Inflation drives the cost of retirement to a record high

Self-funded retirees are the hardest hit by the increasing rise in inflation and cost-of-living according to the latest research from Association of Super Funds Australia.

The annual expenditure needed to reach the ASFA comfortable retirement standard rose another 1.1 per cent in the March quarter to hit a record high of $70,482 per year for couples, and $50,004 for singles, taking the annual increase to 7.7 per cent.

"Retiree budgets have been under substantial pressure for over 18 months due to the higher cost of essential goods and services, namely food, fuel and electricity, with the latter up 15 per cent over the past year," said ASFA CEO, Dr Martin Fahy.

"Self-funded retirees will not be eligible for Federal Budget measures aimed at relieving cost-of-living pressures, and despite recent adjustments to the Age Pension, payments continue to lag inflation."

During the March quarter, medical and hospital services costs rose 4.2 per cent, the price of pharmaceutical products rose by 4.5 per cent and insurance costs were up a further 3.5 per cent.

The ASFA comfortable standard includes the cost of everyday expenses such as health, communication, clothing and household goods and reflects community expectations as well as changing lifestyle expectations and spending habits.

"Fortunately, we are seeing a turnaround in term deposit income, and critically, the 1 July increase in the Super Guarantee (SG) rate to 11 per cent will put a greater number of Australians on track to achieve the dignified retirements they deserve," concluded Dr Fahy.

The largest increases in spending categories were medical and hospital services which rose 4.2 per cent in the quarter and 5.3 per cent over 12 months; insurance costs rose 3.5 per cent in the quarter; fruit and vegetables rose 2.4 per cent.

The report found that the price of pharmaceutical products rose by 4.5 per cent and the increase would have been even greater without the reduction in the PBS general patient co-payment applying from 1 January.

Domestic travel and accommodation rose 4.7 per cent in the March quarter and 25 per cent over the year while international travel and accommodation fell by 8.2 per cent in the March quarter as many destinations entered their off-peak season but was up by 38.3 per cent over the year.

The annual increase in gas prices of 26.2 per cent was the highest on record, with an annual increase of 15.5 per cent for electricity.

Keeli Cambourne

29 May 2023
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