Persistent inflation weighs down retiree costs despite small reprieve

The cost of a comfortable retirement lifestyle was offered a small reprieve in the December 2024 quarter after electricity prices dived, but it still managed to pull up with a 1.3 per cent increase over the last 12-month period.

The latest Association of Superannuation Funds of Australia (ASFA) Retirement Standard confirmed that budgets increased by 0.1 per cent in the December quarter, with couples aged around 65 now needing $73,077 per year to live comfortably in retirement, and singles needing $51,805; similar figures were recorded for those aged around 85, with couples needing $67,714 and singles needing $48,971 to achieve comfortable retirement. 

This comes as the 2024-25 Commonwealth Energy Bill Relief Fund (EBRF) rebates were introduced from July 2024, allowing electricity prices to drop by 9.9 per cent in the December quarter and 25.2 per cent in the last 12 months. Without the rebate, electricity prices would have risen by 0.2 per cent in the December quarter.

Pharmaceutical products also recorded a drop[ of 1.6 per cent in costs due to more individuals now eligible to receive subsidies for prescription medicines under the Pharmaceutical Benefits Scheme (PBS) and increased take-up of 60-day prescriptions.

The majority of other costs tracked by ASFA’s retirement standard recorded some increases, but also indicated that the rate of rising costs had slowed:

• Food prices rose 3.0 per cent over the 12 months to the December quarter, down from 3.3 per cent in the September quarter. Price rises eased across most food categories apart from meat and seafoods. Fruit and vegetable prices remained 6.3 per cent higher compared to 12 months ago, despite falling 3.3 per cent this quarter.  
• Domestic holiday travel and accommodation rose by 5.7 due to an increase in travel demand during the school holiday period driving up prices for airfares and accommodation.
• Beer prices were up 1.2 per cent in the quarter, with the price of spirits up 1.1 per cent.
• Insurance costs rose 1.1 per cent – the weakest quarterly rise since the June 2022 quarter – thanks to easing reinsurance and replacement and repair costs contributing to a moderation in insurance premium price growth across house, home contents and motor vehicle insurance.

According to the association, some of the price increases were mitigated by strong investment returns generated last year, after balanced superannuation funds typically returned between 10.5 and 12 per cent in 2024 and retirement-phase accounts returned even more.

“The good news for retirees from the latest Retirement Standard is there has been a substantial easing in price increases for the goods and services they purchase. However, the last couple of years of high inflation are still weighing on their ability to fund a comfortable retirement,” ASFA CEO, Mary Delahunty, said.

“While recent strong investment returns are helping retirees and those planning for retirement in achieving their desired retirement lifestyles, the most recent Retirement Standard budgets reinforce the fact that Australians need both compulsory superannuation and voluntary contributions which are preserved until retirement to have the sort of retirement they need and deserve.”