Rising food and home prices meant older Australians faced the worst cost of living increases of any Australian household group over the last year, according to research released today.
The Living Cost Index report by the Australian Bureau of Statistics (ABS) has illustrated the potential for downsizing to assist with retirement cost issues.
Michelle Marquardt, Head of Prices at the ABS, said that during 2021 older Australians faced cost increases in the types of goods which formed a large proportion of their budget, particularly food and home costs.
At the same time, employees saw their living costs rise at a lesser rate than older Australians because record low interest rates relieved pressure on their mortgages.
Age pensioner households experienced the highest annual increase for housing costs, with relatively higher expenditure levels on maintenance and repair and property rates," Ms Marquardt said.
"Food (also) makes up a higher proportion of overall expenditure for age pensioner households compared to other types of households."
In the 12 months to 31 December, 2021, pensioners saw a 3.4 per cent increase in their living costs, compared to 2.6 per cent for employees. Self-funded retirees also saw a 3.3 per cent living cost rise.
Food and homes prices have been negatively impacted by labour shortages caused by COVID-19.
One prominent seniors' advocacy group has said this means Australia's pension system needs to change to allow pensioners to work more if they choose, and stil retain the full pension amount, to afford the increasing costs.
Pensioners should expect to see their pension levels increase this year, as a result of the living cost issues.
Self-funded retirees however won't enjoy this increase, and are currently suffering from a declining and volatile share market and low interest rates.
Downsizing may be able to help with cost of living issues
Downsizing your home is one potential way to release home equity to help with retirement costs.
In March 2021, Downsizing.com.au released a report which found Australia’s booming housing market has made downsizing an increasingly lucrative tactic to help over 50s secure their financial future in retirement.
The report shows that the average cash released from selling to downsize from a house to a retirement village in 2020 was $286,810. This compares to a cash release of $211,550 in 2015.
In June last year, a report found that more than 1.6 million Australian households intend to downsize over the next five years - a 30 per cent jump from 12 months ago - in a shift driven by Australia’s ageing population and the desire to release home equity.
FIND OUT MORE: