Pension members to receive up to 5.3% increase
Each year in October the amount of your State Super pension is adjusted to reflect the percentage movement in CPI from one June quarter to the next June quarter. This adjustment has most often historically resulted in an increase in your pension, but it can be decreased if the CPI adjustment is negative (however, there is a cap on negative CPI rates so if the negative adjustment is less than 1.1%, the pensions will not be adjusted).
The legislation to index pensions to the CPI was introduced in the early 1970s following a period of significant inflation.
The movement in the CPI (All Groups Sydney Index) from 30 June 2021 to 30 June 2022 was 5.3%. The adjustment rate for State Super pensions is therefore 5.3% for this year.
State Super pensions will be adjusted from the first pension payday in October 2022, which is on Thursday 6 October this year. Pensions commencing during the first three quarters in the financial year receive a partial CPI adjustment, while no adjustment is made to pensions commencing in the final quarter.
Rise in national CPI
After two decades of relatively low inflation in many world economies, a marked upswing has been recorded over the year. Over the twelve months to the June 2022 quarter, the Australian CPI rose 6.1%. The annual rise in the national CPI is the largest since the introduction of the goods and services tax (GST).
This rise in costs is reflected in this year’s increase to our pensions, being the largest increase in more than 20 years (in 2001 it was 6.3%).
What is the CPI?
Simply defined, the Consumer Price Index (CPI) measures the change in the price of a fixed basket of goods and services acquired by household consumers from one period to another. The Australian Bureau of Statistics (ABS) measures the cost of a set list of items in order to calculate a CPI rate for each of the eight State and Territory Capital Cities. They also calculate a weighted average of the eight Capital Cities, which is generally the CPI that we hear about in the media.
The CPI rate that is used to adjust your State Super pension each year is the All Groups Sydney Index which simply means it is a CPI rate based on Sydney prices and includes all the categories in the standard basket. The 11 categories included in the standard basket are:
* Recreation and culture
* Insurance and financial services
* Food and non-alcoholic beverages
* Alcohol and tobacco
* Clothing and footwear
* Furnishings, household equipment and services