In the last few years and particularly over the last 12 months, the cost of living has soared dramatically, making it increasingly difficult for many Australians to afford their basic needs. Consumers are feeling the financial burden, from rising prices of food and petrol and the higher costs of health care and education to the major pressure on both rents and mortgages.
This report seeks to examine the causes and consequences of the rising cost of living as well as explore potential solutions to help consumers cope with these challenges. We have drawn on a wide range of sources from Finder, the government and other reputable third-party data providers. We incorporated economic data, academic research, market and consumer behaviour insights and expert opinion to provide a comprehensive overview of the issue.
Households were paying 7.8% more for goods and services in December 2022 compared to the same period in 2021.
94% of survey respondents noticed an increase in their weekly grocery shop.
Consumers are spending an extra $37 per week on groceries, an additional $1,924 a year.
43% of consumers are stressed about their grocery costs.
1 in 3 Australians have asked friends or family for financial help in the past 12 months.
Rate rises have added over $12,000 to the annual cost of servicing a $600,000 mortgage.
429,000 households missed a mortgage repayment in the second half of 2022.
An extension of free childcare is supported by 70% of Australians.
Food is the main non-housing expense driving increased inflation
The Australian consumer price index (CPI), the primary indicator of the nation's cost of living, reveals the other categories behind the rise of inflation. These include furnishings and furniture (6.6%), recreational costs (6.4%), and transport (5.6%).
Stress around housing, grocery, petrol and energy costs has been steadily increasing
Each month, Finder's Consumer Sentiment Tracker asks consumers which household expenses, if any, are causing financial stress. The question covers 19 different expense types, with each user able to nominate up to 3 expenses causing financial stress. The most commonly nominated expenses are housing costs (rent/mortgage), groceries, petrol and energy. The percentage of households citing these expenses as a cause of stress has been increasing steadily since 2021.
The average Australian has lost almost a month of their perceived savings buffer since the beginning of 2021
The sharp increase in grocery prices and housing costs has had a considerable impact on how long Australians think their funds could last in an emergency. Every month, Finder asks panellists how long they could live off their savings if they lost their job.
The perceived savings buffer of the average Australian sits at 14–15 weeks, down from around 18 weeks (3-month rolling average). When looking at our last cost of living report published in May 2022, there has been a significant increase in consumers from the middle-income bracket saying they could only live off their savings for 1 week or less.
The past couple of years have been difficult for many Australian families, but they have benefitted from record-low interest rates. Now interest rates are starting to rise and inflation has hit a 20-year high, many households are starting to feel the cost of living crunch.
In this report we delve into how different sectors of the economy have experienced inflation, how much more households are paying for the same basket of goods, how Australians are coping with the rising cost of living and what they're doing to fight it.
How is inflation changing households' living costs?
Over the 12 months to March 2022, the Consumer Price Index, which measures household inflation, rose by 5.1%. This is the largest year-on-year increase Australia has seen for over 20 years.
To put that into perspective, in the first quarter of 2021, the average household was spending approximately $8,860 per month on general living costs like bills and rent as well as entertainment and travel. Inflation means that those same expenses are now costing households $452 more per month on average.
Which goods and services have experienced the highest rate of inflation?
Transport services saw the highest rate of inflation this year at 13.7%. This is largely due to the rapid increase in automotive fuel prices which have increased by 35.1% over the past year. Car prices are also driving high inflation in this category, having increased by 6.6% this year.
Housing costs have risen this year, by 6.7% overall, predominantly due to a 13.7% increase in owner-occupier property prices.
Not all goods and services have increased over the past year though. The price of clothing and footwear actually decreased by 1.5%, as did communication services (–0.8%) which include postal services and telecommunication services like your mobile phone bill.
How has the typical household's grocery bill changed?
The price of food and non-alcoholic beverages has risen by 4.3% over the past year, but this rises to 5.3% if we exclude meals out and takeaway services. This equates to a $48 increase in the average household's monthly grocery bill.
Vegetables have experienced the highest inflation of any food category, having increased by 12.7% in the past year. This is closely followed by beef and veal, which have risen in price by 12.1%. Fruit is the only grocery category to have decreased in price (–0.5%).
How are households dealing with the rising cost of living?
Grocery and petrol stress have surged
Amid rising food prices, data from Finder's Consumer Sentiment Tracker shows grocery stress peaked in April. More than a third of Australians (34%) listed their food bill as one of their most stressful expenses.
Petrol stress also reached a record high of 32% in April, up from just 17% in January.
Housing costs including rent or mortgage repayments are the most stressful expense for Australians, with 34% listing this as 1 of their top 3 most stressful bills.
1 in 5 people are living week to week
1 in 5 Australians (20%) say their savings would last them 1 week or less if they were to lose their job today. An additional 28% could get by for 2 weeks to a month.
Only 32% could survive off their savings for 3 months or more, which is the recommended baseline of emergency savings for Australians.
Extreme financial stress is increasing
Just over 1 in 5 Australians (22%) admit they are extremely stressed with their current financial situation. Extreme financial stress has been slowly climbing after falling to 15% in August 2021.
Only 25% of people say they have no money-induced stress.
Mortgage and rental stress are on the rise
A quarter (25%) of mortgage holders admit they struggle to meet their monthly repayments, according to Finder's Consumer Sentiment Tracker. For renters, it's more than a third (35%) that struggle to pay their rent.
With rising interest rates increasing the cost of home loan repayments, it is likely that mortgage stress will rise over the coming months.
Want to keep your mortgage repayments low? Compare lenders and refinance to a lower interest rate.
What are Australians doing to combat inflation?
More than half of Australians (52%) say they have taken actions to make their money stretch further over the past 12 months.
Starting a budget (27%) is the most common way households are trimming down their spending.
1 in 7 (14%) say they have switched grocery stores, while 13% have started a side hustle. A further 12% have saved money by cancelling travel plans.
Women (56%) are more likely than men (48%) to be actively making their money stretch further.
Between the generations, gen Z are the most proactive in cutting down their expenses, with three-quarters (74%) doing so. This is compared to just 27% of baby boomers, who are more likely to be on higher incomes and have already paid off their mortgages.
How to fight inflation
Prepare your finances by budgeting. Knowing where your money is coming from and where it's going is the first step to get on top of your finances. Figure out how much the essentials like bills and groceries are costing you and how much you spend on "fun" things like eating out and travelling. There are plenty of budgeting apps like the Finder app that let you see all your money in one place. Once you have a rough idea of your spending habits, you can figure out where there's room to cut back.
Save money on groceries. Making a few simple swaps can shave a decent amount off your weekly shop. Frozen veggies can be a cheaper alternative to fresh ones and you won't need to worry about them going to waste. Canned foods such as beans and tomatoes are a great addition to soups and stews, as are grains like barley and rice. Depending on your supermarket and what you're buying, it might also be cheaper to buy in bulk and stock up your pantry. You can also check out grocery comparison apps like Frugl to compare the cost of products between supermarkets.
Consider investing some of your spare cash. Savings accounts are the safest way to keep your cash, but low savings rates make it near impossible to earn interest on your money. Consider switching to a bonus savings account, which pays extra interest if you meet certain criteria. If you're looking beyond cash, investing in other assets such as shares or cryptocurrency can earn you a higher return on your capital, but keep in mind these do come with additional risk.
Graham Cooke is the head of consumer research at Finder. He’s a seasoned analyst and data journalist, who has been covering personal finance, the economy, technology and travel at for eight years.
He had taken part in over 500 live TV interviews and appears regularly on ABC News and Radio, 7 and 9 News, Sunrise, Today, Studio 10 and others.
Graham is also a contributing author at Money Magazine and Yahoo Finance.
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In the last few years and particularly over the last 12 months, the cost of living has soared dramatically, making it increasingly difficult for many Australians to afford their basic needs. Consumers are feeling the financial burden, from rising prices of food and petrol and the higher costs of health care and education to the major pressure on both rents and mortgages.