Employee households will need to further tighten their purse strings, as the latest ABS data showed a 1.5% increase in their living costs in the June quarter.
Michelle Marquardt (pictured above), ABS head of prices statistics, said all household types saw increases in living costs equal to or higher than the Consumer Price Index, with the impact of price changes on household budgets varying between household types with their different spending patterns.
“Increases in living costs in the June 2023 quarter ranged from 0.8% to 1.5%,” Marquardt said. “Employee households recorded the largest rise of all household types. Higher prices for insurance, food and housing contributed to increased living costs for all household types.”
ABS figures showed an increase in insurance premiums across house, house contents, and motor vehicle insurance. Food costs also rose, driven by increases in meals out and takeaway foods, and fruit and vegetables. Strong demand for rental properties amid a tight rental market, meanwhile, contributed to the rise in housing costs.
Annual living costs
A major difference between living cost indexes and the consumer price index is that LCI includes mortgage interest charges rather than the cost of building new dwellings. The interest rate hikes over the past year have contributed to the living cost rises ranging from 6.3% to 9.6% – all of which were higher than the 6% annual increase in the CPI.
All household types experienced increased living costs over the past 12 months, due partly to higher food and utilities prices.
“Annually, food prices rose between 7% and 8%, driven by rises for meals out and takeaway foods, and fruit and vegetables,” Marquardt said. “Utilities prices rose between 12% and 14%, driven by higher wholesale prices for gas and electricity being passed on to consumers.”
Employee households
Employee households recorded the largest annual rise in living costs for all household types, at 9.6%.
“The rise in annual living costs for employee households is the largest increase since this series started in 1999. The last time the CPI recorded an annual increase of 9.6% was in 1986,” Marquardt said.
These households were worst hit by surging mortgage interest charges, which accounted for a larger part of their spending compared to other household types. Over the year, mortgage interest charges lifted 91.6%, up from a 78.9% annual rise in the March 2023 quarter, reflecting the impact of RBA’s aggressive monetary policy tightening and the rollover of some expired fixed rate mortgages to higher rate variable mortgages.
Pensioner and Beneficiary Living Cost Index (PBLCI)
The PBLCI, which measures living costs for age pensioners and other government transfer recipient households, grew 7% over the year, higher than the 6% increase in the CPI.
“Housing costs, other than mortgage interest charges, make up a larger proportion of spending for households where the main source of income is a government pension, including the age pension, compared to other household types. Rents and utilities prices rose over the year contributing to higher living costs for these households,” Marquardt said.
“Over the six months, between the December 2022 quarter and the June 2023 quarter, the PBLCI rose 3.2%. In that same period, the CPI rose 2.2%. Government pensions are indexed on 20 September (and 20 March) by the greater of the rise in the PBLCI or the CPI over a six-month period.”
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