The latest data from the Australian Bureau of Statistics (ABS) highlights an unusual shift in living costs for certain Australian households. A combination of government adjustments and economic trends has influenced these changes. A closer examination provides further insight into the scale and implications of these developments.
Factors Behind the Decline
The ABS has reported a 0.1% decrease in living costs for pensioner and beneficiary households in the December 2024 quarter. This marks the first quarterly decline since June 2020, providing a slight relief to households primarily dependent on government payments.
The decrease has been attributed to a mix of government subsidies and falling energy prices :
- The 2024-25 Commonwealth Energy Bill Relief Fund helped reduce electricity costs, which offset price increases in other areas.
- A 10% increase in Commonwealth Rent Assistance (CRA), implemented in September 2024, lowered rental expenses for eligible households.
- A greater number of households reached the Pharmaceutical Benefits Scheme (PBS) safety net threshold, leading to reduced out-of-pocket medical expenses.
Broader Trends in Living Costs
While pensioner households benefited from these measures, employee households saw a 0.4% rise in their living costs. According to Michelle Marquardt, head of price statistics at the ABS, this increase was mainly due to higher mortgage interest charges, as more homeowners transitioned from fixed to higher variable-rate mortgages.
Although inflation fell to 3.2% over the year to December, some goods and services still experienced price increases. However, these were tempered by:
- Lower electricity and fuel prices
- Slower growth in insurance premiums
How Pensioners Compare to Other Household Groups
The decline in pensioner living costs stands out when compared to trends across different household types:
- Employee households experienced the largest increase in living costs (+0.4%), mainly due to rising mortgage interest charges.
- Self-funded retirees and age pensioner households had the smallest annual increase (+2.5%), as they are less affected by rising rents and mortgage rates.
- Over the last 107 quarters, only eight recorded a decrease in pensioner living costs, highlighting the rarity of this trend, according to Dr Ben Phillips from the Australian National University.
Inflation and Price Movements
- The annual inflation rate fell to 3.2% in December 2024, reflecting a significant decline.
- Factors contributing to lower living costs included:
- Falling electricity prices
- Lower fuel costs
- Slower growth in insurance premiums and mortgage interest charges
- However, some goods and services still saw price increases, impacting affordability.
Uncertain Outlook as Government Support Nears Expiry
The ABS report underscores the significant role of government assistance in reducing pensioner living costs. However, economic experts, including Dr Ben Phillips, caution that this relief may be short-lived.
Key concerns include:
- The Energy Bill Relief Fund is scheduled to end on 30 June 2025, which could lead to a rebound in electricity costs.
- The Reserve Bank of Australia (RBA) will meet in mid-February to review interest rates, potentially affecting household expenses.
Comparison With the Consumer Price Index (CPI)
- The Pensioner and Beneficiary Living Cost Index (PBLCI) increased by 2.8% over the year, compared to 2.4% for the Consumer Price Index (CPI).
- Government pensions are indexed against the higher of these two figures, ensuring pensioners maintain purchasing power despite economic fluctuations.
For now, the data suggests temporary relief for pensioner households, but the sustainability of affordability will depend on future economic conditions and policy decisions.
