The single age pension will increase by $38.90 (including supplements) to $1026.50 per fortnight on September 20.
Disability support pensions and carer payments will rise by the same amount.
It's the biggest pension increase for 12 years and while undoubtedly welcome by seniors struggling to keep up with skyrocketing inflation, advocacy groups have warned it's not enough to keep many older people off struggle street.
The partnered pension will rise by $29.40 to $773.80 per fortnight (each) and the Jobseeker payment for a single aged over 60 after nine months unemployment will rise by $27.60 to $718.60.
Pension increases are based on the higher end of either the Consumer Price Index or the Pensioner and Beneficiary Living Cost Index and benchmarked against the Male Total Average Weekly Earnings.
More than 4.7 million Australians struggling to cope with cost of living pressures will receive increases.
Catch up the hard way
National Seniors chief advocate Ian Henschke said given how quickly living costs are increasing, the government should consider indexing pension payments quarterly rather than twice a year.
"Waiting for an increase when living costs have been high for six months is playing catch up the hard way," he said. "National Seniors Australia would like to see government consider indexing payments in June and December when inflation is extremely high."
Mr Henschke said the rising cost of living had only exacerbated an already dire situation.
"For pensioners barely having enough to cover the necessities, including housing, the amount is important but so too is frequency."
Combined Pensioners and Superannuants policy manager Paul Versteege said the indexation of social security payments coped well when inflation was low but became woefully inadequate in times of high inflation.
"Indexation relates to what inflation was doing almost nine months ago," he said. "Obviously, inflation marches on and pensioners have to cope with huge cost-of-living increases during those nine months."
His organisation has previously advocated for pension increases to be indexed in advance of the Consumer Price Index to cushion the effects of rocketing inflation.
JobSeeker
For those receiving JobSeeker payments the situation is particularly grim.
JobSeeker will rise $25.70 per fortnight to $668.40 (single).
The Australian Council of Social Service was scathing of the increase. It said an increase of $1.80 per day lifted the daily rate from $46 to $48, leaving it well below the poverty line - and to just 42 per cent of the minimum wage.
"We regularly speak to people who cannot eat three meals a day, who cannot afford essential medication and who are in debt with their utility provider because they cannot cover the cost of energy," said acting chief executive Edwina MacDonald.
Labor minister Clare O'Neil said a review of the JobSeeker payment would take place in May next year, defending her government against criticism the increases aren't high enough.
Disqualifying limits
From September 20 the age pension will cut out when assets reach $622,250 (single homeowner) up $13,000; $935,000 (couple combined, homeowner) up $19,500; $846,750 (single non-homeowner) up $13,000; and $1,159,500 (couple non-homeowner) up $19,500.
The current pension income free area is $190 per fortnight for singles and $336 for couples combined.
From September 20, a part pension will be payable up to an assessable income of $2243 per fortnight (single) or $3431.20 (couple). These figures may be higher if rent assistance is paid with the pension.
Pensioners over age pension age may also access the Work Bonus, which operates in addition to the income-free area.
Under the Work Bonus, the first $300 of work income a fortnight is not counted in the pension income test. Pensioners are able to build up any unused amount of the $300 fortnightly concession in a Work Bonus income bank, up to a total of $7800 (at present). This amount can be used to exempt future earnings from the pension income test.
This means a pensioner could earn up to $7800 a year extra without it affecting their pension. The income bank amount is not time-limited - if unused it carries forward, even across years.
Work bonus increase
From December 1 (subject to the passage of legislation) pensioners over age pension age will have their Work Bonus income bank credited with $4000, increasing the maximum income bank a person can have from $7800 to $11,800 until June 30, 2023. The $4000 increase will be added to each person's Work Bonus income bank up front.
This means every age pensioner will be able to have an extra $4000 of employment income disregarded from the income test from the start of the measure, rather than accumulating it over time.
Rent assistance
Rent assistance will rise from $145.80 to $151.60 (single no children) and $137.40 to $142.80 (couple no children).
However, with capital cities and regional areas both reporting substantial rent increases for houses and units, the extra assistance might not go far.
Over the past year, nationally, the cost of renting a two-bedroom unit has risen by $51.
"There's a reason this week's indexation increases to income support payments are larger than usual and that's because cost-of-living is increasing. This is especially true of housing costs," said Housing for the Aged Action Group executive officer Fiona York.
She said recent changes allowing pensioners to earn more before it affects their payments won't help much.
"The reality is many older people struggle to find jobs because too many employers overlook older workers."
The group believes a permanent and significant increase to income support is needed to reduce the likelihood that the 240,000 people older than 55 who currently receive JobSeeker will experience homelessness as they age.
Bowser woes
Those on low incomes are also facing an increase at the petrol bowser as the federal government's temporary reduction on fuel excise expires on September 30.
According to the Australian Competition and Consumer Commission, between June 30 and August 31, petrol prices dropped between 54 cents per litre and 25 cents per litre in the five largest cities (Sydney, Melbourne, Brisbane, Adelaide and Perth), noting that these cities have petrol price cycles that also influence price movements. Other price reductions were Hobart (47 cents per litre), Canberra (37 cents) and Darwin (26 cents). It was noted that these smaller capitals do not have price cycles. Regional locations saw falls of about 36 cents.