Improved indexation for Australia’s pensioners
A new Pensioner and Beneficiary Living Cost Index (PBLCI), released today by the Australian Bureau of Statistics, will better reflect price increases in goods commonly purchased by pensioners.
From 20 September 2009, this new index will be another tool used in the calculation of the base rate of the pension for nearly three million age, disability, carer, wife, widow and veteran service pensioners.
The new index provides another layer of protection for Australia’s pensioners to help their pension keep pace with increases in the prices of the goods they buy.
This delivers on the Australian Government’s election commitment to index pensions by a measure that best reflects pensioners’ living costs.
Pensioner households can face cost of living changes which are different to those measured by the mainstream Consumer Price Index (CPI).
For example, age pensioner households are estimated to spend 21.1 per cent of their household budgets on food, compared with 15.4 per cent for other households.
The PBLCI takes into account the basket of goods pensioners buy and will help maintain pensioners’ purchasing power.
As part of the Australian Government’s Secure and Sustainable Pension Reform, the base pension rate will be adjusted twice each year, in March and September, by whichever is the greater of the CPI or the PBLCI in the preceding six months.
To keep pension rates in line with community living standards, they will also be benchmarked against wages as measured by Male Total Average Weekly Earnings (MTAWE).
As part of these reforms, the effective benchmark for single pensioners will increase from 25 to 27.7 per cent of MTAWE.
These new indexation arrangements will help provide a more liveable pension for Australia’s pensioners.
These changes are enshrined in legislation and will help to deliver a stronger and fairer pension system that is secure and sustainable into the future.
The new pension rates will be released soon, and will reflect the improved indexation process and the specific pension increases announced in the May Budget.