More official figures suggest cost of living pressures in Australia are not as bad as many people believe

Photo: Mike Hewitt/Getty Images

If you think that cost of living pressures in Australia are spiraling out of control, you’d be wrong, at least according to the Australian Bureau of Statistics (ABS) latest Selected Living Cost Index (LCI) report.

The truth is that they remain incredibly weak.

Now, before you start calling BS, pointing to soaring housing, utility and healthcare costs and record-low wage growth to poke holes in that assessment, let’s see what the LCI actually measures.

According to the Bureau, it aims to 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?”

Essentially, whether disposable incomes of households have kept pace with price changes.

The ABS says the LCI reflects changes in the purchasing power of after-tax incomes of households, differentiating it from the consumer price index (CPI) which is designed to measure price inflation for the household sector as a whole.

The LCI measures the purchasing power of after-tax income — how much you can buy — while the CPI measures how much the costs of consumer goods and services has increased.

So how much did after-tax incomes need to increase to purchase the same amount of goods and services in the year when the survey was first conducted nearly two decades ago?

Based on the ABS’ assessment, it wasn’t much in the June quarter, nor over the past year.

This table from the ABS shows the movement in the LCI over the past year, breaking down the results by household type.

Source: ABS

Whether your primary source of income was from salary and wages, a government pension or if you are a self-funded retiree, cost of living pressures were close to non-existent, rising by 0.2% or less during the quarter and by 2.0% or lower over the past year.

Very soft results, and one that will no doubt surprise a few.

And, as seen in the chart below, cost of living pressures remain well below the levels seen earlier this decade.

The ABS has more here for those who wish to dig a little deeper.

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