Drought elevating retiree costs

Retiree costs have increased due to the drought that has developed across the country over the past two years.

According to the Association of Superannuation Funds of Australia’s (ASFA’s) latest retirement standard report, couples and singles aged around 65 and living a comfortable retirement needed 0.4% more in the September quarter compared to the previous quarter. At the modest level, it was a 0.4% increase for singles and 0.3% couples.

ASFA chief executive, Dr Martin Fahy said: "While the increase in the headline rate of the consumer price index (CPI) might not look large, the drought is starting to impact on the prices paid by retirees.

“There also has been increases in the cost of motor vehicles and international travel, in part driven by the decline in the Australian exchange rate.”

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ASFA also found that over the year to the September quarter 2019 costs were up around 1.5% for couples at both the comfortable and modest levels, compared to the 1.7% increase in the all groups CPI. This equated at the comfortable level to couples needing to spend $943 more a year, and for singles the amount is $587.

Older retiree budgets also rose from the previous quarter by around 0.4% at the comfortable level and 0.5% at the modest level.

“Even with inflation running at a low rate many retirees will be in retirement for 25 years or more and need to take into account future price increases and spending needs,” Fahy said.

“With the low rate of overall inflation, the Age Pension is only increasing at a modest rate, with the maximum Age Pension increasing by 1.9 per cent over the last 12 months to September to reach $24,335 a year for a single person (including allowances).

“The Age Pension is less than what is needed to support even a modest standard of living in retirement.”

He noted it was necessary to move the superannuation guarantee up to 12% to allow Australians to live a lifestyle they wanted and deserved in retirement.

The costs for retirees that increased substantially over the last 12 months largely as a result of the drought were:

• Price of beef up by 7.1% and lamb up by 14.3%;
• Price of milk up by 6.7%;
• Breakfast cereals by 6.4%;
• Poultry prices by 5.3%;
• Price of eggs up by 4.5%;
• Price of bread up by 3.6%; and
• Price of cheese up by 3.4%.

The lower Australian dollar exchange rate has also impacted on certain costs although other factors have also been at work over the last 12 months:

• Price of international holiday travel and accommodation up by 5.8%;
• Price of domestic holidays up by a very modest 0.7% and a 1.6% increase in the cost for camping and open-air recreation; and
• Price of motor vehicles up by 3.2%.