Cost of living pressures in Australia are abating


Cost of living pressures in Australia were unchanged in the first three months of 2016, or in the case of self-funded retirees went backwards, according to Australian Bureau of Statistics’ (ABS) living cost index released today.

To clarify exactly what the living cost index is, the ABS suggests it should answer the following question:

By how much would after tax money incomes need to change to allow households to purchase the same quantity of consumer goods and services that they purchased in the base period?

It differs from the better-known consumer price index (CPI), which measures price movements for the household sector.

The ABS suggests that CPI is not the conceptually ideal measure for assessing the changes in the purchasing power of the disposable incomes of households, hence explains the reason why it releases the separate living cost index.

Living expenses for employee households, whose main source of income is from wages and salaries, came in flat, mirroring households living on the old age pension.

In contrast, expenses for self-funded retirees went backwards, falling 0.4% during the quarter.

The chart below, showing the quarterly change over the past decade, reveals costs of living pressures were the weakest seen in several years for all types of households.

From a year earlier, the index for all households increased by between 0.8% to 1.1%, below the 1.3% pace for headline CPI.

This link will take you to the full ABS report.

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