COUNCIL OF STATE RETIREES' ASSOCIATION REPORT

Summary of the report to the AGM of the RVPA - 20/5/10

Members should be advised that there is a large discrepancy between the perception of

what constitutes the CPI that is used to calculate the twice yearly increments in our GSO

pension and the reality.

Background: Professor Pollard who presented a reporti n 1973 establishing the concept

Of increasing superannuation pensions stated that adjustments should contain three

elements;

1. there should be certainty of adjustments i.e. they should be automatic

2. the purchasing power of the pension should be maintained

3. pensions should be adjusted frequently.

Since then there has been a dramatic erosion under point two, this is because of an

anomaly in the calculation of the CPI formula.

We have all been under the impression that CPI adjustments are made after calculating

the increase in the actual cost of a *'basket of goods" thus establishing a CPI.

This is not actually the case; the Australian Bureau of Statistics work out what they call

"pure" prices, these prices are calculated by taking the increase in shelf prices less an

amount they calculate as an improvement in quality of the product.

This calculation means that although an item may cost more to replace an appliance/car

the CPI has not matched the increase.

Practical examples;

1. over the past 20 years the CPI index, used by the statisticians, for motor

vehicles is 7.3%, whereas the actual cost to replace a similar model has increased by 25 - 50%.

2. the rental index over the years 1994-2005 was 22.9% when actual rents

increased by 41.2%

This explains why our Government pensions have deteriorated in purchasing power

when compared to the Age Pension.

In a year with both Federal and State Governments facing elections and opinion polls

indicating close margins it behoves us to pressure our local members to remedy the

situation especially when we compare our situation with their more favourable scheme!!

Ray Dennis

COSRAV delegate