Retirement
How retirees are coping with the cost of living in Australia
While the record-low interest rates are helping mortgagees, retirees are feeling the pinch as the cost of living keeps rising, and their yield from their savings is relatively flat.
How retirees are coping with the cost of living in Australia
While the record-low interest rates are helping mortgagees, retirees are feeling the pinch as the cost of living keeps rising, and their yield from their savings is relatively flat.
The Association of Superannuation Funds Australia’s (ASFA) retirement standard report for the March quarter showed that cost of living rose by around 1.3 per cent for couples who are both living a comfortable and modest level of retirement.
The average term deposit for a three-year term was at 2.7 per cent in May 2015 and has now fallen to 2.3 per cent now. If a retiree has $200,000 in a term deposit, this falling costs around $800 a year for the retiree.
While the overall rate of inflation was relatively low, some costs grew strongly. More specifically:
- Medical and hospital expenses rose by 1.3 per cent in the March quarter and by 4.1 per cent over the last year.
- The current drought and associated increases in production costs have put upward pressure on food costs in the March quarter, with the price of vegetables up 7.7 per cent, up 2.9 per cent for poultry, 1.8 per cent for bread and 1.8 per cent for fruit. Over the last year the price of food and non-alcoholic beverages rose by 2.3 per cent on average.
Dr Martin Fahy, CEO of ASFA, believes retirees are finding it harder to make ends meet.
“While for many, the overall cost of retirement was largely unchanged over the most recent quarter, prices have been going up at a greater rate for a number of items,” Dr Fahy said.
“The relatively low rate of inflation has brought interest rates for bank deposits to historical low levels, placing pressures on the household budgets for retirees relying on income from term deposits and similar investments,” he added.
In better news for retirees, the prices in the March quarter fell for automotive fuel, which was down 8.7 per cent; domestic holidays and travel, which was down 3.8 per cent; and international travel, which fell by 2.1 per cent, according to the ASFA.
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