It's getting more expensive to live in Australia

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  • Cost of living pressures are increasing for Australian households.
  • After-tax incomes needed to increase by 2% to 2.5% over the past year in order to keep up with living expenses, the fastest increase in four years.
  • The largest increase in living expenses was for pensioners. The smallest was for self-funded retirees.

Cost of living pressures are building for Australian households, regardless of whether their main source of income is from wages, government benefits or retirement savings.

According to the Australian Bureau of Statistics (ABS) Living Cost Index, after-tax incomes needed to increase by 2% to 2.5% over the past year in order to keep up with living expenses, the fastest increase seen in four years.

Here’s how individual household types ranked by main source of income.

ABS

And here’s the trend in each group since the survey began.

Much of the recent acceleration reflected higher costs for health and petrol, as well as booze and cigarettes.

For clarity purposes, employee households have wages and salaries as their main source of income, while for self-funded retiree households it comes from superannuation or property income.

Age pensioner households receive most of their income from the age pension while other government transfer recipient households are those receiving a government pension other than the age pension.

The largest cohort among these groups is employee households.

In the year to March, Australia’s average hourly pay rate increased by 2.07%. Little improvement is expected when the June quarter wage report is released later this month.

Wages make up the majority of household incomes, so it’s likely that many households went backwards during the year in terms of their purchasing power.

The Living Cost Index (LCI) measures how much after tax incomes need to change to allow households to purchase the same quantity of consumer goods and services as they did in the past.

In simple terms, it provides a rough indication on how much the household disposable income needs to increase to keep up with everyday living expenses.

This differentiates it from the consumer price index (CPI) which is designed to measure price movements in a select basket of goods and services commonly purchased by metropolitan households.

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