Last week, YourLifeChoices reported that the higher-than-expected Consumer Price Index (CPI) figures meant pensioners could expect an increase of at least 1.4 per cent in September, but the latest numbers from the Australian Bureau of Statistics (ABS) suggest it could be even higher.
The Age Pension (along with various other pension payments) is usually adjusted on 20 March and 20 September each year by the greater of the movements in the CPI or the Pensioner and Beneficiary Living Cost Index (PBLCI) over a six-month period.
The PBLCI measures the effect of price changes on the out-of-pocket living expenses of households whose main source of income is government payments. Those figures were released on Wednesday and revealed an increase of 0.9 per cent for the quarter and 2.9 per cent for the year.
Read: Could the cost of essentials outpace Age Pension boost?
Importantly, the figures increased 1.6 per cent since January – higher than the 1.4 per cent rise in the CPI figures reported last week.
The Department of Social Services will still be left to determine the exact level of the increase pensioners can expect on 20 September, but based on these figures a 1.6 per cent increase is possible.
The March indexation increase, which was already quite large given that there was no indexation in September last year, delivered an $8.40 per fortnight increase for single Age Pension recipients receiving the full pension on the back of a 0.89 per cent increase.
That same Age Pension recipient could expect somewhere in the order of an extra $15.10 per fortnight if there is a 1.6 per cent increase in the September indexation.
Read: CPI figures point to a big pension increase in September
Combined Pensioners and Superannuants Association (CPSA) policy manager Paul Versteege said the indexation increase was looking good, but also pointed out that pensioners would face higher costs based on the latest ABS figures.
“The CPI increase of 1.4 per cent feeding into pension indexation was looking good, but a 1.6 per cent increase in the living cost index means the living cost index will be used,” Mr Versteege said.
“Be mindful that these increases are merely intended to maintain the pension’s purchasing power, but a greater increase than usual will feel good.”
The ABS Living Cost Indexes (LCI) for the quarter also showed a 1 per cent increase in the Age Pensioner LCI and a 0.9 increase in the self-funded retiree LCI.
Transport was one of the main contributors to the rise, with fuel prices increasing due to the continued recovery in global oil prices following COVID-19 lockdowns. Fuel prices have now surpassed pre-pandemic levels.
Housing costs also contributed to the rise in the cost of living due to the unwinding of the West Australian government’s $600 electricity credit which was introduced in the December 2020 quarter.
Read: One million Australians to be excluded from Centrelink payments
The cost of food and non-alcoholic drinks also rose across all households due to an increase in fruit and vegetables prices linked to a shortage of pickers and extreme rainfall on the east coast.
The living costs for age pensioner households recorded the biggest increase for all household types due to a higher expenditure on electricity, fruit and vegetables.
The living costs for pensioner and beneficiary households recorded a larger rise than CPI due to their higher expenditure on electricity.
The increase in living costs for self-funded retirees, which was also bigger than the rise in the CPI, was largely attributed to higher expenditure on medical and hospital services. Rising health insurance premiums in March were partly responsible.
Should the government increase the base rate of the pension to deal with some of the COVID-related price shocks? Why not share your thoughts in the comments section below?
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