Baby boomers on the age pension are now suffering more from the cost-of-living crisis than young workers despite easing inflation.

Previously, working-age Australians bore the brunt as inflation soared to heights not seen since 1990, coupled with the Reserve Bank increasing interest rates 13 times in 2022 and 2023.

However, with two interest rate cuts in 2025 and the lowest inflation rate since the Covid lockdowns four years prior, age pensioners are finding themselves struggling more than younger Australians who are employed.

Recent data from the Australian Bureau of Statistics unveiled on Wednesday indicates that living costs for age pensioners rose by 2.7 percent during the June quarter.

In contrast, the living costs for employees increased by 2.6 percent over the year, marking the smallest quarterly expense rise since early 2022 before the rate hikes began in earnest.

Both of these cost of living increases surpassed the 2.1 percent headline inflation rate, which was the lowest since the March quarter of 2021 and fell on the lower end of the Reserve Bank’s two to three percent target.

According to AMP deputy chief economist Diana Mousina, employees are faring better now due to benefiting the most from rate cuts, unlike most age pensioners who have already paid off their homes.

‘Because the employees have had a larger upward increase in growth, in the times of high interest rates, they are seeing better outcomes now,’ she told Daily Mail.

Baby boomers are now the generation suffering the most from the cost-of-living crisis as inflation eases (pictured is Sydney’s Cronulla beach)

‘They’ve actually had a larger fall in the cost of living only because they went up by more.

‘There are very few age pensioners that still have a mortgage.’

During the past year, the living costs of employees have been moderating more dramatically, following the RBA rate cuts in February and May.

‘This rise was partly offset by falls in mortgage interest charges, which make up a higher proportion of expenditure for employee households,’ the ABS said. 

The two rate cuts this year have shaved $218 off mortgage repayments on an average $660,000 home loan.

The futures market is now expecting the RBA to cut rates three more times by Christmas, which would take the cash rate from 3.85 per cent now to 3.1 per cent for the first time since February 2023.

This is more likely to ease the living costs of workers more than boomers, who are more likely to have paid off their home. 

Rents are increasing at a level beyond inflation but they are no longer going up by double-digit figures annually after immigration moderated from record-high levels approaching 550,000 in late 2023. 

Working-age Australians were previously suffering the most when inflation had approached levels last seen in 1990 and the Reserve Bank raised interest rates 13 times in 2022 and 2023

Those on the age pension, who are more likely to have paid off their homes, are now seeing a bigger increase in living costs than workers.

That’s because their expenses haven’t moderated as much, as their income from government payments fails to keep pace with some big-moving price items like healthcare and food. 

Australians must be 67 to qualify for the age pension, meaning only boomers and the elderly fall into this category.

But self-funded retirees, with high super balances and investments, had the lowest living cost increase of 1.7 per cent, which was below the inflation rate.

They can also live without needing the age pension, which is subject to an assets test. 

This group also benefited from strong superannuation returns, with retirement savings tax free after 60 for those no longer working.

‘Self-funded retirees, for example, would be getting quite strong benefits from the impacts of investment returns,’ Ms Mousina said.

‘Investment returns have been extremely strong in the past few years and that’s benefited retirees, on average, quite a lot – not those on the age pension.

AMP deputy chief economist Diana Mousina said employees were now having an easier time because they benefited the most from rate cuts, unlike most age pensioners who have paid off their house

‘Interest rates have been high – they’ve benefited from that despite the fact they’ve had higher inflation.

‘Just retirees in general in Australia, they’ve actually had a very good situation in the last two to three years.’ 

They also had more to spend on non-essential items like holidays. 

‘Medical, dental and hospital services, and holiday travel and accommodation make up a larger proportion of expenditure for self-funded retiree households than they do for other household types,’ the ABS said.

The Association of Superannuation Funds of Australia recommends $595,000 in super for a comfortable retirement for single retirees, which means an overseas trip every seven years. For a couple, that rises to $690,000. 

Those on Centrelink welfare payments had the biggest living cost increase of 2.9 per cent and are more reliant on federal and state government electricity rebates.

‘Households represented by these indexes source their principal income from government payments,’ the ABS said.

While payments like JobSeeker unemployment benefits are indexed for inflation, welfare recipients are experiencing more pain at the shops because services inflation is still high at 3.3 per cent.