With the price of essentials increasing rapidly over the past few years, many Australian households have faced significant cost of living pressures. These pressures have been more pronounced in the case of older Australians as a result of their typically below-average, fixed incomes, and their generally lower levels of discretionary spending.

The incomes and spending patterns of older Australians are quite different to the rest of the population. Policy makers are concerned rightly about the adequacy of their resources, but income tells only part of the story with regard to adequacy. It is also useful to seek out other measures of standards of living, such as expenditures.

Drawing on inflation data for the five-year period from June 2006 to June 2011 and individual household expenditure data from 2006 to 2009, this report focuses on the impact of changes in prices on the out of pocket living costs for specific types of older households, including age pensioner households and selffunded retiree households. It is clear that the purchasing power of many Australian households has reduced over the last five years.

This analysis shows that older Australians typically spend proportionally more on basic, less discretionary items, and have had considerably less room to manoeuvre in the face of recent food and energy price increases. However, it also reveals that nearly three-quarters of a million older households (aged 50 years and over) are spending half their income on just three essential cost of living items (groceries; electricity & gas; and healthcare) because they have an average income of just over $14,000 per year. These are the same items that are rising faster than inflation, in some cases up to four times faster than inflation.

The impact of cost of living pressures on older Australians is clearly a salient one as it directly affects, and indeed can severely limit, their capacity to engage in social and community activities and to obtain basic services. Older Australians make significant contributions to the nation’s well-being during their lives. With Australia currently enjoying a period of unprecedented economic growth, it is of great concern that a large and possibly growing proportion of older Australians are facing substantial living cost pressures.

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