Australia's Cost-of-Living Crisis Deepens as Mortgage Burdens Soar

Conor's Corner

"The real cost of living for households has spiked over 20% in Australia. This is a much more accurate reflection of the pain that exists for families struggling to get by."

---

Australian households are grappling with an unprecedented cost-of-living crisis, marked by a significant decline in real disposable incomes and escalating mortgage repayments.

According to the Australian Bureau of Statistics (ABS), real per capita household disposable income fell by approximately 8% from its mid-2022 peak to the end of 2024—the sharpest decline on record. MacroBusiness

In the year leading up to March 2025, employee households experienced a 3.4% increase in their cost of living, surpassing the 2.4% rise in the Consumer Price Index (CPI).  Since the first quarter of 2022, the cost of living for these households has surged by 20.7%, outpacing the 13.6% increase in CPI inflation over the same period.

A significant contributor to this surge is the rise in mortgage interest payments. Nearly half of the 20.7% increase in employee household living costs is attributed to higher mortgage repayments, a consequence of the Reserve Bank of Australia's (RBA) interest rate hikes. 

Data from the Bank for International Settlements indicates that Australian households have faced one of the most substantial increases in debt repayments globally, exacerbating financial pressures. 

Looking ahead, there is some optimism. The RBA is anticipated to reduce the official cash rate by another 1.0% by the end of 2025, which could alleviate mortgage burdens and provide relief to struggling households.

As Australia navigates this economic challenge, the interplay between monetary policy and household financial health remains a critical area of focus.