It's no secret that Australian consumers are struggling with the burdeninflation,which peaked at 7.8% last year but remains stubbornly high averaging 7% in the year to March.
The latest figures from the Australian Bureau of Statistics (ABS) show that over the past 12 months, food and non-alcoholic beverages have increased by 8%, travel and accommodation by 25% and medical services by 6.7%. Electricity grew by 15.5%, the biggest annual increase since 2013.
These figures actually translate into higher prices in the supermarket,petrol pricespushing $2 a liter andflight prices above pre-pandemic levels. It means thatTenants pay over 20% more each weekcompared to last year, and many consumers will face a shocking bill this winter,electricity prices rise again by around 20%due to the new maximum retail tariffs set by the Norwegian Energy Authority.
To put this into context: the RBA aims for an inflation target of between 2 and 3%. So if you feel like things are getting more expensive, you're not wrong. The good news is that you can pay less for maintenance and build financial resilience. Here's our Forbes Advisor's guide to the cost of living in Australia: what to expect, how to better manage your budget and how to save on your winter bills.
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How is the cost of living measured?
Although there is no definitive measure of the cost of living in Australia, one of the key indicators is the Consumer Price Index (CPI) - which is designed to measure the average change over time in the prices of the goods and services people need to sustain an adequate standard of living.
The CPI is calculated by the ABS based on a fixed and therefore limited number and type of goods and services that the average Australian household can purchase. Supports analysisinflationin the economy, but it is not complete.
In the 12 months to March 2023Australian CPI up 7.0%, with significant increases in housing, gas and electricity, health and medical services, food, education fees and insurance and other financial services.
How many Australians need cost of living relief?
It's hard to keep up with price increases if your income isn't moving in the same direction. A recent survey of 3,000 Australians by the Australian Trade Union Council showedover 50% of people have reduced spending on essentialsor plunge into savings to make ends meet, with one in four people having to skip meals or seeklateral projectionfew.
Report ntpoverty in Australia by 2023from the Australian Council of Social Service (ACOSS) shows that one in eight people live below the poverty line (where household disposable income is less than half the Australian average). Those living primarily on public welfare were at higher risk of poverty, but 37% of those living in poverty came from income-earning households.
Financial educator, director and author of the online education website Money SchoolThe money school book, Lacey Filipich said the number of Australians in financial difficulty had surpassed three million Australians living below the poverty line.
"The poverty line is the median wage, and wages rise more slowly than prices because of inflation," says Filipich.
"This means that the proportion of people who meet the technical definition may not have changed, but with inflation hitting basic needs such as housing and food, it is likely that more people are now living in poverty.
“Then you have those who may be above the income poverty line but are still struggling because of these inflation-driven price increases and their accompanyinginterest rates rise. According toRoy Morgan Researchmore than a million mortgage holders are in the risk category due to housing stress.
How much does it cost to live in Australia?
ABS talShow that the average weekly salary for a full-time employee in Australia is $1,807.70. For those earning the minimum wage (currently $21.38 an hour), a typical 38-hour work week equates to a salary of $812.60.
One of the biggest causes of financial stress is housing affordability. In addition to home owners feeling the rising prices, the low availability of rental housing has pushed rents to record high levels. According to his researchSQM Research was launched in May 2023, the national average weekly rent for a home is $568 per week, and the most expensive median rental for homes in Sydney is $963 per week. week.
2023 report from Anglicare Australiapointed out that many subsidized wage earners - such as nurses, carers of children and the elderly, hospitality workers and teachers - pay far more than a third of their rental income. In capital cities, skilled workers in these key positions may have to set aside more than 80% of their income to keep a roof over their heads.
Money saving expert and author ofKill bills and easy money, Joel Gibson, says that in addition to interest rate hikes hitting borrowers, ongoing increases in electricity prices are beginning to bite and few people have escaped the impact of rising food costs.
"Grocery bills are probably the only area where every household has felt it so far - it's a big bill, over $12,000 on average, so a 10% increase over the last year means an average increase of $1,200 in the household's budget," she says. Gibson. .
Filipich says that while Australia was not too expensive compared to other countries, there were large differences in the cost of living in cities such as Sydney and Melbourne compared to the rest of the country.
"The biggest factor preventing people from getting promoted is a secure job with decent pay. Getting paid enough to cover the cost of living with some savings and investments for the future is what makes economic progress possible," he says.
"We have seen jobs become less secure, both because of changing technology and companies moving to part-time jobs or contract jobs. We have also seen that wages are not increasing at a rate commensurate with inflation."
Cost of living for students in Australia
The challenge for young people and students is that they are more likely to work in insecure, unequal jobs and lower paid roles because they are less qualified. There is also a lower minimum hourly wage for workers under the age of 21, and wages may be lower for apprentices and trainees.
While some international students are supported by their families, many also have jobs to cover their expenses. Earlier during the Covid pandemic,restrictions on the number of people with a student visacan work casually but will be limited to 48 hours a fortnight from 1 July 2023 (except visa holders employed in the aged care sector).
Students, both domestic and international, must account for educational costs (in addition to tuition) such as the purchase of books, computers and IT equipment and special clothing or tools required for their course of study.
The cost of living also varies depending on the location of the university. For example, Charles Sturt University suggests that studying at one of its regional campuses can be cheaper than choosing a metro university,with reference to the estimated 12-month cost of living per student at just over $21,000.
In comparison, the Australian Government Department's 2019 Expenditure and Income Report on International Student Expenditure found the average annual student expenditure was $28,378, which mainly includes expenses such as rent, food and other household items, but also includes about $2,500 dollars a year for study expenses.
Proactivity and planning are the keys to staying alive
According to Gibson, many Australians could pay less for essentials if they were more proactive.
"We are very reluctant to switch to cheaper suppliers, even if our current suppliers are not offering us a good deal," says Gibson.
“For example, half of us use the most expensive telecommunications in the country. Three quarters of us only have three energy retailers, while almost all energy companies sell basically the same product.
"Our fear of the unknown or of making the wrong decision often causes us to put off any decision - which is often the worst decision we can make."
Gibson says shopping was worth it and not as hard as people think, especially once you get into the habit.
"I think most households can find hundreds or even thousands of dollars of fat in their budget if they look in the right places. You can check out those savings in an afternoon, so even if it was a paying job, a hourly rate be fine.
"Our fear of the unknown or of making the wrong decision often causes us to postpone any decision - and it is often the worst decision we can make."
"And then you can forget about it for 6 months or a year - or at least until the next price increase!"
Filipich agrees with the focus on "big ticket" expenses.
"I think there's often too much emphasis on discretionary costs, whereas fixed costs can be the best return on your time because they're so large in comparison."
He also recommends automating good financial habits so you don't have to think about them or rely on self-discipline to give yourself a better chance of success.
"For that reason, I believe that a savings process that automatically sends money to an account that is not visible in your online bank - press the 'hide' button - or is located in another bank and is not linked to cards or online accounts , money is the number one thing to earn.”
Filipich points to studies that showFinancial stress lowers IQ by 13 pointsas an excuse to forget your financial worries and create a written plan to help you make better decisions.
“Write down what you would do if something went wrong with your finances. Include what you can do in advance to prevent it and what you would do in response if you couldn't prevent it.
"Then you can stop letting it take up space in your brain, knowing that if what you're worried about happens, you'll know what you're going to do."
How to save money on shopping
There are ways to save money on grocery shopping that go beyond looking for special deals. In fact, discounted products can be misleading as they may not be the cheapest on the market if discounted from a high cost base. For a literal apples-to-apples comparison, see unit prices per volume below the advertised price. The larger the volume in grams, the better the value of the item.
- Search for the best price:Buying in bulk can be smarter if it's an item you eat or use regularly, and the same goes for recyclables. Frozen fruits and vegetables, canned foods, and "ugly" foods are just as nutritious, but may cost less than fresh. Compromise brands when you can—Coles has seen an increase in the number of people buying its "private label" products.which are generally cheaper, especially for wardrobe items like pasta.
- Plan meals:Food waste is a common way people spend more on necessities. Average,One in five of your shopping bags end up in the bins. Having a meal and snack plan for the week and using a list so you only buy the specific amounts and types of food you need to stick to your plan reduces food and money waste.
- Plan your store:You can check prices online or in catalogs so you can shop at the best bargain stores and go later in the day to take advantage of discounted prices on the items you need. Choosing a supermarket with a nearby baker, fruit or butcher shop allows you to compare prices and find a better deal.
- Reduce or increase the bet:Replace meat with cheaper proteins, such as lentils, at some meals to reduce costs, and review spending on non-essential foods and beverages, such as soft drinks. If you have the time, you can save money by buying ingredients to prepare food from scratch, such as baking a large batch of cookies instead of buying them prepackaged.
How to save money on electricity and gas
It is important to find and switch to the cheapest providers at regular intervals. Gibson notes, “Utility accounts are the easiest to switch and save accounts – it can be done in minutes using comparison sites such asEnergymadeeasy.gov.au(for energy) andwhistleout.com.au(telephony)". Note that Victorians have a separate energy comparison page,Compare energy.
"About two million of us switch energy plans every year, but that still leaves millions who don't," he says.
Additional cost of living options for utilities include:
- Reduce consumption:Yes, wiping things off the wall helps a bit. Make sure to achieve maximum efficiency by sealing and closing doors and windows when using the heating or cooling system, set the coldest/worst possible temperature and only with full loads of washing machines and dishwashers.
- Switch to electricity:Utility costs have risen across the board, but natural gas saw higher price increases than electricity last year due to higher wholesale prices for retailers. Climate Council's report foundreplacement of gas appliances with electric onescould save Australians about $2,000 a year.
- Make energy-saving improvements:If and when you need to replace your refrigerator or washing machine, choose those that are very energy and water efficient. If you can afford it, consider improving your roof insulation and draft protection. Change old halogen bulbs to LED. Consider investing in solar energy or a heat pump system for hot water heating as a more economical option.
Number zpublic discounts on electricity bills and loan programsunits for purchase are available in various states. The Victorians usesammenligne.energi.vic.gov.auThe site can also claim a $250 energy savings bonus.
This is how you save on transport
- Less lead:By choosing public transport, walking or cycling, you save money because you reduce fuel costs and the money you spend on tolls. If you can do without owning a car, you also save on maintenance, insurance and registration costs.
- Find the cheapest fuel:For those who rely on a private vehicle, finding the cheapest fuel in your area should be a priority. there is onemany mobile applicationsavailable that help you find cheaper fuel every day and even alert you when fuel reaches a certain price.
"About two in three of us don't use fuel price apps, which means we could be up to 50 cents a liter too much when we stop at a petrol station," says Gibson.
"We just have to get used to these habits in the cost of living crisis so we can do these things without thinking."
When you're in the market for a new vehicle, you can save on fuel costs in the long run if you can afford the higher upfront cost of an electric vehicle.
How to save money on an apartment
Filipich says anyone with a mortgage should call their bank once a year and ask for a rate cut.
"It's the fastest way to make $20,000 with your clothes and dignity intact," he says.
"The last time I did it, it took me eight minutes. Compare that to the hours you spend browsing the web for $10 less per month phone plan, and you'll quickly see how finding ways to reduce those high fares can be much more effective."
Alternatively, you can refinance with another lender to access a better interest rate. Australian borrowers draw afixed rate with the current higher variable ratethose in mortgage stress can approach lenders to extend their loan term, access payment holidays or switch to interest-free payments.
Everyone with a mortgage should call their bank once a year and ask for a rate cut
Filipich admits that in a tight rental market it is difficult to require tenants to negotiate.
"I think the times are forcing people to be more creative in terms of intergenerational living, sharing housing and moving further afield, where the cost of transport does not exceed the money saved on rent."
Related:How to deal with rising prices
Put your money to work
If you're currently managing your accounts but want to level up or build savings, here are some strategies to consider:
- Make sure your savings are interest-bearing:Transfer your savings to a high-interest savings account or consider e.gtime depositwhere savings are not available for a limited period of time, such as six months to a year. Many banks offer attractive interest rates that exceed what you would get in a regular savings account. You can read more about it in our guidehigh interest savings accounts.
- Make good use of offset:If you have a 100% mortgageaccount compensation,keeping all your money in an offset account will maximize your ability to reduce interest. Ask your employer to pay your salary directly into the offset account. If you want a separate "savings account", look for loans that offer multiple compensation accounts.
- Salary sacrifice in super:Voluntary contributions, in addition to what your employer pays, are a way to developpension funds. Australian GovernmentMoneysmart advisoryou will probably save tax if you agree with your employer on additional overpayments from your pre-tax income - the so-calledsacrifices wagesor rental package.
- Invest carefully:Investing in real estate is an attractive potential path to wealth, but it is not financially viable for many. A more affordable and common way for Australians to build wealth is to regularly invest a small amount in shares/ETF, especiallyASX. All investments involve risk, so invest only what you can afford to lose.
"If you've been following this automated saving process, start thinking about how much cash you need to have in cash as a backup. Anything above that amount can be invested to make it harder for you," says Filipich.
"The most important thing is to find the right type of investment: bonds, shares, index funds and/or real estate, for example. There is no universal rule here.
"We all have different priorities, values and situations. Take some time to experiment and find what works best, then start small and work your way up, build confidence and work out any issues."
Frequently Asked Questions (FAQ)
Why is the cost of living in Australia so high?
Expert commentators point to high inflation combined with stagnant wages and precarious work as reasons why many Australians are struggling to pay for basic needs such as food, housing and utilities. Rising interest rates and problems with supply and demand in the property market have also pushed up housing costs.
What is the cost of living in Australia compared to New Zealand?
Generally, the daily costs are fairly similar, but the earning potential may be higher in Australia. New Zealand's CPI has increased by 6.7% over the past 12 months, with average weekly earnings at $1,189. This compares with Australia's annual CPI increase of 7% and average weekly earnings of $1,807.70 for a full-time employee.
How much does it cost to live in Australia?
The main costs of living in Australia include accommodation, food, utilities, petrol, healthcare and education fees. The cost of living varies depending on where you live, with major cities such as Sydney, Melbourne, Perth and Brisbane being the most expensive.