Last September, for the first time since 1997, Age Pensioners didn’t receive an increase in their pension rates. The reason for this was that both inflation (CPI) and the Pensioner and Beneficiary Living Cost Index (PBLCI) were negative.
One of the reasons inflation was negative was due to drops in the cost of goods and services such as childcare and education, transport, particularly petrol, and recreation. Essential items such as food and clothing actually went up, though not by much. Depending on where you spend most of your household budget you might have found your overall costs increased last year and the freeze in pension rates would have hit you particularly hard.
What is happening with inflation now?
As many of you will no doubt be aware, inflation has started to rise again although it is still low by historical standards. It rose by 0.9 % for the three months to December 2020 and by 1.6% for the three months before that to September 2020. Despite those two big quarterly increases, however, the annual rate of inflation was only 0.8%. Why is that?
Last year the June quarter saw a big decline in inflation of -1.9%. This was in the midst of the Covid 19 economic shutdown which hammered many parts of the economy. That negative quarter is still impacting the rolling 12-month figures which remain very low.
So will pension rates increase in March 2021?
Last March the full age pension rates increased by $7.70 a fortnight for each member of a couple and by $10.20 for a single – excluding supplements – you can check the current rates below. The Government will definitely consider the CPI over the last 12 months when determining the new Age Pension rates and any changes to the asset and income thresholds for the Age Pension. Hopefully, they will also pay attention to the larger increases in inflation over the last six months.
We don’t have a crystal ball but the fact that CPI has risen would indicate some increase is likely. How big that rise will be, and whether they place extra emphasis on the last 6 months remains to be seen.
We would love to hear your views which you can share below. You can also check your current Age Pension entitlements here