The latest Retirement Affordability Index (RAI) figures show that no matter how much income you have, inflation is having an impact.
At the top end, inflation is curbing travel and discretionary spending, but at the lower end of the scale, its threatening to leave some retirees homeless. So, when will the inflationary nightmare end?
Inflation killing retirements
The cost of virtually everything has gone up, but it’s the size of the increases to two core essentials – housing and food – that are causing the most concern.
Homeowners saw their housing costs jump between 13 and 21 per cent since the last index, but it’s older renters who have been hit the worst. The current rental crisis has pushed housing costs for renters up 38 per cent, an astronomical figure for those who can least afford it.
Anybody who’s been to the supermarket lately can tell you that food prices just keep rising and rising. It seems like each trip costs more than the last, with the supermarkets blaming everything from supply chain issues to the war in Ukraine for the increases.
The RAI showed significant increases in food and beverage costs among all retiree cohorts, but again it was the renters who copped it hardest, with couples in this group experiencing a 22 per cent increase to their grocery bills.
Housing and food costs saw the biggest average jump across all retiree groups out of any category in the RAI. Because they make up such a large part of a retiree’s (or anyone’s) budgets, inflation is having a tangible impact on many retirees’ quality of life.
RBA says no relief just yet
Although the Reserve Bank left interest rates on hold at 4.35 per cent at its most recent meeting, but indicated inflation was still too high, and that it doesn’t expect it to get it under control until the middle of 2026.
The RBA wants inflation somewhere between 2 and 3 per cent, but the most recent Consumer Price Index (CPI) showed inflation was still at 3.9 per cent for the June quarter – the eleventh consecutive quarter it has been above target.
RBA governor Michele Bullock says Australia says even the 2026 prediction is tentative, with demand in the economy still unexpectedly outstripping supply.
“You will recall earlier in the pandemic and the immediate post-pandemic period we had difficulties on the supply side of the economy,” she said in her interest rates decision announcement.
“These supply shocks have largely now worked their way through the system and what we’re dealing with is continued strong demand, particularly for services.
“We’re trying to bring demand back into balance with supply … but the fact is that progress on bringing inflation down has been very slow for a year now and while growth of demand has been slow, there’s actually no guarantee that supply and demand will return to balance quickly enough.”
With no firm ending to this inflationary period in sight, the full effect of inflation on retirements remains to be seen, but the storm doesn’t appear to have passed just yet.
How has inflation impacted your retirement costs? Do you think inflation will be back within the target range by 2026? Let us know in the comments section below.
Also read: ‘Insidious’ inflation causing massive cost-of-living issues for Age Pension recipients
