A moderation in inflation is taking pressure off retirees' living costs, which are rising at their lowest pace in over 12 years, despite sharp rises in electricity prices, which will be exacerbated by the carbon tax.
Data released by the Australian Bureau of Statistics (ABS) for the June quarter 2012 revealed inflation for pensioners and self-funded retirees rising at its lowest pace since measurements began in 1999.
Separately, the Association of Superannuation Funds of Australia's (ASFA) Retirement Standard, released yesterday, found a couple looking to achieve a comfortable retirement would need to spend $55,213 a year, while those seeking a modest retirement lifestyle would need $31,760 a year.
The Retirement Standard numbers were up by just 1 per cent and 1.1 per cent, respectively, over the year to the June quarter 2012, compared to a 1.2 per cent rise in the consumer price index (CPI).
Retirement costs rose just 0.2 per cent at the comfortable level and 0.4 per cent at the modest level between the March and June quarters 2012.
Retirees benefited from price falls or modest price increases across a range of spending items. Food costs fell by 3.2 per cent over the year, while clothing and footwear costs rose 0.6 per cent. On the other hand, health costs rose 3.6 per cent, given rising health insurance premiums.
Electricity costs, however, jumped 10.6 per cent over the year to 30 June 2012, according to ASFA. The introduction of the carbon tax on 1 July is expected to keep upward pressure on electricity bills and feed through to other items.
"The extent to which businesses pass on the carbon price will depend on their consideration of issues such as operating costs, margins and other economic factors such as degree of competition," the ABS forecast last week.
Separate data recently released by the ABS revealed inflation for seniors was rising at its lowest rate on record.
The ABS's Analytical Living Cost Index (ALCI) for age pensioner households rose just 0.5 per cent for the June quarter 2012 and 0.7 per cent over the year, the lowest rate since measurements began in the September quarter 1999.
The ALCI for self-funded retiree households rose 0.4 per cent for the June quarter 2012 and 0.7 per cent through the year to the June quarter 2012, also the lowest annual change since September 1999.
Westpac chief economist Bill Evans said inflation would continue to moderate, which would lead to lower interest rates.
"We expect the next rate cut in the December quarter, with a total of 75 basis points of cuts by early next year. A more solid medium-term outlook for inflation certainly increases the central bank's flexibility on this front," Evans said.
