Tuesday, May 17, 2011

Reckon your own personal rate of inflation's way high?

Almost all Australians are facing a faster rising cost of living than the official rate of 3.3 per cent.

The increase facing working families is 4.9 per cent, the increase facing age pension households is 4.1 per cent, and the increase facing Australians on welfare is 5.1 per cent, according to living cost indices published yesterday by the Bureau of Statistics.

Even self-funded retirees, the group with traditionally the slowest rising cost of living, faced an increase of 3.4 per cent in the year to March.

How can it be that almost all of us are facing prices rising faster than the CPI?

Mortgages, cigarettes and food provide the answers, but for different reasons, for different people. The bureau says the price of tobacco products soared 27.5 per cent in the year to March, the direct result of higher tobacco taxes.

While tobacco is unimportant in most shopping baskets, combined with alcohol it accounts for 10 per cent of dollars spent by people on welfare.

Food is also more important for those on benefits, accounting for 19 per cent of the total spent, compared with 15 per cent for the broader population... The floods and cyclone have pushed up the price of vegetables by 21 per cent and fruit by 25 per cent.

Age pensioners are also highly vulnerable to changes in the price of food, spending

$21 out of every $100 on food, more than on any other of the bureau's expenditure categories. Fortunately for their cost of living, they spend the least of any group on tobacco.

Households earning wages spend the lowest proportion on food and the second-lowest proportion on alcohol and tobacco, but they spend big on mortgages.

Mortgage costs are excluded from the consumer price index, but included in the living cost indices.

The bureau says that in the past year the mortgage costs facing working households jumped 24 per cent, spurred on by the near-double rate rise at the end of last year imposed by the Reserve Bank and a number of private banks who widened their margins.

Wage figures to be published later this week will confirm that working families are going backwards.

Wage growth to February is expected to be 4 per cent, well below the living cost rise of

4.9 per cent. Pension payments are indexed to male wages, meaning that with a cost of living increase of 4.1 per cent pensioners will come out about even.

But the unemployed on NewStart and students on Austudy will get no such compensation. Their benefits increase by the official rate of inflation, 3.3 per cent. Their costs have soared by 5.1 per cent.

Asked whether that was fair, a spokesman for the Treasurer, Wayne Swan, acknowledged last night that "many Australians are under cost of living pressures" but said the budget was "building surpluses to ensure we are not adding to price pressures when the boom hits top gear".

Separately published figures show borrowing for housing and new-car purchases continuing to slide.

The number of home loans approved in March slid a further 1.5 per cent to a new 10-year low. Loans to buy new houses have slipped 10 per cent in three months. "Clearly buying interest has dried up, with potential home buyers holding off on purchases in all areas," Savanth Sebastian, an economist for Commonwealth Securities, said.

"The sector has well and truly come of the boil."

New-car sales fell 3.5 per cent last month and are down 8.4 per cent over the year.

Out of whack?

Living costs, year to March

Unemployed, students 5.1%
Working families: 4.9%
Age Pensioners 4.1%
Self-funded retirees: 3.4%

Consumer Price Index 3.3%

Published in today's SMH and Age

Related Posts

. The CPI does not measure changes in the cost of living

. Up, up and away? For some

. NewStart is $231 and shrinking relative to other benefits

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