Mortgage repayments the main factor in living cost increases

The latest Living Cost Index (LCI) from the Australian Bureau of Statistics (ABS) has revealed all five LCI indices rose by 1.2–1.4 per cent over the June quarter. The five indices are:

1. Pensioner and beneficiary LCI (PBLCI)
2. Employee LCI
3. Age pensioner LCI
4. Other government transfer recipient LCI
5. Self-funded retiree LCI

Throughout the year, these figures jumped from between 3.7 per cent and 6.2 per cent, influenced by the spending patterns of each group.

Michelle Marquardt, ABS head of prices statistics, said on the trends: “Increases in living costs in the June 2024 quarter ranged from 1.2 per cent to 1.4 per cent, depending on the spending patterns of the different household types, compared to a rise of 1.0 per cent in the Consumer Price Index.

“This is the first time since December 2010 that increases in living costs for all household types were higher than the increase in the CPI. Other government transfer recipient households were most impacted by higher rental prices reflecting a tight rental market.”

According to ABS, insurance and financial services, which include mortgage interest charges and food and non-alcoholic beverages were the main contributors across all household types.

“Mortgage interest charges rose 2.6 per cent in the June 2024 quarter driven by the continued rollover of some expired fixed rate mortgages to higher variable rate mortgages,” Marquardt said.

“Employee households recorded the largest annual rise in living costs of all household types with a rise of 6.2 per cent. However, this was down from 6.5 per cent in the previous quarter, and down from the peak of 9.6 per cent in the June 2023 quarter.”

In fact, mortgage interest charges rose by over a quarter in the last year. However, despite the increases we’re still experiencing reduced increases compared to recent years.

“Mortgage interest charges rose 26.5 per cent annually, continuing the moderation seen since the peak of 91.6 per cent in the June 2023 quarter. This reflects fewer rises in the Reserve Bank of Australia’s cash rate in the last 12 months and a slowing in the rollover of expired fixed rate mortgages to higher variable rate mortgages,” Marquardt said.

For employee households, mortgage interest charges recorded the strongest rises over the year. For self-funded retirees, it was housing. Meanwhile, other government transfer recipients saw the strongest increases in rents and electricity.

Marquardt said: “Age pensioner and other government transfer recipient households living costs include interest charges which rose between 20 and 24 per cent for these household types annually. Insurance also makes up a larger proportion of spending for these households compared to the CPI. Insurance premiums rose over the year contributing to higher living costs for these households.”

[Related: Will the 2Q24 CPI figures be enough to trigger a rate hike?]

Jack Campbell is the editor of Broker Daily. After graduating from the University of Wollongong in 2022, Jack began his journalistic career working on Broker Daily’s sister brand, HR Leader. In August 2023 he was made the news editor and worked alongside some talented journalists writing articles and recording podcasts.

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