Australia is rapidly entering a new economic era of high inflation, high and rising interest rates, intense cost of living pressures, and heavily constrained government budgets ladened with high and growing debt levels.
Cost of living pressures, associated with economy-wide inflation, and within certain critical sectors such as energy, transport, and food, are likely to continue rising. Inflationary pressures, combined with weak productivity growth and expectations of weak economic growth, could lead to a return of 1970s-style stagflation.
This new research report, released today, provides an initial analysis of the impact that rising inflation is having on the typical Australians cost of living. To do this, this report analysis what the same basket of goods bought today would have cost on year ago in the absence of inflation. This provides a broad indication of the extra spending required by households to offset the rising cost of living pressures.
Key results of the research using the quarterly ABS CPI data for September 2022 are summarised as follows:
- For the approximately 9.8 million households in Australia in 2021, Australian households would have had to spend an additional $7,844 on average over the year to September 2022, or around $654 more per month, to buy the same items they did a year ago.
- The highest average increases in costs nationally across the consumer basket over the year to September 2022 were in Housing (annual increase of $2,637 or $220 per month), Food (annual increase of $1,635 or $136 per month), and Transport (annual increase of $1,049 or $87 per month).
- Increases in the costs of non-discretionary items such as food, housing and transport made up almost 68% (67.8%) of the increases in costs to national households.
On a state basis:
- The Northern Territory: $9,103 over the year or $759 per month.
- Queensland: $8,383 annual increase or $699 per month.
- South Australia: $8,085 annual increase or $674 per month.
- Tasmania: $7,977 annual increase or $665 per month.
- New South Wales: $7,973 annual increase or $664 per month.
- Victoria: $7,868 annual increase or $656 per month.
- Western Australia: $6,313 annual increase or $526 per month.
This rising cost of living pressure highlights the need for urgent government action, including the following:
- Putting reliability and affordability as the core policy objectives of energy policy, rather than reducing emissions and meeting targets such as net zero.
- Cutting red tape and regulation to increase business investment, and in doing so alleviate supply chain pressures which are pushing up prices.
- Alleviate crippling workers shortage through cutting tax and red tape disincentives on pensioners, veterans, students, and Australians with a disability from working.