Inflation, pension indexation soar – extra cost-of-living relief for self-fundies only
PRICES have increased by 1.8 per cent over the three months from April to June (June quarter).
Food inflation over the past twelve months stands at 5.9 per cent. Transport (that is, petrol and diesel) has gone up by 13.1 per cent.
All combined, the annual inflation rate has risen to 6.1 per cent.
But the rate of pension indexation never matches any of the quarterly or twelve-monthly CPI figures published with much fanfare and grave media commentary.
So, your pension is not going up by 6.1 per cent in September.
Centrelink will base the September pension indexation on what happened with prices between 1 January and 30 June 2022.
During that period prices rose by 4 per cent according to the Consumer Price Index (CPI).
Note that it is possible for the Pensioner and Beneficiary Living Cost Index (PBLCI), which will be published next week, to indicate a higher rise.
In one of its rare displays of generosity, Centrelink will base pension indexation on whichever is higher, the CPI or the PBLCI.
Indexation on the basis of wages will remain unlikely for the foreseeable future. In fact, most wages will not even go up by the rate of inflation, so workers are actually losing purchasing power.
Assuming the CPI increase (4 per cent over six months) will be used, Centrelink will first calculate the partnered rate by adding 4 per cent.
The single rate will be calculated by taking 66.6 per cent of the partnered rate.
This indexation information is not entirely accurate, because the pension consists of the basic pension plus the pension supplement plus the energy supplement.
The energy supplement is not indexed at all.
The pension supplement, which contains a number of historical supplements including compensation for GST, is always indexed according to the CPI.
As mentioned, the basic pension is indexed according to the higher of the CPI and the PBLCI.
As a result of these indexation differences, the eventual pension increase never precisely matches the relevant six-monthly CPI increase, but it is usually close.
So, a 4 per cent (or slightly lower or higher) pension increase it will be on 20 September 2022!
On that same day, a cost-of-living measure for retirees will kick in.
Unfortunately, this measure will only benefit well-off retirees, so pensioners, sorry to get your hopes up, not to mention people on JobSeeker Payment.
During the heat of the last election battle, the now Labor Government matched a then Coalition Government commitment to raise the income limits for the Commonwealth Seniors Health Card.
This will benefit 50,000 additional self-funded retirees to “ease their cost-of-living pressures”, as the Government’s media release puts it.
On 20 September 2022, the income limits for the Commonwealth Seniors Health Card will increase from $57,761 to $90,000 for singles and from $92,416 to $144,000 for couples (combined).
All this is subject to legislation passing but given that it was the Coalition’s idea to increase income limits, it can be assumed that it will pass.
The Commonwealth Seniors Health Card can be used to access cheaper medicines under the Pharmaceutical Benefits Scheme (PBS), bulk billed doctor visits (at the discretion of the provider), and the lower thresholds of the PBS and Extended Medicare safety nets.
The Commonwealth Seniors Health Card also qualifies holders for state and territory benefits where indicated.
“Like other Australians, self-funded retirees are also under pressure in the current economic environment”, Social Services Minister Amanda Rishworth said.
“Cost of living pressures are hurting, and we are determined to do what we can as a Government to assist. We’re committed to leaving no one behind and holding no one back and this important legislation is true to those guiding principles.”
From 20 September, any single person of pension age with financial assets between $610,000 and $4 million (up from $2.5 million), and any couple of pension age with financial assets between $915,000 and $6.5 million (up from $4 million) will be able to apply successfully for the Commonwealth Seniors Health Card, lest they be left behind.