Sent:	Wednesday, 31 January 2001 11:24 AM
To:	'super.sen@aph.gov.au'
Subject:	CPI ADJUSTMENT OF PENSIONS
Dear Secretary,
I am making this submission as an individual who is particularly concerned
with the widespread adoption of the CPI as a means of adjusting the price of
goods and services, and pensions.

There is considerable debate as to the validity of the CPI as an indicator
of the "cost of living".  It measures the cost of a collection of goods and
services with weightings that do not necessarily equate to the living
circumstances of an individual.  This is particularly true of retirees whose

lifestyles and  living expenses will change from that which applied when
they were working.  Examples of this may be:
- less use of public transport and greater use of personal transport
- greater use of medical facilities (particularly for older retirees)
- most retirees owning properties rather than renting or paying mortgages
- no education expenses and other children related expenses

These changes may have both a positive and negative impact on the
suitability of the CPI as a basis for adjusting pensions, but they may not
necessarily balance out, eg.  increases in fuel prices may exceed public
transport fares and not be properly reflected by the CPI.

Another problem with the CPI is that there is a flow on effect.  Some
services are adjusted for the CPI which impacts on the cost of goods that
then feeds an increase in the CPI.  For example, the CPI may be used to
justify an increase in rents that causes an increase in grocery prices that
then increases the CPI that then is used to increase rents again, etc. 

There is also the problem of relevancy.  An increase in the cost of tobacco
products will have an impact on the CPI that is then used to justify an
increase in public transport fares which is not related in any way to
tobacco products.

The advantage of the CPI is that it is independent and readily available.
However, the ABS issues many other indices as do other organisations.  For
retirees there may be something more suitable, but they should not be
disadvantaged by adopting an index that is even less relevant to their "cost
of living" than the CPI.  A logical starting point is to conduct a large
scale survey of the living expenses of retirees and compare this with
available indices.

Yours sincerely,

Glenn Hilling,
10 Carson Court,
Watsonia,
Victoria 3087
Tel. no. 03 9669 4438