2 June 2022
Cost of living pressures hurt retirees too
The ASFA Retirement Standard March quarter 2022 figures released today indicate that couples aged around 65 living a comfortable retirement need to spend $65,445 per year and singles $46,494, up by 1.0 per cent and 1.2 per cent respectively on the previous quarter.
The annual percentage increases in the comfortable budgets are the largest since 2010. Over the year to March 2022, prices were up by around 4.2 per cent for the comfortable couple budget and by 4.7 per cent for the comfortable single budget.
‘While this is marginally smaller than the annual inflation impact of 5.1 per cent for wage earners, the reality is that retirees are doing it tough too,” said ASFA Deputy CEO, Glen McCrea.
Over the year to March 2022 the Age Pension increased by 3.7 per cent, and Age Pensioners and Seniors Health Card holders also benefitted from a $250 one-off payment in April 2022. Additionally, there was a reduction in the minimum drawdown factor for retirees with a superannuation account-based income stream. While that reduction is welcomed by at least some retirees, others need to draw down more than the minimum in order to meet living costs.
However, the percentage increases in the budgets for those aged around 65 were less than the increase in the March quarter All Groups CPI of 2.1 per cent and 5.1 per cent compared to a year earlieri.
‘Retirees have faced significant price increases for non-discretionary items such as food, automotive fuel, and health costs,‘ added Glen McCrea.
Going forward retiree households will continue to face ever increasing health costs. While there is considerable subsidisation of health costs and benefits being paid from private health insurance, out of pocket expenses remain substantial for items such as dental treatment, optical expenses, and gap payments for procedures in hospitals, and private health insurance premiums also continue to increase. Substantial increases in the cost of electricity and gas are also expected.
Retirement budgets for those aged around 85 were up by 1.2 per cent from the previous quarter. The older retiree budgets were not directly affected by the increase in petrol prices, which were significant in the March quarter, as there is no allowance for car ownership for this age group. However, older retirees are facing other increases in costs including food and medical costs. Rising petrol prices also feed into the cost of goods and services purchased by older retirees.
‘The rising cost of living in retirement highlights the need for compulsory superannuation to increase to 12 per cent of wages by 2025,’ said Glen McCrea.
Details for the retirement budget price changes:
- Vegetables (+6.6%) and fruit (+4.9%) rose due to COVID-related supply chain disruptions, and high transport and fertiliser costs. Meat and seafoods rose 4.8% due to herd rebuilding in response to favourable weather conditions, reducing supply. Supply chain disruptions and high transport costs also contributed to the rise.
- Waters, soft drinks and juices rose 5.6% due to packaging, ingredient and freight costs pressures while alcohol rose 1.0% as prices returned from seasonal specials and the excise tax increase for beer and spirits.
- Over the past 12 months food costs overall were up 4.3%.
- Automotive fuel rose 11.0% due to the oil price shock caused by the Russian invasion of Ukraine, paired with ongoing easing of COVID-19 restrictions strengthening global demand. Fuel prices reached record levels in the March quarter.
- The price of motor vehicles rose 1.0% due to supply constraints restricting global supply chains, coupled with strong domestic demand. Over the past 12 months motor vehicle prices increased by 6.6%.
- Meals out and takeaway food rose 0.7% as the easing of restrictions saw restaurants and cafes review their prices to reflect higher input costs. However, this figure reflects the impact of State government voucher schemes. For those who had exhausted their vouchers the average cost increase of eating out was 1.2%.
- Non-durable household products rose 6.7% due to price rises for toilet paper and paper towels.
- Domestic and household services rose 0.9% due to price increases for hairdressing and gardening services.
- Pharmaceutical products (+5.7%) and medical and hospital services (+1.8%) rose as a result of the cyclical reduction in the proportion of consumers who qualify for subsidies under the Pharmaceutical Benefits Scheme (PBS) and Medicare safety net. Over the past twelve months the price of medical and hospital services grew by 4.6%.
- Private health insurance premiums rose on average by 2.7 % from 1 April with some major insurers increasing premiums by more than 3%.
- The price of international holiday travel and accommodation fell by 23.1% due to price falls in airfares as overseas carriers increased their Europe, America, and Asia services. However, not many retirees benefitted from this in the March quarter.
Details for the various updated budgets follow.
Table 1: Budgets for various households and living standards for those aged around 65 (March quarter 2022, national)
Table 2: Budgets for various households and living standards for those aged around 85 (March 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.
iConsumer Price Index, Australia, March 2022 | Australian Bureau of Statistics (abs.gov.au)
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.