Armchair economists would have noticed the Consumer Price Index (CPI), basically a statistic that’s used to calculate inflation, dropped for the first time in 22 years in June.
The decrease from 116.6, recorded on the 31 March, to 114.4 is the first time Australia has recorded deflation since March 1998. This will affect a range of things.
But the big headlines this week revolved around the Age Pension.
The Department of Social Services (DSS) confirmed the Pension won’t be rising when it’s indexed in September, the first time this has happened since 1997.
This in itself isn’t necessarily a sign for alarm and the PM gave strong signals the Government would be looking for a solution for pensioners.
He said, “This is one of those issues that comes in a pandemic, you don’t expect those indexes to go negative. And as a result, budgets and others haven’t been prepared on the basis of them going negative… But the Treasurer (Josh Frydenberg) and I will work through those issues.”
But eagle-eyed readers in retirement villages in some states will know the CPI is used as part of the calculations that are used to determine their village fees.
For example, villages in NSW generally use a fixed formula and increase fees at the same rate as the CPI or Age Pension, depending on an individual’s circumstances.
So, with the Pension lowering should we be worried about fees increasing above CPI?
Well it’s not that simple.
Queensland, Victoria and NSW, where the CPI affects the fee rate, all have legislation that allow for an increase in fees above CPI. But this can only be done with a vote, or a pre-agreed formula.
So, you will be aware of any increases, well in advance.
That said, if you live in a retirement village and are worried about the effect of CPI on your fees, it’s always worth getting in touch with your village manager.
