In a hit to retirement budget planning, a survey has revealed that the annual inflation rate is expected to rise sharply in the next two years.
The survey, conducted by Roy Morgan, asked almost 6000 Australians about their expectations around price rises over the next two years. The results showed Australians expect the inflation rate to hit 4.9 per cent, the highest expectation since 2014.
November was the sixth month in a row in which inflation expectations had risen. Over the past year, these expectations have increased 1.5 percentage points, which is the highest jump on record.
Official figures released by the Australian Bureau of Statistics (ABS) at the end of the September quarter showed the actual increase in inflation is currently at 3 per cent.
Read: Transport, housing, furnishings drive inflation
But consumers are worried about cost-of-living rises over the next 24 months, which could hit cash-strapped retirees hard. After two years of uncertainty due to the pandemic, a rise in inflation could put the budget forecasts of many older Australians in jeopardy.
Inflation puts pressure on retirements because the money you’ve saved has less purchasing power.
“For example, if you retired in 2000 with the healthy lump sum of $500,000, you would have been pretty happy,” says SuperGuide.
“But a basket of goods and services valued at $500,000 in 2000 would have cost you $812,172.09 to buy in 2020. That’s a 62.4 per cent rise in costs in 20 years due to the average annual inflation rate of 2.5 per cent over that period.”
Read: Inflation set to accelerate, economist warns
The Roy Morgan researchers found a significant difference in inflation expectations between those living in capital cities and those in country areas, and say that could prove to be a decisive factor in the upcoming federal election.
Respondents in the capitals expected annual inflation of 4.7 per cent over the next two years, while those living in rural areas expected a much higher inflation rate of 5.3 per cent.
“The large difference between people in rural and regional areas and those in the largest capital cities is set to be a crucial area for the major parties heading towards next year’s federal election due by May 2022,” says Roy Morgan CEO Michele Levine.
“The impact of rising prices, and the possibility inflation will increase even further next year, are sure to be front and centre issues for the electorate as we consider whether to re-elect the LNP government for a fourth term.”
Read: Easy way to save on your food shop as inflation soars
The federal government is hoping to make Australia’s post-COVID economic recovery a centrepiece of its election strategy.
“Australia’s economic recovery has to be secured by people who have a track record of economic management,” Prime Minister Scott Morrison said at a press conference.
“Otherwise, you’re going to see petrol prices go up. You’re going to see electricity prices go up. You’re going to see interest rates go up more than they would need to.”
Are you worried about inflation affecting your retirement savings? Do you think prices will rise steeply over the next two years?
If you enjoy our content, don’t keep it to yourself. Share our free eNews with your friends and encourage them to sign up.
