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The average Australian household has seen numerous price rises over the past year and its the lower income earners who are feeling it the most.

So what can you do to lessen the blow?

In this article we discuss how the cost of living is measured, and explain why the Consumer Price Index matters. We’ll tell you how inflation impacts you and give you our top budgeting tips for 2024.

Cost of Living Pressures in Australia Throughout 2023

The war between Russia and Ukraine, the Covid pandemic and global supply chain issues have all factored into driving up the cost of living in Australia.

Unless you’re one of Australia’s top income earners, you’re most likely feeling the pinch.

The Australian Bureau of Statistics reported that one of the strongest quarterly and annual cost of living increases was due to several rises in mortgage interest charges [1].

What’s worse; as many expired fixed rate mortgage periods draw to a close, many find themselves marked as unable to service their loan amount and trapped in mortgage prison. This leaves them on higher rate variable mortgages at the mercy of the major lenders.

As Australia’s cost of living rises, discretionary spending like travel and going out for dinner – the fun stuff – is reduced.

As our estimated monthly costs continuously increase, payments such as gas and electricity are fast becoming major expenses and we’re left wondering how to save money for the future?

How is the Cost of Living Measured?

The cost of living in Australia is calculating by comparing the price of living expenses including;

  • Food
  • Fuel and transport costs
  • Education
  • Utilities such as gas and electricity prices
  • Health Care
  • Housing costs including rent and mortgage repayments

By breaking the expenses of goods and services down we can determine the cost of living required for the average Australian to maintain their standard of living, depending upon their location.

Those living in major cities will typically experience a higher cost of living compared to those in regional areas.

When the cost of living rises faster than your household income, your standard of living is threatened.

Understanding the CPI Basket

The Consumer Price Index CPI is the single most comprehensive measure of goods and services price inflation presented to the average consumer household [1].

The CPI measure the price changes in a fixed basket of goods and services consumed by a regular household, and the percentage this price fluctuates over time. It is used as a macro-economic indicator by the government and economists to monitor and evaluate levels of inflation and for adjusting the dollar values of some fixed payments including pensions [1].

The CPI does not directly measure the standard of living. A cost of living index is a better representation of living standards, though subjective physical and social factors are difficult to analyse in this format.

You can use an inflation calculator to compare the average cost of the CPI basket over time.

Impact of Inflation in 2023

By the end of 2022 Australia had experienced its largest annual inflation rise in over three decades and wages have not kept the same pace [3].

How does inflation affect you?

To put it simply: life is more expensive.

When food purchases, housing prices and travel costs increase beyond your means, it forces you to start making sacrifices, which impacts your standard of living. Not to mention making it difficult – if not impossible – for you to save money.

The Reserve Bank of Australia has put measures in place in an effort to change our spending habits – particularly those of young people. Since May 2022 interest rates have been steadily increasing, with 13 rate rises occurring across a mere 18 months. Previous interest rate increases delivered a harsh blow to homeowners, with the average mortgage holder baring the brunt of the RBA’s combat against inflation.

The RBA reported that mid-way through 2023, 16% of home loan owners had found themselves unable to meet tough new lending criteria and were trapped in mortgage prison [1].

How much does living in Australia cost?

According to the Expatisan database, $4,342 for a single person per month, and $7,858 for a family of four; making the cost of living in Australia higher than in 87% of countries [4].

Homestar Tips additional information

Budgeting Tips to Prepare for Living Costs in 2024

You’re probably wondering how to save money in 2024: The key is to focus on your biggest expenses; getting a handle on things now will be your best bet to alleviating financial stress in the new year.

Managing Utility Costs

Independent government websites such as Victorian Energy Compare offer easy ways to compare gas and energy prices. Our tips for managing utility costs include:

  • Shop around: use comparative websites to find the best rates in your area
  • Don’t settle for less: call your provider directly and ask for a competitive rate
  • Get power savvy: try and cut down on consumption by limiting the use of heaters and air conditions where possible. Do your washing in off-peak times, and turn appliances and lights off at the switch when not in use.
  • Go Solar: Consider solar power to save money long term. Weigh up the installation costs with long term savings.

Managing Vehicle Costs

The costs of having a car in Australia are also rising. They include:

  • Fuel
  • Insurance premiums
  • Registration, and
  • Purchase prices

All of which have increased over the past 18 months. The declining value of the Australian dollar is reflected in fuel prices: the average household with 2 cars spends approximately $411 per month on petrol alone[2]:

It adds up quickly.

So, what can you do to manage vehicle costs?

  • Work from home as much as possible
  • Look into rewards systems for fuel purchases
  • Pay your premiums in lump sums if you can, as some providers offer a discount

Refinancing and Managing Interest Rate Rises

Home loans are long term debts, typically lasting 25 to 30 years. Small adjustments to your interest rate or repayment amount and frequency can equate to massive expenses over time, or if managed well, significant savings on your overall loan repayment.

To help you get on top of interest rate rises, you can:

  • Compare lenders: Different banks & lenders have different serviceability criteria; don’t accept being locked into mortgage prison until you’ve shopped around.
  • Consider high interest savings accounts: Refinancing may enable you to access a high interest savings account, making financial planning for the future easier.
  • Talk to a reputable financial advisor: To understand your options and help you avoid refinancing pitfalls.

Mortgage Repayment Frequency Adjustments

One of the best tips for preparing for the rising cost of living is to plan for the future as well as you can.

Something as simple as changing your mortgage repayment frequency can save you a huge amount of money in the long run, depending on who you’re banking with.

Let’s say you have a $500,000 mortgage with an interest rate of 5.98% and a loan term of 30 years; switching your repayments to occur fortnightly instead of monthly could save you a staggering $123,201 in interest charges and would see you owning your property 5 years and 6 months sooner!

Talk to a financial advisor to understand your options.

Final Budgeting Tips

We’ve covered the major expenses, but what about the little things? Here are our final tips:

  1. Save money by passing on non-essentials, like soft drink and takeaway food
  2. Consider some meat-free meals: proteins such as beans, tofu, and soy protein are far less expensive than meat.
  3. Use a budgeting app to help you kick start your savings journey (top picks are Buddy, YNAB and Goodbudget).
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The cost of living in Australia is climbing at a pace that’s hard to keep up with; making small adjustments to your major expenses – particularly utilities, vehicle costs and your mortgage – is your best strategy to financial stability.

Make managing your living costs your new year’s resolution! For expert advice, consult a financial planner to help you prepare for whatever 2024 may bring.

Disclaimer: This article is not intended as legal, financial or investment advice and should not be construed or relied on as such. Before making any commitment of a legal or financial nature you should seek advice from a qualified and registered Australian legal practitioner or financial or investment advisor.  


[1] Australian Bureau of Statistics, 2023, Consumer Price index FAQs

[2] Canstar Blue, 2023, How Much Do Australians Spend on Cars?

[3] Reserve Bank of Australia, 2023, Cash Rate Target Overview

[4] Expatisan, 2023, Cost of living in Australia.

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