Cost of living: bare necessities double in price despite low inflation
New research by a retirement body has drawn attention to a spike in the cost of basic necessities over the past 10 years – even as overall inflation barely moved.
The Association of Superannuation Funds of Australia, which represents for-profit and non-profit funds, released new figures on Monday showing electricity costs surged by 124 per cent between June 2006 and March 2017.
Other basic necessities doubled or almost doubled in price over that period, including water and sewerage (+101pc), property rates and charges (+83pc), health costs (+60pc) and food (+24pc), according to data from Australia’s statistics bureau, analysed by ASFA.
Less essential items such as clothing (-3pc), communications (-8pc), wine (+6pc) and international holidays (+16 per cent) either fell in price or increased only moderately.
But these gains were wiped out by the rising costs of necessities – the kinds of goods on which low-income earners, especially retirees and pensioners, rely.
According to ASFA’s calculations, it now costs 33 per cent more a year to retire ‘modestly’ as a single, and 36 per cent more as a couple.
Ross Clare, research director at ASFA, said the research helps reveal the true cost of living, which he agreed can be obscured by the headline inflation rate.
“Flat screen TVs and mobile phones and overseas travel and clothing may have decreased in price or not gone up terribly much, but when you’re looking at some of life’s essentials, that’s where price increases have been greater,” he told The New Daily.
ASFA focussed on health, electricity and other basics because rises in these categories are felt deeply by retirees and pensioners. But the figures apply nation-wide. Everyone has been feeling the pinch in these areas over the past decade.
Overall, the amount of superannuation savings required for both a ‘modest’ and a ‘comfortable’ retirement increased by roughly a third over the 10-year period, according to ASFA’s unique measures.
A single retiree now needs $24,250 a year to live ‘modestly’, up 33 per cent, and a retiree couple needs $34,855, up 36 per cent.
The ‘comfortable’ middle class fared slightly better, but not by much. A single retiree now needs $43,665 a year to live ‘comfortably’, up 23 per cent, and a couple needs $59,971, up 26 per cent.
Pensioners, at first glance, appeared to be better off. The maximum age pension increased in real terms (with inflation factored in) by 70 per cent for a single person and 54 per cent for a couple.
However, as pointed out by ASFA’s Ross Clare, the pension was coming off a very low base “near poverty level”, so it’s not as if older Australians are now feasting on caviar and champagne.
As the data illustrates, big one-off charges like an unexpectedly large power bill or medical emergency (categories that have doubled in price) can throw a pensioner’s finances into chaos.