What Is The Real Cost Of Living In Australia?

We've been hit by the biggest-ever rise to cost of living.

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Last updated: February 21st, 2024

cost of living in australia

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Last updated: February 21st, 2024

Reading Time: 10 minutes

Most Australians are planning to spend less or delay big purchases due to worries about inflation and dwindling savings. Even high-income earners are worried, – 78% cut spending during the holiday season just gone.

Insights into how Australians spend their money shared by the ABS reveal that throughout 2023, we:

  • Increased spending on essentials by 7% (particularly transport, health and food), and
  • Reduced discretionary spending by 2% (less new furniture and fun outings).

More recent Living Cost Indexes data released in February 2024 found household costs rose up to 6.9% in the year to December 2023 — particularly for working families paying more interest on their mortgages.

Above: Employee households 2023 saw the largest annual rise in living costs of all household types.

While our high standard of living makes Australia a desirable place to live and migrate to, day-to-day costs can make it hard to prosper and get ahead.

But with 13 consecutive cash rate hikes in two years, the cost of living in Australia is still on the rise.

Is there relief on the horizon?

Cost Of Living Is Climbing Faster Than Inflation.

Paying off the mortgage became significantly more costly in 2023, thanks to Australia’s well-documented and unprecedented run of interest rate rises.

Above: Many Australians were forced to divert 30% or more of their disposable income to servicing their loan.  

Higher rates and the cohort of borrowers rolling off low fixed rates to much higher variable rates, meant repayments skyrocketed.

ABS’ Living Cost Indexes (LCI) data shows Mortgage interest charges rose:

  • 5.4% in the December 2023 quarter
  • 40.3% across the entire 2023 year.

Expert Tip.

The ABS’ LCI data differs from CPI because it includes mortgage interest charges rather than the cost of building new dwellings.

Rents have also been a major contributor, rising 7.3% annually from Dec 2022 to Dec 2023, based on the ABS’ latest Consumer Price Index (CPI) figures.

Rent inflation was 7.6% in the September ’23 quarter, the largest rise since 2009.

Important!

Rents would be even higher if it weren’t for a 15% increase in Commonwealth Rent Assistance (CRA) subsidies.

With fewer properties available, asking rents in capital cities jumped 14.2% in the year to January 2024, according to property data group SQM Research.

Nationally, the median weekly asking rent is $611.38 a week — and over $800 for a house in a capital city.

Are Australians Paying More For Everyday Items?

When it comes to CPI inflation, other major costs include:

  • Electricity and gas, despite rebates offered by State Governments, rose 6.9% in the 12 months to December 2023 (down from 14.5% in Sept).
  • Alcohol and tobacco, which saw a 6.6% increase in the Dec ’23 quarter.
  • New dwelling price inflation remained steady, but still high at 5.1% – although it’s eased considerably from a peak of 20.7% in 2022.
  • Insurance premiums, which rose 16.2% annually—the strongest rise since March 2001.

(Related: Australian Inflation Rate: Will It Soar In 2024)?

Food prices have been lowering, but stocking up on groceries was still 4.5% more expensive compared to 12 months ago, except for fruit and veggies, which have been falling (by 6.4% in the September quarter and 0.2% in the December quarter).

Above: At least the fruit and veg became cheaper 🙂

How Does Inflation Affect The Cost Of Living In Australia?

Inflation jumps translate to price rises across the economy.

Our current annual rate of inflation (as of December 2023) is 4.1%, with the largest increases from 2022 prices being seen in housing, electricity, insurance and travel.

The Reserve Bank of Australia (RBA) targets a 2-3% inflation level.

Important!

When costs rise too quickly, it’s bad news — and typically triggers action from the RBA in the form of cash rate rises that influence interest rates.

This is designed to put downward pressure on borrowing and spending to cool demand and slow inflation.

Both can be a big hit to your household budget or home ownership/investing aspirations. 

Government policies and spending also play a role—both in influencing demand and prices, and public perceptions (and opinion polls).

Did You Know?

Mercer’s Cost of Living City Ranking for 2023 places Sydney, Melbourne, Brisbane, and Canberra in the top 100 most expensive cities for expat workers. 

Whether it was a cynical move, pre-meditated, or a genuine response to the cost of living pressures, Labor leader Anthony Albanese called a snap caucus meeting in early 2023 that resulted in changes to proposed stage 3 tax cuts.

The changes spread tax cuts across more income brackets to benefit more lower-income Australians.

Proposed changes will mean that from July 1, 2024:

  • More people earning below $120,000 will get a tax cut — around $800 higher than they would have under the original plan.
  • People earning $160,000 or more will get a smaller tax cut than originally proposed (e.g., over $4k less for people on a $200k-plus salary).

Treasury estimates will have a negligible impact on inflation.

(Related: Interest Rate Forecast: Will The Rates Drop In 2024?)

How Do We Measure The Cost Of Living In Australia?

Consumer Price Index (CPI) is the Australian government’s go-to tool for estimating living expenses.

Measuring long-term, high-level inflation (known as “headline inflation”), it monitors price movements in a “basket” of everyday goods and services from 11 categories.

Here they are, ranked from highest to lowest.

Housing22.24%
Food and non-alcoholic beverages17.18%
Transport10.99%
Recreation and culture10.84%
Furnishings, household equipment & services8.94%
Alcohol and tobacco7.87%
Health6.25%
Insurance and financial services5.56%
Education4.43%
Clothing and footwear3.37%
Communication2.31%

Source: Australian Bureau Of Statistics, Annual weight update of the CPI and Living Cost Indexes.

Eagle-eyed readers will notice that housing is over-represented in the above CPI index, and will wonder whether Australia’s skyrocketing housing costs are artificially driving up the official reported CPI level.

The correct answer is – yes and no:

  • Mortgage repayments are not included in the CPI, and neither is the cost of buying established dwellings.
  • Rents, the cost of new houses (excluding land value) and the cost of major alteration are included.

Why Are Australians Not Earning Enough?

Of course, whether you feel life is affordable also comes back to how much you’re earning. ABS data shows that:

  • Australians earn, on average, between $1,400 – $1,900 a week (~$72,000 – $98,000 annually) — variables include whether they work full-time or part-time, their sector, gender and industry.
  • The median income for employed Australians is $56,547 annually.

Expert Tip.

Median is the middle value in a range and offers a more useful insight into wages than an average metric does, as it’s less affected by outliers and skewed distributions.

September 2023 saw the highest quarterly wage growth in the 26-year history of the ABS’ Wage Price Index — it lifted 1.3% for the quarter and 4.0% for the year.

But that number doesn’t meet or exceed the rise in inflation, meaning people’s real incomes are going backwards. 

Borrowing power is plummeting.
  • Recent modelling shows Australians would have needed a pay rise between $50,00-$90,000 in 2023 to afford a median-priced house in an Australian capital city, in light of property price increases and interest rates.
  • In fact, Australians on a median household income would need 10-12 years to save a 20% deposit for a home, as revealed by the ANZ CoreLogic Housing Affordability Report.

The report found servicing home loans was eating up more people’s income — at 46.2% in September 2023, compared to 29% in March 2020.

ANZ Home Loan capability manager Michael Wignall said the rising cost of living limited people’s ability to save, making the transition from renting to home ownership increasingly hard.

“Rising rents deplete savings while higher home prices increase deposit requirements and reduced serviceability sees smaller mortgages offered,” Wignall said.

How Many Aussies Are Struggling With Living Expenses?

Research from The Melbourne Institute found the proportion of households living on incomes less than 60% of Australia’s median income almost doubled (from 4 to 7.4%) between 2016 and 2021.

During the same period, communities living with poverty rates above 12% increased from 60% to 80%. 

The Institute said:

  • More Australians were now at a greater risk of being unable to recover quickly from an unexpected earnings shock (e.g., losing your job or a big expense like having a child), and
  • More than 50% of Aussies reported challenges in making ends meet.

Obviously, people on the lower end of the salary range are doing it toughest. Australia’s minimum wage is $882.80 per week (~$45,900 annually).

The current median rent accounts for 69% of the weekly minimum wage.

The Australian Council of Social Service (ACOSS) expressed concern cash rate rises in late 2023 to tackle inflation would come at the expense of Australian jobs and hurt people on low incomes the most.

How Can Australians Ease Cost Of Living Pressures?

Avoiding spiralling debts and making your money work harder starts with having your fundamentals in order. That includes:

  • Developing a budget that clarifies your income and expenses, including a clear picture of your current spending habits and commitments. Without this, you’ll find it harder to stay on top of larger, less frequent bills (e.g., rego) or see where the biggest cost savings can be.
  • Setting up a foolproof savings plan by automatically diverting an amount from your pay into a different account. Having a savings buffer helps you avoid using more expensive credit products (like payday loans) down the line to fund unexpected costs.
  • Sustainably growing your wealth by considering low-risk, long-term investments, which could include a mix of fixed interest (e.g., term deposits, bonds) and growth assets (e.g., stocks) that provide an opportunity to improve returns on your hard-earned income.

But you also need to think about ways to increase income and reduce expenses. One oft-overlooked strategy that is a clear winner—asking! You should be:

  • Making a case for a raise in your job if you haven’t had one in a while, seek out promotions or consider a move to a higher-paying role with another employer. A number of Australians are also taking up side gigs for extra cash, or making money through the sharing economy (e.g., renting out a spare room, your car, or your parking spot).
  • Asking your current providers for a discount. For instance, if you’re driving less you could ask your car insurer for a discount. If you see a better deal advertised, hit up your current provider and see if they value your loyalty enough to stop you from leaving. You should also check your State Government’s website for available rebates and subsidies.
  • Contacting your lender about a better interest rate. Don’t ignore what is typically your biggest expense. Ring or email your bank at least once a year (or more) and ask if they can do better. It helps to refer to more competitive mortgage interest charges you’ve seen on the market. If you don’t get a discount, explore refinancing with a different lender.

Hacks To Slash Your Living Costs.

Spending money consciously is critical when every cent counts. Ask yourself whether you really need to buy something, and if you do, consider:

  • Buying second-hand, such as via Facebook Marketplace or thrift stores.
  • Buying in bulk such as your pantry staples and items like laundry detergent.
  • Using short-term rentals to cover your needs, such as a power tool, sports equipment or a wedding outfit.

When it comes to food, save money by:

  • Meal plan and prep meals in bulk to make sure you’re maximising every item of food your purchase. If you have a plan for what you’ll make — nothing gets wasted. If you have ready meals prepared—you’re not tempted to get takeout. 
  • Become a bargain hunter. This requires research into weekly specials and loyalty card offers (some apps are available that aggregate specials for you). It’s wise to stock up during sales on long-lasting items or things that freeze well (if you can spare the expense).

To avoid overpaying for electricity:

  • Conserve heat and cool air by using old-school methods first — open the windows to let in air, or close windows and blinds to trap heat. If you turn on your air-conditioner or heater, close up the space as much as possible and use an energy-efficient mode.
  • Use power-hungry appliances sparingly in off-peak hours, run fewer (yet larger) loads of washing, and turn off energy-sapping equipment when needed (e.g., fans, TVs).

To cut your transport costs and petrol prices:

  • Use fuel price apps to help you locate the cheapest option at the pump closest to you.
  • Use public transport or suggest carpooling with a few work colleagues in your vicinity to spread the costs of your daily commute.

Important!

If you’re in strife, you can talk to a financial counsellor for free by contacting the National Debt Helpline (1800 007 007) open from 9.30 am to 4.30 pm, Monday to Friday.

Frequently Asked Questions About Cost Of Living In Australia.

Here’s what Aussies, international students, businesspeople and investors want to know about living costs.

How much do you need to live comfortably in Australia?

How long is a piece of string? Statistics tell one story, but sometimes the anecdotal data can tell a lot more.

Important!

Sydney has become the least affordable city in Australia, with corporate executives living in affluent Inner City and Eastern Suburbs areas struggling to make ends meet despite $220,000+ salaries.

To live comfortably in Sydney’s Eastern Suburbs, a household income of at least $350,000 is needed.

Regional towns can be a lot more affordable. For example, median mortgage payments in Merimbula, on NSW’s South Coast, are almost 50% of the state’s figure.

Australian CityMedian Monthly Mortgage PaymentMedian Monthly Rent Payment
Sydney2,700310
Merimbula1,517555
Newcastle1,987400

Source: Latest Australian Census Data (2021 Census).

What is the cost of living for students in Australia?

Your weekly living costs will depend on whether you live in a major or regional city, live in on-campus accommodation, a homestay family or rental accommodation.

As a rough guide:

  • Shared rentals: $150 – $350 per week.
  • On-campus accommodation: $130 – $350 per week.
  • Private rental (studio apartment) in a capital city: $400-$600 per week.
  • Private rental (studio apartment) in a regional city: $200-450 per week.

Apart from rent and tuition fees, your lifestyle can drastically impact your cost of living in Australia. Limit your spending on restaurant meals and takeaway lunches to save money.

Important!

The notorious Australian avocado toast is (allegedly) the #1 driver of all financial ruin in Australia.

How does the cost of living compare across major cities?

Let me confirm what Sydneysiders already know: your city is the most expensive in the country.

Did You Know?

Sydney is also the 10th most expensive city in the world, behind Paris, New York, Zurich, Tel Aviv and a few others. Singapore is the world’s most expensive city.

But Melbourne, Darwin and Perth trail closely behind. Hobart and Adelaide are still the cheapest cities to live in.

Final Thoughts On Australia’s Rising Living Costs.

While the cost of living in Australia remains high, the longer-term forecast is for interest rates to start decreasing by late 2024 as inflation starts moving in the right direction again and the Australian dollar increases in value.

Property prices and rents are also expected to ease slightly in 2024, which may provide some relief for households and help some Australians buy or invest in property.

Jody

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One thought on “Plus500 Review Australia: Pros, Cons, Fees & Verdict

  • I attempted to use the “hack” to dodge conversion fees, but sadly after converting AUD to USD on a Wise account, there doesn’t seem to be a way to deposit that money into eToro; i.e. eToro recently disabled Wire transfers and Wise doesn’t support SWIFT transfers for sending USD to a bank in the US?

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