The latest living cost indexes have been released by the Australian Bureau of Statistics (ABS) and give an insight into March 2023 Age Pension increase, which is scheduled to take effect from 20 March.
Base pension rates are indexed to the higher of the increase in the Consumer Price Index (CPI) and the Pensioner and Beneficiary Living Cost Index (PBLCI). These measure changes in prices on a range of goods and services including food, healthcare, fuel, housing costs and utilities costs.
Rates are also compared to a wages benchmark, Male Total Average Weekly Earnings (MTAWE), and increased if necessary.
The inflation rate to the end of 2022 was 7.8 per cent and the PBLCI was 7.4 per cent. That, according to Combined Pensioners and Superannuants Association policy manager Paul Versteege, is good news for pensioners.
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He explains: “The PBLCI tells you by how much pensioners’ cost of living has gone up. In compiling it, the ABS excludes, or gives a lesser weight to certain categories of expenditure –categories of goods and services that pensioners generally don’t use or don’t use as much and therefore don’t buy.”
For example, most pensioners own their home and don’t pay rent, he says. But rents have skyrocketed and have had a big effect on the CPI. Mortgage repayments are not included in the CPI, however, the price of building new houses is and that has risen strongly.
Mr Versteege explains that in the 59 quarters since the PBLCI started being used, the CPI came out higher than the PBLCI on 26 occasions.
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And taking into account the past four pension indexations, the CPI increase was much more than the PBLCI increase on three occasions.
What does that mean? An increase in purchasing power. Mr Versteege estimates that those increases equated to about $15 a fortnight for singles and $23 per fortnight for couples since March 2021.
However, he cautions that while that is good news, it’s not good enough.
“Once these increases in purchasing power are offset against the money pensioners had to (and have to) find while they’re waiting for pension indexation, there will still be a significant net loss of purchasing power.”
He advocates pension indexation should occur more regularly than every six months, especially now that the ABS calculates the inflation rate every month rather than every quarter.
Read: Work Bonus increase extended until end of 2023
How increased living costs affected retirees
Every quarter, YourLifeChoices, in association with The Australia Institute, publishes its Retirement Affordability Index. It delivers the real cost of retirement based on how the latest cost-of-living figures affect six retiree cohorts: self-funded couples and singles who own their home, constrained couples and singles who own their home and receive an Age Pension, and pensioners who rent.
The weekly, monthly and yearly expenditure estimates are telling and essential for retirement and budget planning. They will be available this Sunday.
The ABS reports that living costs for self-funded retiree households rose 2.2 per cent in the December quarter, which was higher than the CPI and the highest quarterly rise since the September 2000 quarter.
Annually, living costs for self-funded retirees rose 7.6 per cent, the biggest annual increase since tracking started in 1999.
Living costs for pensioner households rose 1.7 per cent for the quarter and 7.3 per cent for the year.
That all spells a significant increase in how much you will spend to maintain a comfortable – or better – retirement But check the figures on Sunday.
Do you feel that the purchasing power of the pension or your retirement savings is taking a big hit? Why not share your thoughts in the comments section below?
Well, $23 increase every two weeks. That will cover the increased cost of one trip for groceries and a full tank of fuel. Not to mention rents increasing between $50 – $150 a week.
I honestly don’t know why anyone think’s Most Age Pensioner’s own their own homes. It’s a just not true, we people who are called the, Baby Boomer’s could not afford in a lot of case’s to buy our homes and a lot of us had no other option than to apply for Public Housing and we do pay rent albeit no where near what private rentals cost these days. The Morrison Government sure did a good job of getting people to believe that most pensioners own their own homes and that we all have plenty of Superannuation tucked away. I had the Princely sum of $2,400 when I I stopped working and a third of that I’d contributed myself, as before the mid 80’s there was no such thing as Supper and when it did come in at the we only got about $1.50 a week . That was the going rate When you were on the basic wage.
I totally agree Donelle Feltham,
I am in the same situation as most Aged Pensioners that DO NOT HAVE Super or OWN My Own Home. I currently rent an NRAS property which is coming to an end in July, and my current discounted rent will go up to standard market rent meaning my RENTAL INCREASE will be approximately $200.00+ per week! This is obviously way out of my capacity to pay, meaning I need to search for somewhere else to live. Well, that in itself is an absolute stressful nightmare as there are very few places affordable for a single senior person. Even the retirement rental accommodation for seniors, while very grateful, is expensive and mostly consists of a bedsit which does not necessarily suit those of us that have hobbies or need a little more space than a bedroom with small living space and kitchenette (wonderful for those that it suits).
My frustration really does stem from the fact that the previous governments local, state and federal all knew that the NRAS program was coming to an end as it had a lifespan of 10 years and yet not one of them put any other program in place for low-income earners!
WHY???
The Albanese government has a 5-year plan in action which is wonderful, however, not quick enough to deal with the current housing emergency…
For an advanced Western Culture who on the whole believe we have considerable knowledge and know-how, we certainly have fallen BEHIND in this dire housing stress.
If anyone has some recommendations regarding affordable rentals, I would love to hear about them.
last week my shopping increased by %10 alone and over the last 6 n=months by at least%17 and that alone is not covered by the next increase Also you go on about rent so lets not forget that rentees do not pay coucil rates and people who have a mortgage pay that on top of a morgage .My council rates as a pensioner are nearly$2000 on top of morgage .
This means if u have a morgage you have to find an extra $150 /monthon top
Do renters have this extra bill NO