on Age Pension | Singles who rent on Age Pension | |
| Housing | 225.89 | 133.51 | 252.86 | 151.78 | 112.02 | 199.2 |
| As a percentage of expenditure | 13% | 13% | 30% | 15% | 20% | 37% |
| Domestic fuel & power | 51.5 | 38.68 | 40.83 | 37.25 | 33.34 | 28.3 |
| As a percentage of expenditure | 3% | 4% | 5% | 4% | 6% | 5% |
| Food & non-alcoholic beverages | 288.93 | 203.5 | 184.01 | 145.16 | 102.03 | 91.44 |
| As a percentage of expenditure | 17% | 20% | 22% | 15% | 19% | 17% |
| Alcoholic beverages & tobacco products | 62.87 | 34.97 | 56.88 | 34.54 | 20.73 | 29.29 |
| As a percentage of expenditure | 4% | 4% | 7% | 4% | 4% | 5% |
| Clothing and footwear | 31.82 | 18.06 | 9.55 | 21.17 | 9.18 | 7.57 |
| As a percentage of expenditure | 2% | 2% | 1% | 2% | 2% | 1% |
| Household furnishings & equipment | 84.49 | 36.66 | 22.3 | 46.23 | 21.47 | 17.12 |
| As a percentage of expenditure | 5% | 4% | 3% | 5% | 4% | 3% |
| Household services & operation | 49.04 | 34.7 | 18.74 | 44.25 | 25 | 13.29 |
| As a percentage of expenditure | 3% | 3% | 2% | 5% | 5% | 2% |
| Medical & healthcare | 169.89 | 121.09 | 41.93 | 97.55 | 43.2 | 25.56 |
| As a percentage of expenditure | 10% | 12% | 5% | 10% | 8% | 5% |
| Transport | 238.57 | 154.87 | 73.64 | 126.38 | 64.45 | 43.47 |
| As a percentage of expenditure | 14% | 16% | 9% | 13% | 12% | 8% |
| Communication | 35.19 | 24.94 | 26.98 | 34.05 | 17.58 | 13.72 |
| As a percentage of expenditure | 2% | 3% | 3% | 3% | 3% | 3% |
| Recreation | 337.76 | 114.7 | 74.58 | 157.31 | 59.18 | 35.71 |
| As a percentage of expenditure | 20% | 12% | 9% | 16% | 11% | 7% |
| Education | 0.67 | 0.25 | 0 | 0.15 | 0.13 | 0.01 |
| As a percentage of expenditure | 0% | 0% | 0% | 0% | 0% | 0% |
| Personal care | 33.86 | 20.55 | 14.28 | 21.09 | 11.13 | 9.86 |
| As a percentage of expenditure | 2% | 2% | 2% | 2% | 2% | 2% |
| Miscellaneous goods & services | 105.31 | 56.79 | 28.4 | 63.92 | 31.11 | 19.38 |
| As a percentage of expenditure | 6% | 6% | 3% | 7% | 6% | 4% |
| Total weekly expenditure | 1715.8 | 993.25 | 844.98 | 980.82 | 550.55 | 533.93 |
| Total monthly expenditure | 7435.13 | 4304.1 | 3661.58 | 4250.24 | 2385.72 | 2313.69 |
| Total annual expenditure | 89,221.60 | 51,649.21 | 43,939.01 | 51,002.87 | 28,628.68 | 27,764.28 |
| Est. expenditure after Dec quarter 2022 | 86,257 | 49,712 | 42,078 | 49,232 | 27,515 | 26,542 |
Have you noticed an easing in living costs? Are you happy with the various inquiries into supermarket prices? Share your thoughts in the comments section below.
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