Your best defence against inflation

High inflation is increasing living costs. Our checklist could help secure your retirement lifestyle against its effects.

By Dan Choo - 3 min read

A little about Dan

Daniel Choo manages the diversified portfolios on behalf of Russell Investments Master Trust members and retail investors. The portfolio management team allocates between different asset classes such as shares, bonds, property and currencies.

If you’ve noticed a dollar doesn’t stretch as far as it used to, you’re not alone—and you’re not imagining it!

In the 12 months to the end of December 2023, the price of goods and services across a range of categories increased by 4.1%, according to the Australian Bureau of Statistics. That figure is the change in what’s known as the Consumer Price Index (CPI) indicator.

What is inflation and why does it matter?

The CPI measures inflation, which is the term economists use to describe the increase in the cost of goods and services over time. The price of virtually everything is affected by inflation. Back in 1973 you could have picked up a kilogram of potatoes for around 31 cents. Today, the same sized sack of potatoes costs closer to $3.80. In 1976, you could see a movie for about $3.30—now it’s about $24 for a standard seat in a cinema.1

Weekly earnings also increase over time, so wage earners can usually afford to pay higher prices. There may be times, like over the past few years, when inflation rises more quickly than wages, but both prices and incomes usually head in the same direction.

But things can get tricky when you stop earning an income from work—such as in retirement.

After work, you’re spending money you’ve saved through your life, along with any government Age Pension or other income you may receive, to cover your living expenses—but don’t worry, that’s what you’ve saved and prepared for!

The key at this point is to protect your purchasing power against rising inflation, so you can continue to afford to buy what you need and want. There are several smart and simple ways you can do that. Here are some examples.

Checklist to navigate inflation

Bar chart icon with performance line above Stay invested in growth assets: Growth assets, such as shares, property and infrastructure, are generally expected to increase in value over time. This can help the value of your investment keep pace with (perhaps even get ahead of) inflation. Be aware that growth assets can experience more short-term ups and downs than defensive investments, such as fixed income and cash, but in general their value is expected to rise in the long run.
Federal or municipal building icon Apply for the government Age Pension: The Age Pension is a useful source of income for many retired Australians. What’s more, it increases once or twice a year in line with inflation to maintain its purchasing power. Remember to apply as soon as you’re eligible.
Hand holding person icon Claim all your entitlementsVarious concessions and benefits are available to retirees that may provide extra income or help to reduce expenses. Take advantage of what’s available to you.
Building with refresh sign Consider continuing or returning to workThis option won’t suit everyone, but paid work in some capacity can give you extra to spend. Did you know you can earn income from paid work up to a certain limit without impacting your government Age Pension entitlements?
Pie chart with arrows icon Make small spending adjustments: With prices rising quickly, many people have tightened their belts. Making small changes to spending habits, like switching to cheaper products at the supermarket or shopping around for a better deal on utility providers, can provide savings that allow you to maintain your lifestyle.

There are ways to keep up with inflation but if you are in financial difficulty and need support, do reach out for help. There are plenty of ways to access assistance including:

  • Free online resources, such as the government’s Moneysmart website and charities like The Salvation Army.
  • Financial counselling services – a free and confidential service offered by not-for-profit community organisations that can help you to manage your debts and bills.
  • Financial support  if you’re in financial hardship – where you may be able to get a payment from Services Australia to help you navigate those hard times. Payment options include crisis payments, income support payments, special benefits, advance payments, weekly payment options and Centrepay.

For more useful tips and hints, see our fact sheet: Taking care of your finances.

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1. Australian Bureau of Statistics, 29 November 2023, ‘What changes in prices and their collection tell us about Australia

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