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How does recent inflation impact you?

As Australia is beginning to feel the effects of inflation, you will likely see an increase in daily expenses and savings.

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Inflation is expected to impact all people and the cost of living, including older Australians. [Source: iStock]

You may be seeing a lot of complaints about the cost of inflation, and rightly so, because this will be an issue that impacts everyone in Australia.

Why is inflation happening?

When prices for products or services surge, it can result in inflation.

The increase in prices for everyday items is largely due to global factors, like ongoing disruptions to supply chains because of COVID-19 and the Russian invasion of Ukraine.

New figures were released on 27 July, 2022, finding inflation in Australia rose to 6.1 percent in the June quarter.

To combat the rise in inflation, the Reserve Bank of Australia increased interest rates to "slow down" the economy and reduce the demand for goods and services. This means interest rates will be higher and so will your bills for loans.

So in what ways will inflation impact older people?

Aged care will cost more

If you are yet to enter an aged care facility or currently receive care within your own home, you will likely see an increase in how much you pay for aged care services.

The recent increase to the Modern Award Wage had an immediate effect, with home care providers passing along the extra costs to their consumers.

And a recent jump to the Maximum Permissible Interest Rate (MPIR) will also increase the cost of placements in aged care homes.

These changes to aged care costs may also foreshadow a trend of cost increases over the next few years for the sector.

Groceries will be more expensive

When coming away from the supermarket checkout, you will be seeing an increase in your grocery bills.

It's just not fruit and vegetables, like lettuce, tomatoes, or raspberries, that will be increasing in cost, it will impact every aisle of the supermarket.

Meat aisles have seen an increase in cost, as have canned goods - like beans or tinned tomatoes - and soft drink and other beverages.

It is also expected that any products that contain wheat, like bread and pasta, will be increasing in cost.

Financial firm UBS Australia estimates that the cost of groceries will continue to increase over the September quarter.

Dine and take out

Similarly to the increased costs of groceries, dining out and take out will also be a further hit to the pocket.

Just as prices are increasing for everyday people, hospitality businesses are also feeling the pressures from increased costs.

Your morning 'cup of joe' may have seen a jump in price by as much as 50c to $1, depending on how your local cafe is managing the increase in food costs.

You may also find your usual meal at your favourite restaurant is arriving with a higher price tag than what you have been used to.

If you have been utilising fast food or delivery apps, the cost of delivery has also jumped quite largely. This month, Domino's Pizza announced it intended to increase its delivery by 6 percent and KFC was in the headlines for switching out lettuce for cabbage in its burgers.

Housing and electricity will be more expensive

The housing crisis is becoming the most dire problem for many Australians this year, with limited rentals available and a blistering competitive housing market.

Unless you own your house outright, you will likely see an increase in your rent or your mortgage repayments.

And even if you own your home, you will be seeing an increase in electricity bills and council rates due to inflation.

Make use of public transport

While the cost of petrol has made a slight dip in the past days, it is expected to rise again in September of this year when the Government cut in fuel excise finishes.

This means a full tank of gas will be a lot more expensive and you may find taking public or community transport is more cost-effective in the long run.

Retirement income may be impacted

If you are already retired, the cost of inflation will likely be draining your savings or Age Pension a lot quicker than you expected.

This will result in your retirement savings not lasting as long and lead to the need to potentially start accessing the Age Pension sooner than you anticipated.

However, if you have other alternative avenues of income in retirement, such as investments, rental income, or dividends, this income will likely increase with inflation - so this will actually provide you with higher revenue yields.

A potential silver lining?

The Federal Government is trying to help older Australians out with the cost of living increases.

For example, the Government is trying to put a cap on administration and management fees for those receiving home care services.

This would help consumers receiving home care to not pay so much on fees for their Home Care Package.

Already, home care providers indicated that fees would be increased to cover the cost of bolstered wages for home carers.

Putting a cap on administration and management fees would ensure your provider isn't making unreasonable pricing requests.

Additionally, there have been suggestions from the Federal Treasurer, Jim Chalmers, that the Government will increase the Age Pension to meet the cost of inflation by changing the indexation.

"We understand that pensioners are doing it incredibly tough when it comes to their costs of essentials like groceries, electricity and petrol and in other parts of the household budget," says Minister Chalmers.

"We don’t want to see pensioners fall further and further behind. And that’s why this indexation which tries to keep up with the skyrocketing cost of living is so important."

The next indexation change for the Age Pension will be in September, which is also when inflation is meant to increase again.

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