17 November 2022
Australian retirees face increased cost of living driven by global factors, but superannuation is buffering the impact
As skyrocketing inflation pressurises household budgets worldwide, the Association of Superannuation Funds of Australia (ASFA) says Australian retirees stand in stark contrast to their overseas counterparts who do not have the safety net provided by compulsory superannuation.
While the major categories of expenditure including food, transport and energy have all increased in price over the past quarter, analysis of those increases reveals that the causes lie mainly outside Australia.
“The global energy crisis, raw material scarcity, and supply chain disruptions caused by ongoing COVID lockdowns in China are converging to pose significant inflationary challenges globally and here at home,” said ASFA Deputy CEO, Glen McCrea.
Mr McCrea says despite the current pressure on household budgets, Australian retirees are in a stronger retirement position than their global peers because of Australia’s robust superannuation system and retirement pillar settings.
“We can take some solace from the fact that the investment we’ve made in superannuation over the last three decades is acting as a buffer in the face of these strong headwinds.
“Governments in Europe and the UK are actively considering raising the retirement age or slashing the amount of pension retirees receive as they struggle to deal with the global economic challenges they are facing.
“In contrast, the Age Pension remains affordable for the Government in Australia where, in aggregate, retirees on average have larger private retirement savings balances than in most countries in the world. This helps cover costs during tougher times, providing a brighter outlook for Australian retirees than is the case for their international counterparts.”
The ASFA Retirement Standard September Quarter 2022 figures have risen in lockstep with quarterly inflation. Couples aged around 65 living a comfortable retirement now need to spend $68,014 per year and singles $48,266, both up by 1.9 per cent on the previous quarter.
Over the year to September 2022, the amount needed for a single person to fund a comfortable retirement has risen by 6.7 pr cent and for a couple by 6.6 per cent, slightly lower than annual CPI of 7.3 per cent.
Details for the retirement budget price changes (all price changes from the previous quarter except if specifically referred to as annual)
- Strong price rises were recorded across all food and non-food grocery products in the September quarter. These increases reflected a range of price pressures including supply chain disruptions, weather-related events, such as flooding, and increased transport and input costs. In the 12 months to the September quarter fruit and vegetables prices rose 16.2% and dairy products increased 12.1%. Dairy and related products rose 6.8% due to higher milk prices.
- Over the year to the September quarter, imported inflation saw oils and fats up 19.3%, coffee up 10.7% and gas 16.6% and automotive fuel 18.0%. These prices are set to remain high while geopolitical concerns persist.
- Increased demand, high fuel prices and capacity constraints saw domestic travel and accommodation up 10.8% over the year and international travel and accommodation up 25.3%. (The ASFA Comfortable budget assumes one major trip overseas every seven years)
- Meals out and take away foods rose 2.9% due to rising input costs and ongoing supply and labour shortages. Alcohol rose 1.4% due to the increase in the bi-annual excise tax for alcohol on 1 August.
Details for the various updated budgets follow.
Table 1: Budgets for various households and living standards for those aged around 65 (September quarter 2022, national)
Table 2: Budgets for various households and living standards for those aged around 85 (September quarter 2022, national)
The figures in each case assume that the retiree/s own their own home and relate to expenditure by the household. This can be greater than household income after income tax where there is a drawdown on capital over the period of retirement. All calculations are weekly, unless otherwise stated. Annual figure is 52.2 times the weekly figure.
For further information, please contact:
ASFA Media team, 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.