Low inflation rate masks rising living costs woes

While the overall inflation rate has been low, retirees are seeing a "steep" increase in the cost of basic items, according to the Association of Superannuation Funds of Australia.

In ASFA's latest Retirement Standard, it found over the year to June quarter 2019 costs rose by 1.5% for retiree couples at both the 'comfortable' and 'modest' levels, compared to the 1.6%increase in CPI.

That's equivalent to an additional $918 couples needed  to maintain their standard of living, and $648 for singles.

This increase in headline rate, while it does not look large, hides some substantial increases in the cost of living in many basic items, said ASFA chief executive Martin Fahy.

Food, in particular, has seen a significant rise in price due in no small part to the drought, with the price of bread up by 4.8%, beef by 6%, lamb by 13.5%, fruit by 4.9%, and vegetables by 6.2%.

Petrol prices have also gone up in the last 12 months, as is the cost of private health insurance, which continues to grow at around twice the general rate of inflation, he said.

"Many retirees would have welcomed the recent decision to decrease the deeming rate in the asset test for the Age Pension but at the same time they have been facing increased costs of living and lower returns from investments, such as term deposits," he said.

Fahy uses these figures to highlight the importance of having sufficient savings in superannuation "to support the lifestyle Australians want and deserve in retirement". He supports moving the superannuation guarantee to 12% for those who are not yet retired.

According to ASFA data, the most significant price increases in the June quarter were automotive fuel, which increased by 10.2%, medical and hospital service, which saw a 2.6% increase, and international holiday, travel and accommodation, which saw a 2.7% increase.

Read more: ASFAAssociation of Superannuation Funds of AustraliaMartin FahyAge PensionRetirement Standard
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