Rising costs affecting vulnerable households

Mark Bristow

Mark Bristow

( 3 min read )

Pensioners and other recipients of government benefits have been the most affected by rising prices for goods and services, according to the latest figures from the Australian Bureau of Statistics (ABS).  

The ABS Selected Living Cost Indexes (LCI) show that in December 2017, Australian households for employees, pensioners, self-funded retirees and recipients of other government transfers, all saw their overall cost of living increase, both over the previous quarter and the past 12 months.

While the ABS Consumer Price Index (CPI) looks at the average costs of a variety of goods and services, the LCI looks at how much household incomes would need to grow to allow Australians to continue to buy these goods and services in the same quantities. This includes the costs of mortgage interest and consumer credit charges, as well as housing and insurance costs for different households.

All household types experienced increases in the cost of:

  • Food and non-alcoholic beverages
  • Alcohol and tobacco
  • Housing
  • Transport
  • Recreation and culture
  • Education
  • Insurance and financial services

Offsetting these increases were falls in the following categories:

  • Clothing and footwear
  • Furnishings, household equipment and services
  • Health
  • Communication
Weighted average of eight capital cities Pensioner and beneficiary LCI Employee LCI Age pensioner LCI Other government transfer recipient LCI Self-funded retiree LCI Consumer Price Index (CPI)
Food and non-alcoholic beverages 1.3% 1.0% 1.4% 1.2% 1.2% 1.0%
Alcohol and tobacco 4.8% 3.0% 3.4% 5.6% 1.9% 3.2%
Clothing and footwear -0.3% -0.2% -0.4% -0.4% -0.5% -0.3%
Housing 0.2% 0.3% 0.2% 0.3% 0.3% 0.3%
Furnishings, household equipment and services -1.0% -0.8% -1.2% -0.8% -1.2% -0.8%
Health -2.0% -0.3% -1.7% -2.5% -0.7% -0.5%
Transport 3.5% 2.7% 3.3% 3.5% 2.3% 2.4%
Communication -1.3% -1.3% -1.2% -1.4% -1.3% -1.3%
Recreation and culture 0.8% 0.7% 1.0% 0.4% 0.8% 0.6%
Education 0.1% 0.1% 0.0% 0.1% 0.1% 0.1%
Insurance and financial services 1.1% 0.8% 1.4% 0.8% 1.5% 0.2%
All groups 0.8% 0.7% 0.6% 1.0% 0.6% 0.6%

Source: ABS

The higher cost of tobacco over the quarter was due to the flow-on effects of the federal excise tax increase effective 1 September 2017, while the increase to transport costs were driven largely by rising fuel prices. The rise in food and non-alcoholic beverage costs was driven by fruit, due to rises in the price of berries, particularly strawberries and grapes.

The reduced cost of health over the quarter was attributed to pharmaceutical products, due to the cyclical increase in the proportion of consumers exceeding the Pharmaceutical Benefits Scheme (PBS) safety net. Ongoing competition and continued discounting activity in the retail industry contributed to lowering the cost of household textiles, softening the furnishings, household equipment and services figure.

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