Grocery bills have been one of the things adding pressure to Aussie households over the past five years. (Source: Getty/Yahoo Finance)
Since the Covid pandemic first arrived in Australia more than half a decade ago, the nation’s cost of living has at times seen the largest and swiftest rise in over 30 years. Prior to the pandemic the RBA dropped interest rates again and again for over eight years, as they tried to bring the rate of inflation up to sustainably sit within it’s 2 per cent to 3 per cent target range.
But how quickly things can change. Fast forward to 2025 and there are growing concerns inflation could remain resurgent, making the next move in interest rates a hike.
That poses an interesting question: How has the cost of the most vital things we all have to pay for changed since the pandemic?
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Here, we’ll look at these expenditures:
Rents
Mortgage costs
Utility Bills
Groceries
In the last six years, rental markets across the nation have experienced quite the rollercoaster of conditions, from pandemic driven exodus’ to population explosions resulting in record low rental vacancy rates.
In December 2019, the median rent per week at a national level was $472 for houses and $449 for units.
In the nation’s capital cities, the median house rent per week was $506 and $466 for units.
As of the latest data from Cotality (formerly known as Corelogic), house rents nationally are up by $212 per week or 45.0 per cent, with unit rents up by $189 or 42.1 per cent.
In terms of the nation’s capital cities, the median house rent has risen by $221 per week or 43.7 per cent, with unit rents up by $186 or 39.7 per cent.
(Source: Cotality)
Mortgage repayments in the years since 2019 have been on quite a rollercoaster for the nation’s home loan holders.
The pandemic saw the RBA plunge the cash rate from an already record low 0.75% all the way down to 0.1%, which is where it would sit until it began raising rates in May 2022.
Using December 2019 as our baseline and using the average payable owner occupier variable rate as the chosen metric, the cost of mortgage interest repayments was 20.2 per cent lower in April 2022.
Relative to December 2019, the greatest additional burden held by variable rate mortgage holders was felt in March 2024, at which time mortgage interest repayments were 77.0 per cent higher than pre-pandemic.
For households repaying principal and interest, this equates to a drop in overall repayments of 8.8 per cent by April 2022 and a rise of 37.3 per cent by March of 2024, relative to December 2019.
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As of the latest data from the Reserve Bank, mortgage repayments for principal and interest rate are currently 25.0 per cent higher today than in 2019.
(Source: RBA)
Since 2019, food and non-alcoholic beverage prices as measured by the CPI have risen by 21.5 per cent, with the peak rate of annual food price inflation occurring in the September quarter of 2022 when the figure hit over 7.0 per cent.
But this doesn’t tell us how the actual spending level of households has evolved over time, just what prices have done as measured by the CPI, which factors in changes such as households substituting in cheaper products.
By looking at household expenditure on food for home in the national accounts over time, we can gain some insight into how much more households are spending at the average.
Based on an average sized household of 2.5 persons and extrapolating per capita spending onto that figure, in 2019 the average spend on food for home was $196 per week.
As of the latest snapshot from the September quarter of this year, that figure has risen to $245 per week, up by 25.2 per cent.
(Source: ABS National Accounts)
While the impact of higher interest rates and higher rents has a disproportionately larger impact on the average household budget than electricity bills, it has often been the cost of household energy making headlines and leading to some of the most public frustrations with the cost of living.
Rising electricity bills have been such a significant political issue that the Albanese government and several state governments deployed taxpayer funded subsidies to temporarily reduce the impact of higher costs on household budgets.
Since the end of 2019, the cost of electricity as measured by the CPI has risen by 14.4 per cent.
When the impact of various government subsidies are removed from the equation they have risen by 39.8 per cent over that period. This equates to an increase in dollar terms of approximately $600.
(Source: IFM/ABS)
While the focus has generally been on the proportional increase in household costs over time in today’s analysis, it’s worth noting that in pure dollar value the relative rise in mortgage repayments and rents is the significantly greater increased burden on households, more so than electricity and grocery costs.
Overall, the increase in rents has added more than $10,000 per year to the costs for renters at the national average.
While the increase in electricity and grocery bills has been significant, the $600 per year increase for electricity bills and $2,564 increase in annual grocery bills represent a fraction of the additional cost pressure placed on households facing higher mortgage repayments and higher rents at the average.
Ultimately, there is little good news in the nation’s cost of living examined in today’s analysis, except perhaps for mortgage holders, where there are still hopes that costs could come down significantly.
The same can’t really be said for electricity bills, grocery costs and home rents.
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