Living cost indices published by the Bureau of Statistics yesterday show the increases facing working families, age pension households and welfare beneficiaries have all outpaced the consumer price index.
In the year just gone, working households faced extra costs of 4.5 per cent, aged pensioners 3.1 per cent and welfare recipients 4.5 per cent. The CPI grew 2.7 per cent.
The bureau says there are different reasons for each of the rises. Aged pensioners spend a relatively high proportion of their income on utility bills and fruit and vegetables, the cost of which shot up.
As a group, welfare beneficiaries spend more than most on alcohol and tobacco, which rose sharply in price largely as a result of the 25 per cent increase in cigarette tax.
Working families are highly likely to face mortgage payments, which rose by 30 per cent over the year as a result of four Reserve Bank rate rises and one imposed by the banks themselves.
Mortgage increases feed directly into the living cost indices calculated by the bureau but not into the CPI itself. Self-funded retirees fared better though.
The bureau says their living costs rose 2.6 per cent, a fraction lower than the CPI. They are unlikely to face too much pain from rising interest rates.
The bureau says this means the CPI is a poor guide to living costs. The CPI is meant to be a measure of inflation rather than living costs, a subtly different concept which is why the bureau produces separate living cost indices.
The good news for pensioners is they get a choice. Their payments are adjusted twice a year in line with either the CPI, the pensioner living cost index or male total average earnings, whichever has increased the fastest.
The unemployed are not so lucky. Their Newstart allowance is adjusted in line with what is usually the lowest of those, the CPI, which the Centrelink website wrongly describes as a measure of changes in the cost of living.
Newstart is shrinking so fast relative to other benefits it is now worth just two-thirds of the pension and is projected by Treasury to shrink to one-third by 2050.
”Right now, someone on Newstart is living on $33 a day,” said the chief executive of the Australian Council of Social Service, Cassandra Goldie.
Tighter family budgets and greater caution were evident in credit card figures published yesterday that showed the average balance up just 1.9 per cent on the previous December, a result in line with retail spending figures that went backwards in real terms.
Housing finance figures showed the total amount of borrowing for owner occupation rose 2.3 per cent in December compared with the previous month despite the sixth consecutive increase in interest rates.
NSW and Victoria led the pack, the number of owner-occupied loans rising 2.1 per cent and 1.4 per cent respectively.
”Softer prices are attracting buyers,” said a CommSec economist, Craig James.
”The average mortgage size has climbed only 0.3 per cent over the past year, the slowest growth rate in almost 10 years.”
Story by Peter Martin, domain.com.au