Budget pain for Aussies as soaring inflation starts to bite

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Australian retirees' budgets are under threat by the rise of everyday living expenses, according to findings from the Association of Superannuation Funds of Australia (ASFA).

ASFA's Retirement Standard for the December 2021 quarter indicates that couples aged around 65 living a comfortable retirement need to spend $64,771 per year and singles $45,962, up by 1.5% and 1.6% respectively on the previous quarter.

"Australian retirees are now facing significant pressure on their budgets from non-discretionary inflation," says ASFA deputy chief executive Glen McCrea.

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"This means unavoidable price increases on goods and services such as food, petrol and health costs.

"It's critical that future retirees are able to build sufficient retirement savings to ensure they can have dignity, health, vitality and connection in retirement."

The annual percentage increases in the comfortable budgets were the largest since 2010.

Automotive fuel costs rose 6.6% in the quarter, while vehicles rose 1.9%. Food - either dine-in or takeaway - costs increased by 1% too, while groceries like cheese, milk and yoghurt went up by 1.7%.

In 2021, prices were up by around 3.5% for the comfortable couple budget and by 3.9% for the comfortable single budget.

In addition, the percentage increases in the budgets for those aged around 65 was higher than the increase in the December quarter All Groups CPI of 1.3%.

The research also found that price increases for retirees are outstripping those for employees and retirees haven't been able to simply switch what they buy to save.

While health costs are largely subsidised, out of pocket expenses remain substantial for items such as dental treatment and, particularly in recent months, the cost of COVID-19 rapid antigen tests.

"It's so important that future retirees are able to build sufficient savings over their working lives to ensure they can face retirement with financial confidence," says McCrea.

"Over the last couple of years, the balances of women and low-income earners have been impacted by the acceleration of price increases, COVID-19 and policies such as the early release of super.

"It is crucial that the government addresses the repair of people's retirement budgets as we start to see the other side of the COVID-19 crisis."

This article first appeared on Financial Standard

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Chloe Walker is a journalist at Financial Standard. She has a Bachelor's degree in journalism from QUT.

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