24 August 2021
Cost of retirement rises again in the June quarter with higher petrol, health and food costs
Australian retirees are now facing greater price pressures than the general population, with price increases for food, health care and petrol in particular impacting on retiree budgets.
The ASFA Retirement Standard June quarter 2021 figures indicate that couples aged around 65 living a comfortable retirement need to spend $63,352 per year and singles $44,818, up by 0.8 per cent and 0.9 per cent respectively on the previous quarter.
However, over the year to June 2021, prices were up by around 2.3 per cent for the comfortable couple budget and by 2.6 per cent for the comfortable single budget.
“Price increases faced by retirees have begun to accelerate following a period when COVID-19 led suspensions or delays in key costs such as health insurance,” said ASFA CEO Dr Martin Fahy.
“We’re seeing significant increases in the price of essentials, namely petrol (+27.3%), hospital and medical services (+6.7%) and even basic fruit and vegetables.”
After adjusting for one-off changes to All Groups CPI items, such as increases in childcare costs and education costs, as well as those that are not currently relevant (such as international travel and holidays), price increases for retirees were considerably higher than the underlying rate of inflation for the CPI of around 1.5 per cent over the year to June.
“Small price rises across the board can add up to have a big impact on the average retiree budget. The cost of retirement is now 2 to 3 per cent more expensive, on average, than a year ago.
“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. Moving Australia to the 12 per cent Superannuation Guarantee (SG) setting is an excellent step towards achieving this goal,” Dr Fahy concluded.
Also, there are still significant differences in retiree lifestyles compared to two years ago as a result of COVID-19 related restrictions. The only travel overseas for a holiday in the June quarter 2021 was to New Zealand with only a very small proportion of retirees doing so. As a result, at least some expenditure normally devoted to such recreation activity has shifted to domestic holidays (when not prohibited by lockdowns) and furniture and appliance purchases and home improvements. Trips to the hardware store have to some extent replaced much longer journeys.
Details for the retirement budget price changes
- Food prices were up significantly in the quarter. Vegetables (+5.5%) and fruit (+4.7%) both rose due to a shortage of pickers, extreme rainfall on the east coast of Australia and Cyclone Niran affecting banana crop yields.
- Beef and veal rose 3.6% with farmers continuing to re-build herds, reducing meat supply and putting pressures on prices.
- Private health insurance premiums were up by 2.7 per cent reflecting the annual increase in premiums on 1 April. Over the past twelve months the health costs rose 4.8%. Medical and hospital services (+6.7%) was the main contributor.
- Automotive fuel rose 6.5% due to continued recovery in global oil prices following COVID-19 lockdowns. Fuel prices have surpassed pre-pandemic March 2020 quarter price levels.
- Motor vehicles rose 2.2% due to continued strength in consumer demand combined with supply constraints such as a global semi-conductor shortage.
- Over the past twelve months there were even larger price increases for transport, with substantial price increases for automotive fuel (+27.3%) and motor vehicles (+7.4%).
- Garments rose 1.0% due to the introduction of new season winter stock.
- Furniture rose 3.8% with strong demand for timber and supply constraints contributing to price rises in timber-based furniture.
- Takeaway and fast foods (-0.7%) and restaurant meals (-0.6%) were down, but this was due to the NSW ‘Dine & Discover’ and City of Melbourne ‘Melbourne Money’ voucher schemes. These voucher schemes have the effect of reducing out-of-pockets costs but only do so on a temporary basis and only in the geographic areas where they apply.
- Domestic holiday travel and accommodation prices on average fell 1.3% due to lower domestic airfare prices. Increased competition and the Federal Government’s tourism package, which included subsidised airfares to selected destinations, drove the fall. Domestic accommodation price rises partially offset the fall, with accommodation operators in Queensland experiencing higher demand following the commencement of half-price airfares, particularly the Gold Coast, Cairns and Sunshine Coast regions.
- International travel and holidays remained largely unavailable for retirees, with only limited opportunities to travel to New Zealand.
Details for the various updated budgets follow.
Table 1: Budgets for various households and living standards for those aged around 65 (June quarter 2021, national)
| Household type | Single Modest | Couple Modest | Single Comfortable | Couple Comfortable |
|---|---|---|---|---|
| Housing – ongoing only | $103.10 | $115.88 | $120.98 | $126.35 |
| Energy | $33.90 | $45.54 | $42.95 | $53.27 |
| Food | $95.18 | $176.46 | $123.07 | $213.90 |
| Clothing | $20.58 | $39.10 | $27.49 | $51.18 |
| Household goods and services | $34.48 | $40.48 | $77.01 | $94.75 |
| Health | $52.21 | $100.86 | $106.90 | $200.25 |
| Transport | $92.24 | $98.46 | $150.58 | $163.30 |
| Leisure | $96.81 | $151.92 | $187.41 | $281.78 |
| Communications | $17.74 | $19.98 | $22.18 | $28.87 |
| Total per week | $546.25 | $788.70 | $858.58 | $1,213.65 |
| Total per year | $28,514 | $41,170 | $44,818 | $63,352 |
Table 2: Budgets for various households and living standards for those aged around 85 (June quarter 2021, national)
| Household type | Single Modest | Couple Modest | Single Comfortable | Couple Comfortable |
|---|---|---|---|---|
| Housing – ongoing only | $103.10 | $115.88 | $120.98 | $126.35 |
| Energy | $33.90 | $45.54 | $42.95 | $53.27 |
| Food | $95.18 | $176.46 | $123.07 | $213.90 |
| Clothing | $20.58 | $39.10 | $27.49 | $51.18 |
| Household goods and services | $52.61 | $75.41 | $155.54 | $186.28 |
| Health | $90.61 | $126.62 | $150.00 | $236.65 |
| Transport | $40.46 | $50.57 | $45.51 | $55.62 |
| Leisure | $63.28 | $90.67 | $130.56 | $183.63 |
| Communications | $17.74 | $19.98 | $22.18 | $28.87 |
| Total per week | $517.46 | $740.24 | $818.27 | $1,135.74 |
| Total per year | $27,011 | $38,640 | $42,713 | $59,286 |
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:
Jacqui Maddock, 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.
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.
