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Today’s release by the ABS of the Cost of Living Indexes show clearly that, despite the pick-up in inflation seen in the 4th quarter (see our post here), the bulk of households are actually experiencing cost of living increases still well below 2%.
The Cost of Living Indexes 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). The results for Q4 are as follows:-
| q/q | % | y/y | % | |
| Q3 | Q4 | Q3 | Q4 | |
| Pensioner & beneficiary | 1.2 | 0.5 | 2.0 | 2.4 |
| Employee | 0.8 | 0.4 | 0.9 | 1.3 |
| Age Pensioner | 1.3 | 0.6 | 2.0 | 2.5 |
| Other Govt Transfer Recipient | 1.1 | 0.6 | 2.0 | 2.5 |
| Self-funded retiree | 1.5 | 1.0 | 2.0 | 2.6 |
| Headline CPI | 1.2 | 0.8 | 2.2 | 2.7 |
It is clear that the employee household group (the bulk of everyday Aussies) are facing cost of living pressures well below those being felt by the Retiree/Pensioner groups. What is also clear is that the effects of the weakening A$ are starting to have a very real impact on the cost of living being faced by everyone; this is the inevitable flip-side to the weakening of the currency that we saw towards the end of last year, and continue to see in this quarter.
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