Cost of living is rising. Here’s what you can do
The cost of living is skyrocketing, yet our wages aren’t growing. Here’s how you can cut household costs.
Australians’ living standards are declining for the first time in a generation, according to new research for News Corp.
The slide in living standards is mainly due to the weakest wage growth on record.
News Corp’s cost of living editor John Rolfe spoke to Weekend Today about what we can do about it.
1. The last time we saw a trend of declining wage growth was in the 80s, so what’s happening?
Cost increases have outstripped income gains by 1.4% in the past year and 3.8% since 2013 – it’s a trend not seen since the 1980s.
The slide in living standards is mainly due to the weakest wage growth on record, and that has become the norm since the GFC.
In the run up to the Global Financial Crisis, pay rises were typically double the size they are now.
ANU cost of living expert Ben Phillips says what has changed is that wages are no longer growing at 3 or 4%, they are growing at 1 or 2%. It’s just nothing like it used to be.
2. What is the biggest expense in most Aussie households?
It’s health. Health-related bills have become the number one source of budget pressure for most households across the country, ANU analysis shows.
Medical and hospital expenses – including health cover – have recorded the biggest dollar increase since 2007. The most dramatic spike has been in NSW where they have more than doubled to over $4000 a year.
The ANU says this is a surprise but it’s because health costs aren’t as transparent as quarterly electricity bills. It just doesn’t receive as much attention as power and petrol prices.
3. Are things just going to get worse come April 1st, with the annual health insurance hikes?
Another hit looms from April 1 when the latest annual insurance hike kicks in. It will add $120 to a $3000 policy. About half of all households have health cover.
And the impact of the long-term rise in health bills is made more severe by steep increases in the cost of home and car protection, up substantially across the country; and electricity bills, which have also increased markedly.
South Australians have felt the biggest power price jolt, up about $1200 to $2300 over the past 10 years. More than $450 of the rise there has come in the past 12 months.
2 ways to save on the cost of living:
4. Obviously another massive cost is rent or mortgage repayments, what did the study reveal about that?
From a national perspective, in dollar terms, rent is paid by a minority of the population but it has gone up even more than health, insurance and electricity bills. About a third of people rent.
The burden of mortgage repayments has been restrained by falling interest rates. RBA data shows the typical variable home loan rate is more than three percentage points lower now than it was in 2007.
But many people will have bigger loans than they did a decade ago. And those trying to save a deposit are under severe budgeting stress because house prices have risen rapidly.