23 November 2020
Cost of retirement up in the September quarter despite partial return to pre-COVID prices
The Association of Superannuation Funds of Australia (ASFA) Retirement Standard September quarter 2020 figures indicate that couples aged around 65 living a comfortable retirement need to spend $62,083 per year and singles $43,901, up 0.3 per cent for couples and by 0.5 per cent for singles on the previous quarter. The increase from a year earlier was 1.8 per cent for couples and 1.6 per cent for singles.
The overall increase in the September quarter All Groups CPI of 0.7 per cent was largely driven by factors such as a rise in child care expenses following the end of free child care. Such expenses are not typically relevant to retirement budgets.
“COVID-19 has had a substantial impact on Australia’s financial and economic conditions but there has been a partial unwinding of both price increases and decreases that immediately flowed from the impact of the pandemic,” said ASFA CEO, Dr Martin Fahy.
“Dramatic changes in our lifestyles had a big impact on demand and prices right across the economy but for at least some categories of expenditure there is a return to something closer to normal.”
However, retiree lifestyles are yet to return to normal. Restrictions on domestic and international travel, along with changes to entertainment and dining-out options, have had a significant short-term impact on retirement lifestyles. People are spending more time at home, doing repairs and renovations and buying more appliances and household items.
Health insurance premiums remained unchanged in the September quarter but these will have increased from 1 October by around 3 per cent for many retirees. There are now 2.2 million Australians aged over 65 with private health insurance, up from 2.0 million just three years earlier.
“Recent reductions in interest rates and dividends also are having an impact on the financial position of many Australian retirees,” Dr Fahy said.
For wage earners, the increases in costs in retirement have highlighted the need for the Superannuation Guarantee to move from 9.5 per cent to 12 per cent as legislated. Over the year to September 2020 official figures indicate that wages grew by only 1.4 per cent on average for the entire economy, and by only 1.3 per cent in the private sector. Over the September quarter increases in wages in the private sector averaged just 0.1 per cent.
Increases in retirement costs are outstripping growth in wages and higher contributions are needed for future retirees to achieve the standard of living they want and deserve in retirement.
Details for the retirement budget price changes
- The price of certain food products fell with a return to regular discounting cycles after the peak COVID-19 stockpiling period ended
- There were rises of 2.6 per cent for beef and 1.3 per cent for other meats as a result of producers restocking and strong world demand
- Property rates and charges recorded the softest rise in the history of the CPI series (+1.3 per cent), due to rebates, discounts and rate freezes provided by local councils in response to the COVID-19 pandemic
- A fall of 2.7 per cent in water and sewerage was driven by annual price reviews conducted across a number of capital cities
- Falls of 4.1 per cent in non-durable household products and 3.0 per cent in personal care products reflected a return to discounting on products such as toilet paper and body washes
- Rises of 6.4 per cent in furniture and 5.3 per cent in major household appliances were due to strong demand for products such as home office furniture and fridges and freezers, combined with supply constraints
- Health insurance premiums were frozen during the quarter
- Automotive fuel increased in price by 9.4 over the quarter as demand in Australia increased
- Electricity prices were down 0.7 per cent over the quarter
- Garden equipment prices were up 1.4 per cent
- Wine prices were up 1.3 per cent but beer prices were down 0.3 per cent
Details for the various updated budgets follow.
Table 1: Budgets for various households and living standards for those aged around 65 (September quarter 2020, national)
| Household type | Single Modest | Couple Modest | Single Comfortable | Couple Comfortable |
|---|---|---|---|---|
| Housing – ongoing only | $101.91 | $114.51 | $119.49 | $124.80 |
| Energy | $35.80 | $48.08 | $45.35 | $56.24 |
| Food | $94.18 | $174.61 | $121.77 | $211.64 |
| Clothing | $20.60 | $39.14 | $27.51 | $51.24 |
| Household goods and services | $34.56 | $40.51 | $77.13 | $94.78 |
| Health | $49.92 | $96.31 | $102.31 | $191.51 |
| Transport | $86.08 | $91.93 | $140.48 | $152.39 |
| Leisure | $95.30 | $149.53 | $184.67 | $277.70 |
| Communications | $17.83 | $20.08 | $22.30 | $29.02 |
| Total per week | $536.16 | $774.71 | $841.01 | $1,189.33 |
| Total per year | $27,987 | $40,440 | $43,901 | $62,083 |
Table 2: Budgets for various households and living standards for those aged around 85 (September quarter 2020, national)
| Household type | Single Modest | Couple Modest | Single Comfortable | Couple Comfortable |
|---|---|---|---|---|
| Housing – ongoing only | $101.91 | $114.51 | $119.49 | $124.80 |
| Energy | $35.80 | $48.08 | $45.35 | $56.24 |
| Food | $94.18 | $174.61 | $121.77 | $211.64 |
| Clothing | $20.60 | $39.14 | $27.51 | $51.24 |
| Household goods and services | $52.24 | $74.80 | $154.44 | $184.85 |
| Health | $86.17 | $120.63 | $143.00 | $225.87 |
| Transport | $38.59 | $48.23 | $43.41 | $53.06 |
| Leisure | $62.44 | $89.36 | $128.58 | $180.99 |
| Communications | $17.83 | $20.08 | $22.30 | $29.02 |
| Total per week | $509.76 | $729.45 | $805.85 | $1,117.72 |
| Total per year | $26,609 | $38,077 | $42,065 | $58,345 |
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.
More information
Costs and summary figures can be accessed via the ASFA website. Australians can find out more about superannuation on the independent Super Guru website.
For further information, please contact:
Jacqui Maddock, 0451 949 300.
About ASFA
ASFA is the peak policy, research and advocacy body for Australia’s superannuation industry. It is a not-for-profit, sector-neutral, and non-party political, national organisation. ASFA’s mission is to continuously improve the superannuation system, so all Australians can enjoy a comfortable and dignified retirement.
