New calculations for Australian pensions

Almost 3 million Australian pensioners can look forward to a small, but significant improvement in their living standards from next month.

That’s because the Federal government is changing the basis on which pension rates are calculated.

The Federal Minister for Families, Housing, Community Services and Indigenous Affairs, Jenny Macklin,  announced two basic changes yesterday.

One is the calculation of a new index, called the Pensioner and Beneficiary Living Cost Index.  This index, ordered by the Federal government, was calculated by the Australian Bureau of Statistics.

Ms Macklin recalled that, before the last election, Labor had promised that pensions would  be set on a measure that reflected their costs more closely than the Consumer Price Index.

She said pensioners’ costs are often different from those of other Australians.

Age pensioners, for example, are estimated to spend 21.1 per cent of their income on food, on average.

That compares with 15.4 per cent for other families.

Ms Macklin said that to keep pensions in line with community standards, they will also be adjusted against a new wage benchmark.  That would be 27.7 per cent of the male total average weekly earnings measure, which the bureau also calculates.

She said the base pension rate would be adjusted twice a year in future, each March and September.

“These new indexation arrangements will help provide a more liveable pension for Australia’s pensioners,” Ms Macklin said.

So what will all this mean, in terms of cold, hard cash?

The precise calculations haven’t been done yet.

But Ms Macklin said the new rates would be published soon.

Pensioners’ costs, measured on the new index, rose by 0.9 per cent in the March quarter and 0.1 per cent in the June quarter.

The CPI rose by 0.1 per cent in the March quarter and 0.5 per cent in the  June quarter.