Employee households recorded the strongest quarterly and annual cost of living rises due to increases in mortgage interest charges

 

“Employee households recorded the strongest quarterly and annual rises due to increases in Mortgage interest charges.” [ABS, Selected Living Cost Indexes, Australia: Living Cost Indexes (LCIs) measures the price change of goods and services and its effect on living expenses of selected household types, Reference period September 2023]

Australian Bureau of Statistics (ABS), media release, 1 November 2023, excerpt:

A significant difference between the Living Cost Indexes and the CPI is that the Living Cost Indexes include mortgage interest charges rather than the cost of building new dwellings.

Employee households were most impacted by rising mortgage interest charges, which are a larger part of their spending than for other household types.

“Mortgage interest charges rose 9.3 per cent following a 9.8 per cent rise in the June 2023 quarter. While the Reserve Bank of Australia has not increased the cash rate since July 2023, previous interest rate increases and the rollover of some expired fixed-rate to higher-rate variable mortgages resulted in another strong rise this quarter,” Ms Marquardt said.

Living costs for each of the three indexes for households whose main source of income is government payments (age pensioner, other government transfer recipient, and pensioner and beneficiary households) increased more slowly than the CPI in September quarter. The primary reason for this was a fall in their Housing costs for the quarter following the introduction of the Energy Bill Relief Fund rebates and changes to Commonwealth Rent Assistance. The Energy Bill Relief Fund reduced electricity bills for all households in Brisbane and Perth, and for households eligible for electricity concessions in the remaining capital cities.

From 20 September 2023, the maximum rate available for Commonwealth Rent Assistance increased by 15 per cent on top of the CPI indexation that applies twice a year, reducing out of pocket expenses for eligible households. Given the timing of these changes, the September quarter results show only a partial impact of the Commonwealth Rent Assistance changes with further impacts to come through in the December 2023 quarter.

Living costs rising fastest for employee households

Employee households also recorded the largest annual rise in living costs of all household types with a 9.0 per cent increase, down from a peak of 9.6 per cent in the June 2023 quarter.

Increasing interest rates over the year have contributed to annual living cost rises ranging from 5.3 per cent to 9.0 per cent for different household types. Most households recorded higher rises than the 5.4 per cent annual increase in the CPI.

Higher automotive fuel prices and insurance premiums also contributed to increases in annual living costs for all household types.

After employee households, other government transfer recipients recorded the next largest annual rise in living costs through to September 2023.

“Rents make up a higher proportion of spending for these households compared to other household types. Rental prices have increased over the last year reflecting strong demand and low vacancy rates across the country,” Ms Marquardt said.