Mortgage costs, living expenses increase over June quarter: ABS

As highlighted in the ABS latest Selected Living Cost Index data, there was a complete rise across all five measured groups during the June quarter, with mortgage costs also lifting over the same period.  

The index, which measures the price change of goods and services alongside its effect on living expenses, explored five specific cohorts: pensioners and beneficiaries, employees, age pensioners, other government transfer recipients, and self-funded retirees. 

According to the data, employees and self-funded retirees experienced the highest increase for their Living Cost Index over the quarter at 1.5 per cent.  

Over the year, age pensioners reported the highest lift at 5.2 per cent, with employees at the lowest with 4.6 per cent. 

According to the ABS, employees experienced the lowest annual increase “mainly due to mortgage interest charges falling over the year”.

Without this reduction, employees would have experienced an annual increase of 4.9 per cent. 

As to what was contributing to this cost, transport as well as furnishings, household equipment and services were found to have increased the most over the June quarter.  

These two categories increased by a median of 2.5 per cent and 2.9 per cent respectively across the five groups. 

Housing, excluding new dwelling purchases by owner-occupiers, increased by 50 bps over the quarter across all five groups.  

However, ABS data also noted that mortgage costs boosted over this three-month period. 

According to the index numbers, self-funded retirees had the biggest index number for the June quarter in regard to mortgage interest charges, lifting from a score of 56.8 to 58.2 over the three-month period. 

This was followed by employee households, which grew by 1.4 points to reach 57.4. 

The lowest was other government transfer recipients, which reported a figure of 57 at the June quarter’s conclusion.

All five cohorts increased by 1.4 points.

By comparison, at the start of the pandemic, this figure was between 69 and 71 points for all five groups, steadily tracking downwards until this most recent quarter. 

Further, ABS’ data also noted that mortgage interest charges increased by 2.5 per cent from the previous quarter for all five cohorts. 

This percentage change is the largest increase in mortgage interest charges since the March 2016 quarter.  

Further, this is the first percentage increase since the September 2019 quarter. 

The figures reflected a common consensus on how raising interest rates will impact property owners. 

Earlier this week (2 August), the Reserve Bank boosted the cash rate to 1.85 per cent, marking the fourth consecutive lift. 

Further, in the year to June, inflation rose to 6.1 per cent.

This figure is tipped to peak at almost 8 per cent during the December quarter of this year. 

Speaking at his ministerial statement last month (28 July), Treasurer Jim Chalmers acknowledged that high inflation will eventually subside, but its prevalence was impacting those with a mortgage. 

“Left untreated, inflation which is too high for too long undermines living standards and jobs, and wrecks economies,” the Treasurer said. 

“But the medicine is also very tough to take – and millions of Australians with a mortgage are feeling that pain right now.

“Rate rises began before the election, they rose by a full per cent across June and July, and the independent Reserve Bank has told us to expect more to come.”

Mr Chalmers said there was “no point pretending these rate rises don’t hurt”.

“Every extra dollar Australians have to find to service the mortgage is a dollar that can’t help meet the high costs of other essentials,” Mr Chalmers said.

[Related: Inflation surges to highest figure since GST introduction]