10 February 2022
Inflation increases pressure on Australian retiree budgets
Fuel and healthcare cost increases have driven the largest annual rises in retiree budgets since 2010, according to the Association of Superannuation Funds of Australia (ASFA).
The ASFA Retirement Standard December quarter 2021 figures indicate that couples aged around 65 living a comfortable retirement need to spend $64,771 per year and singles $45,962, up by 1.5 per cent and 1.6 per cent respectively on the previous quarter.
“Australian retirees are now facing significant pressure on their budgets from
non-discretionary inflation,” said ASFA Deputy CEO Glen McCrea.
“This means unavoidable price increases on goods and services such as food, petrol and health costs.
“It’s critical that future retirees are able to build sufficient retirement savings to ensure they can have dignity, health, vitality and connection in retirement.”
The annual percentage increases in the comfortable budgets were the largest since 2010. In 2021, prices were up by around 3.5 per cent for the comfortable couple budget and by 3.9 per cent for the comfortable single budget.
In addition, the percentage increases in the budgets for those aged around 65 was higher than the increase in the December quarter All Groups CPI of 1.3 per cent. Price increases for retirees are outstripping those for employees.
Retirees have not been able to avoid the price increases through switching what they purchase. Non-discretionary annual inflation is higher than the CPI and more than twice the rate of discretionary inflation. Non-discretionary inflation includes goods and services such as food, automotive fuel, and health costs.
Retiree households will face ever increasing health costs. While there is considerable subsidisation of health costs, out of pocket expenses remain substantial for items such as dental treatment, gap payments for procedures in hospitals and emerging items such as the cost of COVID-19 rapid antigen tests.
“It’s so important that future retirees are able to build sufficient savings over their working lives to ensure they can face retirement with financial confidence,” said Mr McCrea.
“Over the last couple of years, the balances of women and low-income earners have been impacted by the acceleration of price increases, COVID-19 and policies such as the early release of super.
“It is crucial that the Government addresses the repair of people’s retirement budgets as we start to see the other side of the COVID-19 crisis,” Mr McCrea concluded.
Retirement budgets for those aged around 85 were up by 0.8 per cent from the previous quarter reflecting the different expenditure pattern in such budgets.
The older retiree budgets were not directly affected by the increase in petrol prices, which were significant in the December quarter, as there is no allowance for car ownership for this age group.
However, older retirees are facing other increases in costs. Rising petrol prices also feed into the cost of goods and services purchased by older retirees.
Details for the retirement budget price changes
- Automotive fuel rose 6.6% due to increased global demand for oil as COVID-19 restrictions continued to ease and global oil supply remained limited. Fuel prices reached record levels in the December quarter.
- Motor vehicles rose 1.9% due to supply constraints restricting global supply chains, coupled with strong domestic demand.
- Meals out and takeaway food rose 1.0% as the easing of restrictions saw restaurants and cafes review their prices to reflect higher input costs.
- Dairy and related products rose 1.7% due to price rises for cheese, milk and yoghurt. Fruit (-1.2%) partially offset the rise due to favourable growing conditions for bananas and berries.
- Non-durable household products (+3.7%) rose due to price rises for toilet paper.
- Domestic and household services (+1.3%) rose due to price increases for hairdressing and gardening services.
- Domestic holiday travel and accommodation rose 4.8% following the re-opening of state and territory borders and the commencement of the peak summer holiday period.
Details for the various updated budgets follow.
Table 1: Budgets for various households and living standards for those aged around 65 (December quarter 2021, national)
| Household type | Single Modest | Couple Modest | Single Comfortable | Couple Comfortable |
|---|---|---|---|---|
| Housing – ongoing only | $105.49 | $118.47 | $123.90 | $129.31 |
| Energy | $34.09 | $45.79 | $43.19 | $53.56 |
| Food | $96.10 | $178.17 | $124.25 | $215.96 |
| Clothing | $20.32 | $38.61 | $27.14 | $50.54 |
| Household goods and services | $35.09 | $41.20 | $77.91 | $95.96 |
| Health | $51.86 | $100.27 | $106.07 | $198.79 |
| Transport | $97.90 | $104.36 | $159.91 | $173.28 |
| Leisure | $99.69 | $156.48 | $196.02 | $294.67 |
| Communications | $17.67 | $19.90 | $22.09 | $28.76 |
| Total per week | $558.21 | $803.24 | $880.49 | $1,240.83 |
| Total per year | $29,139 | $41,929 | $45,962 | $64,771 |
|
More information
Costs and summary figures can be accessed via the here. Australians can find out more about superannuation on the independent Super Guru website.
For further information, please contact:
Brian Karlovsky, 0451 949 300.
About the ASFA Retirement Standard
Since 2004 the ASFA Retirement Standard has served as a retirement companion for Australians, providing a reliable retirement savings guide by benchmarking the annual budget needed to fund either a comfortable or modest standard of living in the post-work years. It is updated quarterly to reflect inflation, reviewed regularly to reflect changes in lifestyle, and provides detailed budgets of what single people and couples would need to spend to support their chosen lifestyle.
