Australia’s latest living cost data reveals a slight easing for many households, but some groups are still grappling with rising expenses, particularly as mortgage interest charges continue to weigh heavily on budgets. According to figures from the Australian Bureau of Statistics (ABS), employee households saw the smallest quarterly increase in living costs since September 2021, with a modest rise of 0.6 per cent this quarter compared to 1.3 per cent in the previous period. This reduction follows a trend of slowing growth, although the strain on household budgets remains for many, especially those with significant mortgage debt.
Michelle Marquardt, ABS Head of Prices Statistics, pointed out that while the Reserve Bank of Australia kept its cash rate steady this quarter, many employee households continued to feel the pinch due to the transition from fixed-rate mortgages to higher variable rates, compounded by higher mortgage debt levels. This shift in mortgage terms remains a major driver of cost increases for this group.
However, some relief has come from falling fuel and electricity prices. The introduction of the 2024-25 Commonwealth Energy Bill Relief Fund and various state government electricity rebates in Queensland, Western Australia, and Tasmania helped offset these increases. These rebates, which affected the electricity bills of many households, provided much-needed relief, particularly for employee households that had not qualified for previous rebates. While those who received earlier assistance saw a smaller reduction in costs, the new relief was more significant for employee households, who saw electricity costs drop by 20 per cent compared to around 10 per cent for other groups.
Employee households, despite benefiting from these reductions, are still facing higher living costs than other household types. In particular, the higher proportion of their spending dedicated to mortgage interest charges continues to put pressure on their finances.
Meanwhile, age pensioner and self-funded retiree households saw much smaller increases in their living costs, with the former experiencing only a 0.3 per cent rise for the quarter. This was a significant decrease from the 1.2 per cent increase recorded in the previous quarter. Although pensioners were similarly affected by rising costs in most areas, they were less impacted by mortgage interest hikes. In fact, many age pensioner households benefited from a large drop in healthcare costs, particularly after reaching the Pharmaceutical Benefits Scheme (PBS) safety net threshold, which led to lower out-of-pocket medical expenses.
Self-funded retirees, on the other hand, were impacted more by rising costs in travel and accommodation, a sector that saw notable price hikes over the quarter. However, these households also benefited from the same electricity rebates as other groups, easing their financial strain somewhat.
When considering annual increases in living costs, employee households experienced the largest rise of 4.7 per cent over the year to the September 2024 quarter. This was largely driven by the significant 18.9 per cent rise in mortgage interest charges, although this was down from the record 91.6 per cent increase seen in the June 2023 quarter. The annual rise in mortgage costs reflects a slower pace of fixed-rate mortgages transitioning to variable rates, as well as fewer increases in the Reserve Bank’s cash rate.
In contrast, self-funded retiree households saw the smallest annual increase, with living costs rising by just 2.8 per cent. This relatively low rise can be attributed to a combination of factors, including the smaller proportion of their budget dedicated to mortgage repayments, as well as the substantial falls in health costs for pensioners.
Other household types, including renters, non-retired people, and families with children, saw living costs increase by between 3.5 per cent and 4.4 per cent over the year. These rises were due to higher costs for essential services like insurance premiums, food, and rents, though these were partially offset by drops in electricity and fuel prices.
Electricity and automotive fuel prices have been key factors in moderating the overall rise in living costs for most households. Despite significant price hikes in other areas, such as food and insurance, these drops in energy prices helped ease the pressure on household budgets, particularly for those who were eligible for government relief. However, even with these reductions, many households are still grappling with the overall impact of rising costs in other sectors.
Looking ahead, the data suggests that living costs may continue to rise, albeit at a slower pace than seen in the previous quarters. While the slowdown in mortgage interest charges offers some hope for employee households, it remains to be seen whether the broader inflationary pressures in food, rent, and insurance will ease in the coming months.
For many Australians, especially those with large mortgage debts, the pressure of rising living costs is still very much a reality. While some households are seeing a degree of relief thanks to government rebates and lower energy prices, the situation remains complex, with different groups feeling the effects in different ways. The ongoing challenge of managing household budgets in the face of rising costs will likely continue to dominate discussions as Australians try to navigate an uncertain economic environment.
