Sharp rise in living costs for pensioners

Colin Brinsden, AAP Economics Correspondent
(Australian Associated Press)

Workers may be getting a little excited about the prospect of a tax cut in next week's federal budget to help with their cost of living pressures, but new figures suggest it is retirees who may need a greater helping hand.

Consumer confidence, according to one survey, has risen for three straight weeks heading into next Tuesday's budget where personal income tax cuts are expected to be its centrepiece.

However, despite this better mood, respondents may have been a little surprised by the benign result of the latest quarterly inflation figures released last month, particularly if they are struggling to make ends meet in a low wage growth environment.

The consumer price index, which measures a basket of goods and services, rose just 0.4 per cent in the March quarter for an annual rate of 1.9 per cent, below the Reserve Bank two to three per cent target band.

However, the Australian Bureau of Statistics also produces its cost of living indexes every three months, which measure the impact of inflation on various households.

They gauge how much after-tax incomes need to change to allow different types of households to purchase the same quantity of consumer goods in a given period.

For employee households, the cost of living is calculated to have grown at a slightly higher rate than the CPI would suggest, increasing at 0.5 per cent for an annual rate of two per cent.

The bureau blames this on a 2.8 per cent increase in education fees at the start of the new school year and a 1.1 per cent rise in transport costs through rising petrol prices.

This assumes employee households are raising children and need to travel to and from work while enjoying falls in international holiday travel if they took advantage of winter off-peak sales.

However, age pensioner households are deemed to have a greater reliance on health products and services, which rose 5.5 per cent in the March quarter.

The bureau also calculated such households would have endured a 0.7 per cent increase in housing costs, including electricity.

Overall, pensioners would have seen a cost of living increase of 0.8 per cent over the quarter, double the quarterly rate of CPI.