What it could mean for your retirement and what you can do about it
Inflation is back, and it’s biting. Australia’s annual Consumer Price Index (CPI) reached 4.6% in March 2026, the highest since September 2023, driven by surging transport costs, persistently elevated housing costs of 6.5% per year, and food inflation running at 3.1%[1].
We’ve been here before, sort of
Australia experienced its most painful inflation era in the 1970s, when the OPEC oil shocks pushed CPI to a peak of 17.7% in 1974[2]. Wages and prices chased each other in a damaging spiral, interest rates climbed sharply, and real purchasing power was eroded for years.
Today’s environment is meaningfully different. The Reserve Bank of Australia (RBA) has a formal 2–3% inflation target and an independent monetary policy framework that didn’t exist in the 1970s[3]. Superannuation, now at a 12% employer contribution rate, helps provide a structural savings buffer that was previously absent[4]. Nonetheless, the parallel is worth heeding. Inflation that persists above the RBA’s band for an extended period quietly erodes real wealth.
The squeeze on households
The inflation impact is not uniform. It hits differently depending on your life stage.
Cost-of-living pressures are squeezing today’s cash flow, while inflation is simultaneously raising the retirement income target you need to hit. Every year of elevated prices increases the real capital needed to fund your retirement.
Retirees are particularly exposed because their spending skews heavily toward the very categories rising fastest, housing costs (up 6.5% annually), healthcare, and food. ASFA’s Retirement Standard for the December quarter 2025 now puts a comfortable retirement at $77,375 per year for a couple and $54,840 for a single homeowner, both at record highs[5].
What this means, and what you can do
The good news: this environment rewards preparation. Key steps worth considering:
- Review your investment allocation. Cash and fixed-rate investments that seemed safe can quietly lose real value. Growth assets, such as equities, have historically provided meaningful inflation protection over the long run.
- Reassess your retirement income needs. With costs rising, the income figure you planned for even two years ago may already be too low. Modelling your required return and stress-testing your portfolio against a prolonged inflationary scenario is essential.
- Increase super contributions while you can. Pre-retirees should consider catch-up concessional contributions if their Total Super Balance was below $500,000 at the start of the year. The concessional cap of $30,000 per annum remains a powerful, tax-effective tool and is due to increase to $32,500 on 1 July 2026.
- Consider the Division 296 tax implications. From 1 July 2026, super balances above $3 million will be subject to an additional tax on earnings. If you’re approaching this threshold, structuring advice is timely.
How your financial adviser adds value
Inflation is precisely the kind of environment where the gap between good advice and no advice widens considerably. A qualified financial adviser can model your specific retirement income gap, the difference between your projected income and your income requirements, and stress-test it against multiple inflationary scenarios. They can also:
- Navigate the Age Pension means test and deeming rate changes to protect your entitlements.
- Rebalance your portfolio toward real-return assets without compromising your risk profile.
- Structure contributions and withdrawals to boost tax efficiency across the inflation cycle.
- Assess whether lifetime income products, such as annuities, can provide inflation-linked certainty alongside your account-based pension.
The 1970s taught Australia that ignoring inflation is costlier than confronting it. The difference this time is that you have tools, a superannuation system, and access to advice that previous generations didn’t.
Find out how you can best use them by calling us today.
The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser.
[1] Australian Bureau of Statistics, Consumer Price Index, Australia — March 2026 (released 30 April 2026). abs.gov.au
[2] Western Union / ABS data, ‘Australia’s Inflation Rates Over the Years’; IMF, ‘Inflation and Monetary Policy Reform in Australia’ (elibrary.imf.org).
[3] Reserve Bank of Australia, Inflation Overview (rba.gov.au/inflation-overview.html); RBA Speech, Glenn Stevens, ‘Inflation Targeting: A Decade of Australian Experience’, April 2003.
[4] Australian Taxation Office / SIGA, Superannuation Rate 2026: New Rules & Key Changes — SG rate reached 12% on 1 July 2025.
[5] ASFA media release, ‘Super balances needed for comfortable retirement reach all-time high’, 24 February 2026
