The latest Cost of Living Index released by the Australian Bureau of Statistics (ABS) indicated that older retirees have been hit harder by rising costs than any other type of household.
Elderly retiree households saw a 4.9% annual increase in the cost of living in the March quarter, the largest increase since the September quarter of 2006.
The ABS noted that retirees had been particularly hard hit by the increases in food and non-alcoholic beverages, since grocery food items accounted for a higher proportion of overall retiree household spending compared to other types.
“These households have also been more affected by rising housing costs, as they have relatively higher levels of spending on utilities, maintenance and repairs, and property prices,” said Michelle Marquardt, head of price statistics at ABS.
“Vehicle fuel and food prices have contributed to the rising cost of living for all Australian households, with fuel prices rising by around 35% and food prices by more than 4% in past 12 months.”
The cost of living index is a different but closely related measure to the consumer price index (CPI), which last week showed that consumer prices rose 5.1% annually.
“The annual increase in the CPI was higher than all cost of living indexes because the CPI measures changes in the prices of new homes. Cost of living indices, on the other hand, measure changes in mortgage interest charges, which have fallen over the past 12 months,” the ABS explained.
The bureau noted that the cost of living index measures the impact of price changes on the cost of living for five different types of households, including employees, retirees, other recipients of government transfers, retirees self-financed, retirees and beneficiaries.
On a quarterly basis, households of retirees (2.3%) and other recipients of government transfers (2.1%) recorded the largest increases since the September 2000 quarter following the introduction of the GST.
“As house prices have risen, many households have replaced their mortgages with fixed rate loans at lower interest rates and as a result mortgage interest charges have fallen over the past year. . Interest charges account for almost 6% of spending by salaried households, compared to around 1 to 2% for other households,” Ms Marquardt said.
“Mortgage interest charges for employee households fell 5.4% during the year. As a result, employee households recorded the lowest annual increase of all the different types of households, at 3.8%.
Excluding mortgage interest charges, the ABS said the cost of living index for employee households would have risen 4.3%.
On Wednesday, Prime Minister Scott Morrison announced a freeze on the presumptive rate for around 450,000 pensioners and 440,000 other recipients of Social Security benefits as a “shield” against cost-of-living pressures.