As we head into an election year, the cost-of-living crisis will be at the forefront of voters’ minds. The good news for the Government is that cost inflation is continuing to ease.
The Australian Bureau of Statistics’ (ABS) cost-of-living indices show living costs for age pensioner and pensioner and beneficiary households fell by 0.1% in the December quarter. For these groups, it was the first fall in quarterly living costs since the height of the Covid crisis in mid-2020.
They were helped by two things. First, lower prices for electricity due to the 2024-25 Commonwealth Energy Bill Relief fund rebates. Second, an increase in Commonwealth Rent Assistance in the quarter, especially for age pensioner and pensioner and beneficiary households. This increased assistance reduced the amount of rent payable by eligible households.
So-called ‘employee households’ didn’t fare as well. Their living costs went up 0.4% in the December quarter due to this group being more impacted by higher mortgage interest charges, partly from the continued rollover of expired fixed rate mortgages to higher variable rate mortgages.
However, living costs increases for workers for the December quarter were still considerably lower than the 0.6% and 1.3% recorded in the September and June quarters of last year.
In the year to December, there was also progress. The ABS says it was the lowest rise in annual costs in more than two years. Households benefited from declines in electricity and fuel, as well as slowing growth in food prices, insurance premiums and mortgage interest charges.
Despite slowing increases, annual costs for each group were still above official CPI figures. Worker household costs rose 4% in the year to December, while those of pensioner and beneficiaries were up 2.8%, and aged pensioners and self-funded retirees were both 2.5% higher respectively – compared to the 2.4% increase in annual CPI.
The cost-of-living increase for workers was higher principally because of mortgage interest charges. These charges went up 14.7% for the year. Though worker cost growth of 4% was high for the year, it was still well down from the 6.9% recorded the previous year.
Age pensioners and self-funded retirees saw the smallest annual rises in living costs due to mortgage interest charges and rents, both of which rose over the year, making up a smaller proportion of spending for these households.
It’s positive for the Government that the cost-of-living crisis is largely in the rearview mirror. The problem is the cumulative inflation that’s happened over the past few years. In the three years to December 2024, the CPI is up 15.3%, but the living costs for workers has risen 21.2%, while for pensioners it’s up 16%, and for other groups it’s been largely in line with official inflation. For all the different households, there’s been a significant increase in costs over a short period.
Unfortunately for the Government, people don’t celebrate when costs don’t rise as fast as they once did. Instead, they remember that the $5 that they paid for a coffee a few years ago is now $6.
Let’s see how it plays out in the upcoming election.
*For the un-initiated, the ABS cost-of-living indices are a useful alternative to the wide-quoted consumer price indices (CPI). While the CPI measures price changes, cost-of-living inflation is the change in spending by households required to maintain a given standard of living. The main difference between the CPI and the living cost indexes is that ‘living costs’ include interest paid on mortgages whereas ‘consumer prices’ do not.
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Curated by James Gruber and Leisa Bell
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