Cost of Living follows CPI higher

The Cost of Living Indexes released this morning by the ABS are designed to answer the question “By how much would after tax money incomes need to change to allow households to purchase the same quantity of consumer goods and services that they purchased in the base period?” They consider this question for a variety of household types (given the different expenditure patterns of households). Given the tick-up in CPI reported last week (see here for our post) it is no surprise to see the COL indexes also moving higher. The results for Q2 are as follows:-

q/q y/y
Q1 Q2 Q1 Q2
Pensioner & beneficiary 1.1 0.4 3.0 3.1
Employee 0.7 0.4 2.1 2.3
Age Pensioner 0.9 0.4 3.0 3.1
Other Govt Transfer Recipient 1.1 0.4 3.1 3.1
Self-funded retiree 0.3 0.5 2.9 3.2
Headline CPI  0.6 0.5 2.9 3.0

What is perhaps surprising is to see the rate at which the COL Indexes are catching up, and overtaking, the rate of inflation as measured by the CPI.

The bulk of Aussies sit within the “employee” household group so are still seeing their cost of living rising slower than headline CPI (although the gap between the two is closing). In the second quarter the main source of cost increases for this group came from health (+2.5% q/q due to the increases in private health fund premiums effective from 1 April 2014 and the indexation to the Private Health Insurance rebate effective from 1 April 2014) and Alcohol& Tobacco (+1.5% q/q which was was partially due to the flow-on effects of the excise tax increase from 1 March 2014). Falls in the cost of petrol saw transport offset some of those increase with a 0.8% q/q decline.

Similar effects were seen across the other groups with the Self-funded retirees, not surprisingly, suffering the biggest effect of the health cost increases (+3.0% q/q)

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