What Is The Cost Of Living In Australia? The Complete Guide

While there’s no definitive measure of cost of living in Australia, one of the key indicators used is the consumer price index (CPI)—which is designed to measure the average change over time in the prices of goods and services that people need to maintain an adequate standard of living.

The CPI is calculated by the ABS based on a fixed, and therefore limited, number and type of goods and services that an average Aussie household might purchase. It supports an analysis of inflation in the economy, but it’s not comprehensive.

In the 12 months up to March 2023, Australia’s CPI rose to 7%, with notable rises across housing, gas and electricity, health and medical services, food, education fees, and insurance and other financial services. However, by August 2024, the annual headline inflation figure had eased to 3.8%, helped in part by the federal government’s energy bill relief.

How Many Aussies Need Cost of Living Relief?

Keeping up with price rises is challenging if your income isn’t moving in the same direction. A 2023 poll of 3,000 Australians by the Australian Council of Trade Unions found more than 50% of people had reduced spending on essentials or dipped into savings to get by, with one in four people being forced to skip meals or look for a side gig to make ends meet. It’s even harder for those who live in remote parts of the country, with a recent CHOICE study finding that people in Western Australia were paying on average $1 more for a basket of groceries than in other states and territories due to the lack of options or competition.

A report on poverty in Australia in 2023 by the Australian Council of Social Service (ACOSS) showed one in eight people live below the poverty line (where a household’s disposable income is below one-half of the median level for Australians). People relying mainly on government social security payments were more likely to be in poverty, but 37% of people in poverty come from wage-earning households.

Financial educator, director of online training site Money School and author of the Money School book, Lacey Filipich said the number of Australians who were financially strained exceeded the three million Australians living below the poverty line.

“The poverty line is defined by the median wage, and wages have been slower to grow than inflation-driven prices,” Filipich says.

“This means the proportion of people meeting the technical definition may not have changed, but with inflation hitting basics like housing and food, it’s likely more people are living in poverty in practise now.

“Then you have those who might be above the poverty line as defined by income, but still struggling because of those inflation-driven price rises and the accompanying interest rate rises.”

According to the RBA’s Financial Stability Review of 2024, the share of borrowers with expenses exceeding their income remains at 5%.

“In addition to cutting back their spending to mostly essential items and trading down in quality for some goods and services, these households have had to make other difficult adjustments to continue servicing their mortgages. These include drawing down on liquid savings, selling assets and working additional hours,” the report noted.

ABS figures show the average weekly earnings for a full-time worker in Australia is $1,923.40 pre-tax according to the latest statistics from the ABS. This is 4.6% higher than the same time last year, when earnings were $1,807.70.

One of the biggest causes of financial stress is housing affordability. In addition to home owners hurting from rising rates, low availability of rental properties has pushed rents to record highs. According to research by SQM Research released in May 2023, the national median weekly asking rent for a dwelling was $568 a week. Some six months later and rents had surpassed the $600 mark, coming in at $601 on average as of January 2o24. By mid-year, rents had started to ease slightly, declining by .5% per week on average.

A 2023 report by Anglicare Australia highlighted that many workers on award wages—like nurses, childcare and aged care workers, hospitality workers, and teachers—are paying significantly more than a third of their income on rent. In capital cities, qualified workers in these essential roles may need to allocate more than 80% of their income to keeping a roof over their heads.

Money-saving expert and author of Kill Bills and Easy Money, Joel Gibson, says in addition to rate rises hurting borrowers, ongoing power price hikes were starting to bite, and few people had avoided the impact of rising food costs.

“Grocery bills are probably the one area where every household has felt it so far—it’s a big bill, over $12,000 on average, so a 10% increase in (12 months) means a $1200 average increase in the household budget,” Gibson says.

Filipich says that while Australia wasn’t prohibitively expensive compared to other countries, there were major differences between the costs of living in cities like Sydney and Melbourne compared to the rest of the country.

“The biggest factor stopping people getting ahead is secure work with decent wages. Getting paid enough to cover living costs with some left over to save and invest for the future is what makes it possible to get ahead financially,” she says.

“We’ve seen work become less secure, both through changing technology and companies moving to casualisation or contracting arrangements. We’ve also seen wages fail to rise at a rate commensurate with inflation.”

Cost of Living for Students in Australia

The challenge for young people and students is that they’re more likely to have insecure, casual jobs and lower paid roles due to being less qualified. There’s also a lower hourly minimum wage for workers under 21, and wages may be lower for apprentices and trainees.

While some international students are supported by their families, many also hold down a job to cover their expenses. Earlier in the Covid pandemic, restrictions on how much people on a student visa can work were relaxed, but are now capped at 48 hours hours per fortnight (with an exemption for visa holders employed in the aged care industry).

Students, both domestic and international, have to account for educational costs (above and beyond tuition fees) like buying books, computers and IT equipment, and special clothing or tools needed for their area of study.

Cost of living varies depending on the university’s location too. For example, Charles Sturt University suggests studying at one of its regional campuses could be more affordable than choosing a metro university, citing a 12-month cost of living estimate for a single student at just over $21,000.

According to Gibson, many Aussies could be paying less for basic expenses by being more proactive.

“We’re too reluctant to switch to cheaper providers even when our current providers aren’t giving us a good deal,” Gibson says.

“Half of us are with the most expensive telco in the country, for example. Three quarters of us are with just three energy retailers when almost all power companies are selling essentially the same product.

“Our fear of the unknown, or of making a bad decision, means we often put off making any decision at all—which is often the worst decision we can make.”

Gibson says shopping around was worthwhile and not as hard as people think, especially once you get into the habit.

“I think most households can find hundreds or even thousands of dollars of fat in their budget if they look in the right places. You can search for those savings in an afternoon so even if it was paid work, the hourly rate would be good.

“And then you can forget about it for 6 months or a year—or at least until the next price rise.”

Filipich agrees with focusing on ‘big ticket’ expenses.

“I think there’s often too much emphasis placed on discretionary costs when fixed costs may be the best pay-off for your time because they are so big by comparison.”

She also recommends automating good money habits so you don’t have to think about them or rely on self-discipline, to give yourself a better chance of success.

“For that reason, I think a saving process that automatically sends money to an account that’s not visible on your online banking—hit the ‘hide’ button—or is with another bank and not connected to any cards or online accounts is the number one money action to take.”

Filipich points to research that shows financial stress drops your IQ by 13 points as a reason to get your financial worries out of your head and onto a written plan to help you make better decisions.

“Write down what you’d do if something specific went wrong financially. Include what you can do in advance to prevent it happening, and what you’d do in response if you couldn’t prevent it,” she says.

“Then you can stop letting it occupy brain space, knowing that if the thing you’re worried about does happen, you know what you’ll do.”

There are ways to save money on groceries that extend beyond looking for specials. In fact, discounted items can be misleading as they may still not be the cheapest on the market, if they’re being discounted from a high cost base. The ACCC is suing Coles and Woolworths for misleading consumers by lifting the prices of groceries for a short period, then placing them on sale—even though prices were still higher than, or the same as, the product’s regular price.To literally compare apples with apples, look at the unit prices per volume underneath the advertised price. The higher the volume in grams, the better value the item.

Other tips include:

• Look for the best value: Buying in bulk may be smarter if it’s an item you regularly eat or use, and the same is true for refillable products. Frozen fruit and vegetables, tinned and ‘ugly’ produce are just as nutritious, but may cost less than fresh. Compromise on brands when you can—Coles has seen a surge in people buying its ‘own-brand’ products, which are generally cheaper, especially for pantry staples like pasta.
• Plan your meals: Food wastage is a common way people end up spending more on essentials. On average, one in five of your bags of groceries will end up binned. Having a plan for meals and snacks for the week, and using a list so you only buy the specific amounts and types of foods needed to execute your plan, reduces wasted food and money.
• Plan your shop: You can check prices online or via catalogues so you can shop at stores with the best specials and go later in the day to take advantage of mark-downs on items you need. Choosing supermarkets with a nearby bakery, fruit shop or butcher gives you the chance to compare prices and find better deals.
• Cut back or increase effort: Replace meat with cheaper proteins like lentils for a few meals to reduce spending and reconsider spending on non-essential food and drinks like soft drinks. If you have time, you might be able to save by buying the ingredients to make food from scratch, e.g., baking a large batch of brownies instead of buying them pre-packaged.
• Avoid the Dominant Duo: Coles and Woolworths have long been accused of price-gouging, and whether this is true or not, there is no doubt there are cheaper options. A recent CHOICE investigation found that shoppers who buy their groceries from discount chain Aldi save at least $15 on a basket of essential items compared to shopping at Coles or Woolworths.

Regularly finding and switching to the cheapest providers is key. Gibson notes: “Utilities are the easiest bills to switch and save—you can do it in a matter of minutes using comparison sites such as energymadeeasy.gov.au (for energy) and whistleout.com.au (telco).” Note, that Victorian residents have a separate energy comparison site, Compare Energy, which will help consumers determine if they’re on the cheapest energy plan.

“About two million of us switch energy plans each year but that still leaves millions who don’t,” he says.

Additional options for cost of living relief on utilities include:

• Reduce consumption: Yes, switching things off at the wall does help a little. Make sure you get maximum efficiency by fixing seals and closing doors and windows when you’re running a heating or cooling system, settling for the coolest/warmest temperature you can, and only running full loads in your washing machine and dishwasher.
• Switch to electric: Utilities costs have risen across the board, but gas has seen higher price rises in the past year compared to electricity—driven by higher wholesale gas prices faced by retailers. A Climate Council report found swapping gas appliances for electrical ones could save Aussies around $2,000 per year.
• Make energy-efficient upgrades: If and when you need to replace the fridge or washing machine, choose ones with high energy and water efficiency ratings. If you can afford to, consider improving your ceiling insulation and draught-proofing. Swap old halogen lights to LEDs. Consider investing in solar power or a heat pump system to heat hot water as a more cost-effective option.

A number of government rebates on electricity bills and loan schemes to purchase appliances are available in different states. The Federal Government’s energy bill relief fund, as well as state-based schemes in Tasmania, Western Australia and Queensland, has started flowing into customers’ bank accounts, helping electricity prices to fall by 17.9% in the 12 months to August.

There are a number of actions you can take to keep transportation costs to a minimum:

• Drive less: Choosing public transport, walking or cycling is a money-saver, because you’ll reduce your fuel costs and money spent on tolls. If you can get by without owning a car you’ll also save on maintenance, insurance and registration costs.
• Find the cheapest fuel: For people who depend on a private vehicle, finding the lowest-cost fuel in your area should be a priority. There’s a multitude of mobile apps available that help you find cheaper fuel daily or even notify you when fuel hits a certain price point.

“About two in three of us aren’t using fuel price apps, which means we could be over-paying by as much as 50c per litre when we pull into a fuel station,” according to Gibson.

“We just need to get into these habits in a cost-of-living crisis so that we do these things without thinking.”

When you’re in the market for a new vehicle, if you can afford the higher upfront costs of an electric vehicle you may save over the long-term on fuel costs.

Filipich says everyone with a mortgage should be calling their bank once a year to ask for a rate reduction.

“It’s the quickest way to make $20k with your clothes on and dignity intact,” she says.

“The last time I did it, it took eight minutes. Compare that to hours spent trawling the internet for a phone deal that’s $10 less a month and you quickly see how finding ways to reduce those big-ticket costs can be much more effective.”

Alternatively you may be able to refinance with a different lender to access a better rate. Aussie borrowers coming off a fixed rate onto higher variable interest rates that find themselves in mortgage stress could approach lenders about the possibility of extending their loan term, accessing a payment holiday, or switching to interest-only payments.

Filipich acknowledges that in a tight rental market it’s a tough ask for renters to negotiate.

“I think times are forcing people to get more creative about co-generational living, house sharing and moving further out where the transport costs don’t outweigh the money saved on rent.”

Related: How to Handle the Rate Hikes

If you’re currently handling your bills, but want to get ahead or build a nest egg, these are some strategies to consider:

• Ensure savings are earning interest: Syphon savings into a high-interest savings account, or consider a term deposit where savings can’t be accessed for a set period, for example for six months to one year. Many banks offer attractive interest rates that exceed what you’ll get in a normal savings account. You can read more in our guide to the best high interest savings accounts.
• Put your offset facility to good use: If you’ve got a home loan with a 100% offset account, keeping all your funds in the offset account will maximise your ability to reduce your interest. Get your employer to deposit your salary directly into the offset account. If you’re keen to have a separate ‘savings’ account, look for loans that offer multiple offset accounts.
• Salary sacrifice into super: Voluntary contributions, on top of what your employer pays, is a way to grow your retirement funds. The Australian Government’s Moneysmart site advises you’ll probably save on tax if you arrange with your employer to make extra super payments from your pre-tax income—known as salary sacrificing or salary packaging. Super is considered by many to be an ideal investment vehicle, as the returns are only taxed at 15% within the fund.
• Investing carefully: Property investing is an attractive potential path to wealth, but it’s not financially feasible for many. A more affordable and common way Australians build wealth is by regularly investing a small amount in shares/ETFs, particularly on the ASX. All investments come with risk, so you should only invest what you can afford to lose.

“If you’ve got that automated saving process happening, start thinking about how much you need to keep in cash as your buffer for emergencies. Anything over that amount, you could be investing so it’s working harder for you,” Filipich says.

“The most important thing is to work out what kind of investing might suit you: bonds, shares, index funds and/or property for example. There’s no one-size-fits-all rule here.

“We’ve all got different priorities, values and situations. Take the time to experiment and learn what suits you best, then start small and work your way up as you build confidence and iron out any issues.”