The Reserve Bank of Australia (RBA) has raised interest rates for the eighth time in a row to 3.1 per cent in a bid to combat inflation.
RBA boss Philip Lowe said the move is necessary as “inflation in Australia is too high”.
“There has been a substantial cumulative increase in interest rates since May,” Lowe stated.
“This has been necessary to ensure that the current period of high inflation is only temporary.
“High inflation damages our economy and makes life more difficult for people. The Board’s priority is to re-establish low inflation and return inflation to the 2–3 per cent range over time.”
Recent data from the Australian Bureau of Statistics (ABS) found that senior Australians were suffering the most from the rising cost of living crisis, with the current Consumer Price Index (CPI) sitting at a high of 7.3 per cent.
So, how do the RBA’s most recent rate hikes affect older Australians?
For pensioners, the Age Pension payments will continue to be indexed with the rising inflation, with the most recent indexation bringing the largest increase the social security payments have seen in over a decade.
The Federal Government has also introduced a welcome boost for pensioners wanting to earn a little extra cash from December 1, allowing for an extra $4,000 in income before pension payments are affected.
In a bid to help ease financial pressures, deeming rates for seniors will continue to remain frozen.
As part of the income test for welfare payments like the pension, deeming is a set of rules the government uses to determine how much income people earn from financial assets such as shares, superannuation, and bank accounts.
Regardless of whether or not people are actually seeing a return on these financial assets, deeming assumes people are receiving a set income from the interest on those investments.
As of July 1, the deeming rate is frozen at 0.25 per cent on assets up to $56,400 for singles and $93,600 for couples, and 2.25 per cent for any assets worth more than $56,400 for singles and $93,600 for couples.
However, the big win for seniors suffering through the cost of living will be in savings as banks pass on the rising interest rates by the total 25 basis points raised by the RBA.