Update (2/08/23): the PBLCI has been released and it is sitting at 3.2%. This means that the September pension increase will be 1% higher than CPI, which was 2.2% as reported in this article. Read more here.
Pension to go up by at least 2.2%
THE June 2023 Consumer Price Index (CPI) suggests that the pension will go up by 2.2 per cent on 20 September this year. This would mean that the single pension goes up by $23 to $1,087 per fortnight and the couple’s combined pension by $35 to $1,639 per fortnight.
Annual inflation now stands at 6 per cent, down from the 7 per cent figure for the March 2023 quarter. This is good news for all Australians, but it also means that the half-yearly pension increase will be lower than before.
The pension has been indexed to inflation increases for well over a decade. Pension indexation according to wage rises has fallen by the wayside.
Living cost index
The pension increases we are forecasting may be less than the actual increase if the Pensioner and Beneficiary Living Cost Index (PBLCI) is in fact higher than the CPI. The PBLCI will be published on Wednesday next week. Centrelink compares the CPI and the PBLCI, then applies whichever yields the highest pension increase.
So, 2.2 per cent is in the bag. More (but not much more) may be added.
The PBLCI reflects prices for things older people typically spend their money on.
Things that went up
Looking at the commentary provided by the Australian Bureau of Statistics (ABS), if you weren’t renting privately or bought a new house and did not go on an overseas holiday, your own, personal ‘inflation rate’ was probably a lot lower than the CPI.
The most significant contributors to the CPI rise in the June quarter were rents (up 2.5 per cent), international holiday travel and accommodation (6.2 per cent), other financial services (up 2.5 per cent) and new dwellings purchased by owner occupiers (up 1.0 per cent).
Fees and charges associated with real estate transfers were the primary contributors to the increase in other financial services.
Food prices (up 1.6 per cent) also rose over the June quarter following increases of 1.6 per cent and 0.9 per cent in the March 2023 and December 2022 quarters. This rise was driven by meals out and takeaway foods (up 1.7 per cent), fruit and vegetables (up 2.4 per cent) and bread and cereal products (up 2.9 per cent).
A shortage of potatoes due to wet weather in key growing regions late last year placed pressure on prices for potato products, including takeaway hot chips, potato crisps and frozen potato products. Vegetable prices rose due to some salad vegetables, like tomatoes and lettuces, coming out of season.
Things that went down
Reducing the June quarter rise were price falls for domestic holiday travel and holiday accommodation (down 7.2 per cent), electricity (down 1.8 per cent), clothing (down 2.2 per cent) and petrol/diesel (down 0.7 per cent).
The rate of inflation is now trending down. This will inevitably mean that pension increases after the September 2023 indexation will be smaller. While that may seem like bad news, it also means that prices will not have been increasing as much as they have been.
Update (2/08/23): the PBLCI has been released and it is sitting at 3.2%. This means that the September pension increase will likely be 1% higher than CPI, which was 2.2%. If this is the case, the single pension would go up by $34 to $1098, and the couple’s combined pension would rise by $51 to $1655. Read more here.