Interest rates drive falling cost of living

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By Leith van Onselen

The Australian Bureau of Statistics (ABS) today released its cost of living indices for the June quarter, which revealed minimal cost pressures for the typical Australian worker, with pensioners and those on welfare fairing slightly less favourably (see below table).

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According to the ABS, the cost of living for households headed by working Australians rose by only 0.4% over the quarter and by 0.9% over the year – well below the 2.3% average wages growth over the year and the 1.5% annual increase in the Consumer Price Index (CPI).

The estimated increase in the cost of living was lower than the official CPI inflation figure, primarily because it includes falls in interest charges, which are not included in the CPI.

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For households headed by Australians on benefits, old age pensioners and self-funded retirees, the cost of living rose by only 1.0%, 0.9% and 1.2% respectively over the year.

Overall, declining insurance and financial services costs were the key driver of the falling cost of living across all cohorts over the year (see below table).

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.